Entries in Electricity (6)

Thursday
Sep082016

Transparency needed on cap and trade costs

With all that is going on around the issue of electricity, a recent decision from the Ontario Energy Board (OEB) has the Peterborough Chamber and the Ontario Chamber of Commerce Network shaking their collective heads.

Currently businesses in Peterborough are dealing with price increases that are impacting competitiveness, the impact of a potential merger of PDI into Hydro One, lack of transparency around the items included in the Global Adjustment fee and now the Ontario Energy Board has decided to include cap and trade costs in the delivery charge of utilities.   

This move presents a number of concerns including that it seems to be in direct conflict with the Premier’s goal of being the most transparent and accountable government anywhere in Canada.  

In response to this decision the Chamber Network through the Ontario Chamber of Commerce has sent a letter to the Chair of the OEB and copied Premier Wynne and Energy Minister Glenn Thibeault requesting that cap and trade costs be their own line item on energy bills for businesses and consumers. 

The letter outlines four areas of explanation as to why a separate line item is required: transparency, efficiency, sectoral applications and exemptions.

Transparency

Under this area of concern, the letter outlines the need for accurate information to be available to customers so they can make appropriate choices about their energy use including: 

  • understanding how month-to-month emissions costs will help emphasize the value of reducing usage
  • allowing Ontario businesses to properly manage and reduce their usage of fossil fuels
  • offering more information than tariff sheets on a utility’s website
  • creating a direct signal to customers to use less gas and invest in energy efficiency measures
  • educating and influencing customer behaviour

Efficiency

A separate charge will enable customers to confirm they have been charged the correct amount and recognize the different treatment of large emitters in relation to the to customer-related obligations and allow for fewer incidents of customer confusion and inquiries.

Sectoral Applications

Large emitters agree the charge should be separate to allow them to ensure they have been charged the correct amount.

Exemptions

Some users of fossil fuels (farmers and First Nations) are currently tax exempt.  Will this continue to be the case if the cost is rolled into other delivery charges on the purchase of gasoline, diesel, propane, or natural gas?

The letter concludes with a call for the decision for cap and trade costs to be included in delivery charges to be reversed to allow for more transparency for businesses and consumers, and to better inform customer behaviour to help achieve the government’s emissions reduction objectives.  

Read the full letter on our website:

peterboroughchamber.ca

Thursday
Dec032015

The making of a Christmas wish list for business

Recently the provincial government released a fiscal review, outlining the status of the province’s finances.  Contained in that document were a few early Christmas presents for the business community.  The Peterborough Chamber of Commerce and Ontario Chamber of Commerce (OCC) are encouraged to see the Chamber network’s powerful advocacy work directly reflected in the government’s economic plans and priorities for 2016. 

The fall fiscal review introduced for the first time detailed steps to address the cumulative burden facing Ontario businesses. 

  1. A removal of the Debt Retirement Charge on commercial, industrial, and other non-residential electricity users on April 1, 2018, nine months earlier than expected;
  2. A promise to maintain the industrial exception in the Professional Engineers Act;
  3. The “Red Tape Challenge,” a strategy encouraging Ontarians to submit comments to a Regulatory Modernization Committee regarding regulations that impact them;
  4. A Regulatory Centre of Excellence, which identifies and champions best practices from around the world; and,
  5. A Government Modernization Fund to address the cost of modernizing outmoded regulatory processes.

These measures directly reflect the work of the Chamber Network, of which the Peterborough Chamber is a part, over the past year.  

However, there is still more work to do in a number of areas from energy to taxation to the environment.  With that in mind here are a few items from the business community Christmas wish list.

  1. The release of the economic analysis for the Ontario Retirement Pension Plan to inform business and the public as to the true impact of the plan.
  2. An electricity system that is designed to power the economy.  Currently, electricity prices are the highest in North America making it one of the largest barriers to business expansion.
  3. More information on the proposed Cap and Trade system and implementation timeline.  Announcing new programs such as this without some basics as to the impacts on the economy creates apprehension in the business community.  
  4. A more focused and flexible approach to the apprenticeship program as this sector of the economy has a shortage of available workers.  
  5. A recognition that the impact of multiple major policy changes in a short period of time has a significant impact on the business community, many of which are small and medium-sized enterprises. 

In the past two years there have been about a half dozen major policy shifts from ORPP to Cap and Trade to WSIB to minimum wage to electricity to the College of Trades.  In isolation the impact may be manageable; however, the piling on effect of this shift has the potential to have a very negative impact.

“Businesses are pulled in many directions on a daily basis,” says Stuart Harrison, President & CEO, Peterborough Chamber of Commerce. “If their ability to be innovative and competitive in our communities, provincially and globally is constantly hampered by additional legislation, then there is the potential to lose any momentum the Ontario economy is currently experiencing.”

