Canadian Manufacturing

Ontario offers cheap power, but few details

Qualified companies will receive 25 per cent electricity discount

Toronto—When the Ontario Ministry of Energy announced its energy incentive program to attract new companies to the province, government officials boasted about job creation and economic growth.

But weeks after the announcement, few details are available on how the program will be implemented.

The Industrial Electricity Incentive (IEI) proposes to give businesses bringing new investment and jobs to Ontario a 25 per cent discount on their hydro bills.

“The program will help create new jobs for Ontarians through incentives that attract significant new industrial investments and encourage existing companies to expand their operations,” claims energy minister Chris Bentley.

Under the IEI, eligible businesses can qualify for contracts of up to 20 years for electricity at $55 per-megawatt-hour, including transmission and delivery charges, compared to the normal rate of $75 per-megawatt-hour.

Set to roll out in January 2013, the program is aimed at big business, with those looking for cheap rates required to make a $250-million investment in new technology, products or processes.

While the program has the potential to attract new industry to the province, Canadian Manufacturers and Exporters (CME) Ontario vice-president Ian Howcroft said the lofty guidelines may act as a barrier for up-and-comers.

“I think you’re limiting the number of companies,” Howcroft said of the $250-million requirement. “There’s going to be many companies that aren’t able to (take advantage) so we still have to find opportunities and solutions for them to better deal with the trend of higher electricity rates.”

Existing businesses can qualify for the reduced energy rates, according to the Ministry of Energy, granted they are expanding their operations.

According to the minister, existing companies don’t need the same level of investment, but he couldn’t offer concrete specifications.

“We’ll work out the details, but any business that’s expanding is going to be able to benefit from the discount price,” Bentley said. “You might not make any extra capital investment (because) you’ve already got the facility there.”

He also said the program will not be subsidized by current hydro consumers because it will use surplus energy created in Ontario.

That power is often exported to neighbouring states or provinces.

How the program will effect this surplus energy usage also remains unanswered.

According to a Toronto Star story published June 12, 2012, surplus energy generated in Ontario is often exported “to neighbouring states and provinces at a steep discount.”

The Independent Electricity System Operator (IESO)—a not-for-profit entity tasked with establishing, monitoring and enforcing electricity reliability standards in Ontario—tracks how much power is imported and exported by the province during any given month.

According to the IESO website, during the month of May the province exported 1.2-terawatt-hours (TWh), with an associated value of $27.4-million.

It imported 0.4-TWh, with an associated value of $9.7-million.

That money, according to IESO spokesperson Alexandra Campbell, goes straight to companies that generate Ontario’s electricity.

“What isn’t in this number is that when power is exported, the exporters have to pay some other fees … that also offset costs that would otherwise have to be recovered through Ontario consumers,” she said.

With the IEI program “expected” to dip into this energy earmarked as surplus, a spokesperson for the Ministry of Energy said Ontario consumers will not have to subsidize the reduced energy costs.

“The program does not impose any additional costs on other electricity consumers or on the taxpayer,” spokesperson Jennifer Kett said in an email. “It is expected that participants will use power that otherwise would have had to be exported.”

Here or there?

Ontario Progressive Conservative energy critic Vic Fedeli said the program is nothing but smoke and mirrors, a feel-good offer masking a bigger issue.

An MPP for the northern constituency of Nipissing, Fedeli said the program spells bad news for his and other northern jurisdictions, as there will no longer be an incentive to locate industry in the north.

“In northern Ontario this is awful news because (it) already has what’s called the Northern Industrial Electricity Rate (NIER) program,” he said. “They’re already paying $55/megawatt-hour so this program negates the northern incentive.”

Bentley, though, said the NIER program was introduced because many northern businesses are resource-based and heavily energy dependent.

He insists the IEI program should not be considered a threat.

“Many northern businesses are resource-based, they are different than many of the businesses in the south,” he said. “(These programs) add on to each other, they don’t substitute for each other.”

When asked whether companies could combine both programs once the IEI is implemented, Bentley said there is nothing in place that would allow so just yet.

“They’re not cumulative programs at the moment,” he said. “We haven’t worked out the details but one is a long-term fixed-priced contract so you’re able to lock in the price for up to 25 years depending on your investment and the job creation.”

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