The Ontario Government Needs a Lesson in How Energy Markets Work

Originally posted on Huffington Post: on August 28, 2014.


Does Ontario’s Minister of Energy Bob Chiarelli understand how electricity markets work?
Or is he deliberately sabotaging negotiations with Quebec to justify Ontario spending billions on nuclear power?
Ontario has an opportunity to purchase low cost water power from Quebec. The province could avoid wasting billions on the Darlington Nuclear Station Re-Build Project.
No nuclear project in Ontario’s history has delivered on time or budget. The Darlington re-build is already over budget.
Premier Wynne in her recent meetings with Quebec Premier Philippe Couillard has raised hopes that a power deal is possible. The Green Party, along with environmental NGOs such as the Ontario Clean Air Alliance, have long advocated replacing high cost nuclear power from Darlington with lower cost water power from Quebec.
Just when it looked as if Ontario was on the verge of saving billions, Minister Chiarelli seems to be playing games that threaten the Premier’s plans.
The Minister claims that buying water power from Quebec is not “a slam dunk” because Quebec sells electricity to the U.S. at above-spot market prices.
The Minister should know that Ontario’s electricity contracts normally pay rates above the market average. Publicly owned Ontario Power Generation (OPG) says that power from Darlington, for example, will cost around 8.3 cents per kWh, well above the spot market price of around 2 cents per kWh.
The Liberal’s gas plant scandal has certainly opened our eyes to how private gas-powered plants receive above market contract prices. So does the privately operated Bruce Nuclear Plant, as well as renewable energy projects.
So, why does the Minister expect Quebec to sell power at the spot market price which is well below contract prices Ontario has with other suppliers? This is a billion dollar question.
Studies show that Ontario could save over $600 million per year by paying those above market prices for Quebec power instead of paying even higher prices for Darlington nuclear power.
Nuclear power is a bad choice for our financial future. Nuclear power is a bad choice for our energy future. It’s time for the Liberals to wake up from their nuclear dream, and get down to the business of providing Ontario with safe, secure, and affordable electricity.