Comment through the "Peterborough Chamber" group of LinkedIn.

Wednesday
Apr292015

A tale of two budgets: federal and provincial

In a tale of two budgets, the federal and provincial budgets were delivered last week. The federal budget is a pre-election document with something for everyone.  The provincial budget is one of a majority government with an eye to transportation infrastructure and getting the province fiscally on solid ground. 

Provincially  

Ontario Chamber of Commerce (OCC) policy analysts were in the budget lockup at Queen’s Park last Thursday and came away with the following analysis:

Provincial deficit has risen

Budget 2015 makes the right commitments but is vague on details when it comes to how the government will meet its deficit reduction targets (eliminating the deficit by 2017-2018).  Total provincial debt is projected to grow to $284 billion this year – equivalent to $20,772 of debt for every Ontarian.  The OCC applauds the government for making difficult decisions in terms of wage restraint measures and holding average annual growth in program spending to 1.5 percent.  This should be a top priority area for the government as eliminating the deficit is the most important step government can take to improve Ontario’s competitiveness and create jobs in the province.

Government is plowing ahead with the Ontario Retirement Pension Plan (ORPP)  

The OCC remains concerned about the impact that the ORPP could have on the economy.  Budget 2015 provides little in the way of clarity for employers on the details of the ORPP.  We continue to call on government to develop a comprehensive understanding of the impact of the ORPP and to re-examine the narrow exemption rules it has in place.  These narrow parameters ignore the contributions that many employers are already making to their employees’ retirement through defined-contribution plans.

Employers will continue to be shocked by rising electricity rates

Budget 2015 does little to address business’ concerns over rising electricity rates.  According, to the OCC’s most recent survey, rising electricity prices are the number one factor hurting business competitiveness.  While the Industrial Conservation Initiative (ICI) and the extension of the Northern Industrial Electricity Rate (NIER) program are encouraging, we remain very concerned about out-of-control electricity rates.  

Government is making important investments in transportation infrastructure

The OCC welcomes increased spending in areas of strategic, economic importance, including transportation infrastructure.  Budget 2015 increases dedicated transportation infrastructure funds by $2.6 billion to $31.5 billion available over 10 years.  These funds will be used for transit, transportation, and other priority infrastructure projects across Ontario. The Province should continue to make use of its world-leading Alternative Financing and Procurement (AFP) expertise in order to ensure it is getting the best bang for its infrastructure buck.

Government is aggressively pursuing an asset recycling strategy

The OCC supports the government’s goal to maximize the value of its assets. Budget 2015 increases the asset optimization target to $5.7 billion, up from a $2.6 billion target in 2014.  As it undertakes its asset review, government must ensure that its actions do not hurt domestic industry and, as it relates to the sale of electricity infrastructure, do not put the rate payer at risk. 

Innovation initiative:  The government is investing $20 million to establish a Health Technology Innovation Fund and appoint a Chief Innovation Strategist.

Cuts to the Apprenticeship Training Tax Credit: Funding is being returned to pre-recession levels, resulting in $30 million in cost savings. 

Youth Employment: Ontario Youth Jobs Strategy is being renewed to the tune of $250 million in the next two years. 

Full Provincial Budget 

Federally

“Oil prices have recovered slightly, to around $56, and we expect them to be back in the $65 range by year-end.  The government also enjoyed a $3.4 billion windfall from the sale of GM shares,” says Hendrik Brakel, Senior Director, Economic, Tax and Finance Policy, Canadian Chamber of Commerce.  “As a result, there is room for some helpful measures to support Canadian business, a few things that will make life easier for business.”

Taxes

Small Business Tax Rate will be reduced from 11 percent to 9 percent by 2019 (0.5 percent reduction each year starting January 1, 2016), resulting in $2.7 billion in tax savings through 2020.  

The federal government also committed to extending the accelerated capital cost allowance to 2025.  

On payroll taxes, the Canadian Chamber was pleased by the government reconfirming the EI premium rate freeze.  

Trade and International Affairs 

There was a significant increase in funding for agriculture exports, including $18 million to promote
competiveness and trade opportunities and $12 million to market Canadian food.  

Technology and Innovation

The federal government promised $1.3 billion over six years starting in 2017-18 to the Canada Foundation for Innovation for advanced research infrastructure at universities and research hospitals. 

As well as, $1 billion over five years for technical demonstrations in the aerospace industry plus $30 million over four years for Canada’s satellite communications sector.  

People and Skills

The investment of $65 million will allow business and industry trade associations to work with post-secondary institutions to better determine the needs of the market.

The Canadian Chamber has been advocating for improved labour market information, so it was pleased to see $4 million over two years to launch a new one-stop national labour market information portal.  We welcome this as a first step toward more investments in actual surveys.  

