TVO Battle Blog: Hydro Rates

Crossposted to Today’s question: “A number of Ontario industries, from the forestry sector in the north to the manufacturing sector in the south, are struggling. Some say we should help lower their costs by reducing the price of energy. Should Ontario lower its hydro rates?” (400 word limit)

As residential customers we already pay less than the true cost of energy, and large industrial users pay even less than that. This is perhaps the worst kind of corporate welfare, because it encourages waste and inefficiency while harming competitiveness and contributing to pollution and a distorted market economy. Lowering hydro rates would not only be an environmental disaster, but in the long run would harm these sectors more than it would help. To the contrary, we should raise them.

Am I under any illusion that pledging to raise electricity rates to their true cost will be an instantly popular idea? Of course not. But it’s the right decision, and it must be done. As long as we keep the price of energy artificially low (not factoring in real “externalized” costs caused by air pollution, climate change, nuclear disaster insurance, etc.) we’ll be unable to fully realize what policies (investments in renewable energy, efficiency, decentralized generation, etc.) are actually the most economically responsible and ecologically sane.

At the same time, however, we must ensure that lower-income people, who could be the most vulnerable to higher energy prices, are not left in the dark. Increasing the price of energy must be done within the context of a tax “shift” which reduces income tax. A Green government would also provide targeted financial supports for energy retrofits and other cost-saving measures, which can reduce energy consumption (and, therefore, energy bills) by up to 80%.

We must also ensure there are other kinds of supports made available to Ontario industries, including the forestry sector and manufacturing sector. There are huge opportunities in those areas for the creation of more “green-collar” jobs and more internationally competitive businesses. We should learn from the lessons of American car manufacturers who complained inexplicably that increasing their efficiency would hurt them, only to be left in the dust by their Japanese counterparts. By subsidizing the price of energy and keeping it artificially low, we are discouraging innovation and positive progress. Good, responsible government would do precisely the opposite.

One thought on “TVO Battle Blog: Hydro Rates

  1. Responsible government should preserve real economics at all nodes in its system. If electricity costs more, it should be higher priced.

    Government subsidies distort real economics and truth and therefore are illogical and amoral. So what is the purpose of subsidies ?

    Could it be that our governments are de-constructionists ?

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