Ontario climate change plan could spike hydro, natural gas rates

Ontario would likely be able to handle an increase in demand for electricity if the province pushes through with its reported $7-billion climate change plan that includes phasing out natural gas — but consumers could see a spike in their rates.

The four-year plan, according to the Globe and Mail, would seek to phase out natural gas for residential heating, used in 76 per cent of Ontario homes, to be replaced by electric and geothermal sources. 

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​"If you're switching from gas, it's going to cost you more. There's no way your electricity bill is going to go down," said Brady Yauch, executive director of the Consumer Policy Institute. "They've gone up faster here, on a percentage term for residential home owners, than anywhere else. They're going to continue to go up."

According to the Globe, the plan would require all new homes built in Ontario in 2030 or later be heated without the use of fossil fuels. As well, the plan calls for 12 per cent of all new vehicle sales to be electric cars and trucks by 2025 — about 1.7 million vehicles. There are currently only about 5,800 electric vehicles in Ontario.

While the plan promises to subsidize any increased electricity costs for homeowners, according to the Globe report, energy analyst Tom Adams said rates would go up for both hydro and natural gas users.

On the track to higher rates

The province currently has an oversupply of electricity, Adams said, so it should be able to meet demand for power if this plan were to come to fruition. In fact, the province has been selling its excess power to the U.S., but critics say the government has lost millions, as it costs more to produce the electricity than what is recouped through those sales.

"There's not a problem with the grid being able to meet the additional load. It's whether the customers can afford to buy this stuff." 

Despite this oversupply, hydro rates remain high, in part to pay for the fixed costs of replacing and adding infrastructure for new generation and eliminating coal as a power source. 

Since 2009, Adams said household electricity prices have been going up at a compound annual rate of increase at around eight per cent. 

"That trend is not showing any signs of turning around," he said. "The bottom line is the Ontario government has made a hash of the whole electricity system and now they want to do the same for natural gas."

There's also been a lot of investment in natural gas, Adams said, and if the government is successful in driving down its demand, taxpayers will be on the hook for those costs.

"If that pipe starts to go empty, we're going to be paying for empty pipe in the way that we're paying for disposal of excess electricity," he said. "This plan that they have put forward is headed us on the track to much higher natural gas costs as well as electricity.

"Double whammy."

Ontario Environment Minister Glen Murray would not deny the report on Monday but insisted that the government is not attempting to eliminate natural gas as a home-heating source.

"You'll have to wait to see the details but no, we're not banning natural gas or taking it away from people," he told reporters. 

Seeking to expand natural gas

Such a move would be a stark reversal for the government, which has been seeking to expand the use of the fossil fuel. Last April, the Ontario government announced a $230-million plan to expand natural gas access, a move it said would "lower prices, help businesses and create jobs."

"Natural gas heating is significantly less expensive than electric or oil heating," it said in a news release.

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"We know that expanded access to natural gas is important to families and businesses in communities across Ontario," Economic Development Minister Brad Duguid said in the statement.

The province has been asking the Ontario Energy Board to look at programs to expand natural gas in rural areas, where it's much more expensive to heat homes using electricity, Yauch said. At the same time, at least according to the Globe report, the province is saying "we're all going to get off natural gas."

"The province, from an economics point of view, is just talking out of both sides of its mouth and doesn't really know what it wants," Yauch said.