Buy hydro from lowest bidder to cut rates, says report
Ontario should be buying electricity from the lowest bidder to get hydro rates down, says Ontario Chamber of Commerce.

thestar.com
By Rob Ferguson
Dec. 14, 2016

The province can buy electricity cheaper - resulting in lower bills for consumers - by asking for competitive bids from energy suppliers, the Ontario Chamber of Commerce says.

It’s time to replace an outdated model in which the government decides how power should be generated and signing long-term contracts with companies to produce it, the business group argues in a report to be released Wednesday.

“Ontario currently finds itself at a crossroads,” the chamber said.

“The status quo is no longer an option,” the report added, echoing remarks last month from Energy Minister Glenn Thibeault, who acknowledged the current system has led to “uncompetitive prices.”

Thibeault - tasked with finding innovative ways to trim skyrocketing electricity bills - told the Empire Club a “capacity auction” for electricity supply, as the chamber suggests, could save about 8 per cent based on results in jurisdictions buying power that way.

New York and New Jersey are among the U.S. states that do so.

“Future energy procurement must place a greater emphasis on affordability,” said the chamber report aimed at influencing Thibeault as he updates Ontario’s long-term energy plan for release next spring.

“The implementation of a capacity market has the potential to create significant cost savings for Ontario’s electricity system by procuring supply on a shorter term and more cost-efficient basis.”

In a luncheon speech two weeks ago, Thibeault said the province needs to break its habit of arbitrarily deciding how much of the electricity supply mix should come from nuclear, natural gas, wind, solar and other sources.

The government should, instead, get the best deals on whatever sources of clean electricity are cheapest by calling for bids when more supply is needed.

In its report, the chamber - which supports the move to a low-carbon economy - warned that making cost the most important criteria could make some clean sources of electricity generation uncompetitive.

To get around that, the bidding system should take into account both cost and renewable criteria.

“Ultimately, Ontario must strive to balance objectives regarding climate change, renewable resources and maintaining a diverse supply mix without forfeiting the competitiveness and transparency of the capacity market system,” the report said.

It blamed “long and unfavourable contract terms” of up to 20 years “at above market rates” for clean, renewable energy under the feed-in tariff program for helping to put Ontario at a disadvantage.

As well, an oversupply of power has contributed to higher rates that have both residential and business consumers screaming for relief, the report said, citing statistics that energy demand increased by eight per cent between 2003 and 2014 while supply increased 14 per cent.

That is an argument for shorter-term contracts, the report states.

“The inability of long-term supply contracts to respond to market fluctuations, coupled with lower demand, has contributed to the export of excess supply (of electricity) below market prices.”

Premier Kathleen Wynne issued a mea culpa on hydro prices at a recent Liberal convention, saying her government - which is seeking re-election in 2018 – must do better.

Starting next month, the government will waive the 8 per cent provincial portion of the HST on electricity bills for consumers, while some rural residents will get up to 20 per cent off, and more industries can apply for a program to shift power use away from peak periods of demand in return for discounted prices.