Lifting and Shifting Electricity Cost

Fresh from the election of Green Energy and Green Economy Act (GEA) architect Don McCabe as prez of the Ontario Federation of Agriculture (OFA), that organization is turning its formidable lobbying capacities to the issue of electricity costs, now rising for farmers and non-farmers alike as a direct result of the introduction of the GEA.

During the 2014 election for OFA prez, the candidates circulated selfie blurbs. In his blurb, Mr. McCabe declined to highlight his role in the creation of the GEA.

As this commentary from the OFA sets out, the OFA now seeking “the lowering of on-farm electricity rates by adopting an industrial and farm rate for Ontario.” The description the OFA provides of its proposal is that it will be demanding “the Ontario government should make industrial electricity rates available to farmers.” The public statements available from the OFA indicate no awareness that they understand where this road leads.

The industrial power rates now in Ontario benefits the few by shifting costs to the many. As the class of government-preferred customers receiving the industrial rate increases, as it has recently with selected industries with a power demand of 3 MW and greater getting access to the preferred rate, more and more of the cost pie shifts to non-preferred customers. The actual mechanism driving this cost shift requires the preferred users to avoid using grid power during the 5 highest peak demand times of the year. Many preferred industrial users achieve this today by firing up diesel generators, the quantity of which Ontario’s green PR-oriented government avoids monitoring. Before the High 5 mechanism was adopted for commodity electricity costs, it had been considered and rejected by the Ontario Energy Board for application to transmission costs. While it is at least arguable that High 5 would not just shift transmission costs but would also mitigate somewhat overall transmission costs, there is no substantive argument that applying High 5 for commodity power costs is achieving any reductions in overall commodity costs.

If the OFA succeeds in expanding the customer groups able to participate in the Ontario government’s industrial rate program so that the program includes selected farmers and food processors, look for power rates of non-participating farmers and food processors to rise even faster (along with rates to other non-preferred users).

One Comment

  1. Can the Canadian Manufacturers and Exporters Association and the Canadian Federation of Independent Business be far behind? I fear not! The latter have identified “Electricity Sector Restructuring” as one of their lobbying activities and the former isn’t registered yet but many of their members are! I would suspect the push to transfer costs to consumers will continue.

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