Missing from the federal budget were discussions around climate change.

Full Federal Budget

The business community is fighting for a business climate that functions at the utmost efficiency and look to the government at all levels to set the framework so that goal can be realized.   The economic health of our country and our province are key to moving us forward.  However, both budgets reflect a common tension that governments must balance through the best of times and the worst of times. 

Comment through the "Peterborough Chamber" group of LinkedIn.

Wednesday
Apr222015

OCC: Selling off Hydro One - the key details for business

Most notably, the government announced that they will proceed with the sale of a portion of its interest in both the transmission and distribution components of Hydro One, Ontario’s largest distribution utility. With a
valuation of $13.5 to $15 billion, the sale will raise an estimated $4 billion
that will be invested in transit and infrastructure through the Trillium Trust. However, the majority of the sale – $5 billion – will be used to pay down the utility’s debt.

The divestiture of a portion of Hydro One will be staged over time in order to protect the public interest. The first step will be an initial public offering of 15 percent on the stock market. Over time, government will sell the remaining shares, retaining 40 percent of ownership.

In response to concerns over the impact of the sale on electricity rates, the government has committed to ensuring that the sale of a portion of Hydro One will not lead to higher rates.

OCC Position
For the past several years, the OCC has been calling on the provincial government to ensure it is maximizing
 the value of its assets, including Hydro One. The announcement is a bold step that will allow the provincial
government to pay down a portion of its stranded debt and make much needed investments in transportation
infrastructure. However, the announcement also raises key questions to which the OCC will be seeking answers: 

  • Can government guarantee that the sale of Hydro One Brampton and a portion of Hydro One will not affect electricity rates?
  • While the short-term impact of the sale of 60 percent of Hydro One will generate short-term revenue, what will be the long term impact on government’s fiscal situation?
  • Will strategic buyers be given the flexibility to implement private sector discipline that will allow for an eventual reduction in electricity rates?

While the OCC is cautiously optimistic about this announcement, it is clear that there are details that have yet to be determined. Ontario’s economic growth is dependent on our ability to create a competitive business climate. Rising electricity rates have been cited by our membership as a consistent problem that hinders businesses’ ability to compete on a level playing field with our North American counterparts. According to OCC survey results, 4 percent of businesses will either shut their doors and/or move to another jurisdiction in the coming years due to these rising rates.

The Government of Ontario must ensure that any steps taken to pay down the debt not adversely affect the cost of doing business in the province. We are committed to remaining an active participant in any discussions about the future of Ontario’s electricity system.

Wednesday
Apr152015

A competitive energy regime will power business forward

“Ontario’s decision to phase out the use of coal-fired generation facilities has branded the province as a leader in modern, clean energy.  Ontario’s energy supply now consists of a strong mix of nuclear, hydro, gas, and renewable.  

However, this path has not been without its challenges.  The province’s competitiveness suffers from its relatively high electricity prices for industrial users. While minor steps have been taken since the release of the 2013 Long Term Energy Plan (LTEP) to mitigate costs, further system-wide cost savings should be explored within the province’s existing energy landscape.  Further, Ontario should focus its investments in areas such as nuclear and data analytics where Ontario can be an innovation and export leader and that, at the same time, can lower long-term costs.”

The above statement is from “Emerging Stronger 2015: Ontario’s Path from Recovery to Growth” which the Greater Peterborough Chamber of Commerce co-released with the Ontario Chamber of Commerce (OCC) in January of this year.  The OCC is currently writing a report on the issue and delegates to the OCC AGM at the end of the month will be having a discussion to ensure that the business case is brought forward effectively to government.  

Electricity is the second largest input cost for business, second only to labour costs.  Therefore, understanding the electricity system and pricing has also been an ongoing concern for the Peterborough Chamber Policy Committee and Board of Directors.  A letter written to the Minister of Energy, Bob Chiarelli in January 2014 expressed three concerns: 

  • The forecasted prices do not promote Ontario as a competitive place to do business, in fact, they give reason for manufacturing companies of all sizes to leave the province
  • Comparing mid-peak time of use pricing in Ontario to other provinces finds Ontario at more than double what is charged in Quebec and Manitoba
  • The decreasing price gap between on- and -off peak hours will hurt the advanced manufacturing sector in the Peterborough area, and the province in general

Unfortunately, the Minister’s answers failed to address these concerns in a concrete way.  Read the original article addressing the Minister’s letter at connectingptbo.ca/ news/2014/4/17/frankly-accepting-the-long-term-energy-plan-is-asking-a-lot.html.

The Chamber of Commerce and many businesses in the Peterborough area are aware of the conservation programs available to companies.  In February, the Chamber’s PBX networking event hosted Peterborough GreenUp and several members. Rocky Ridge Drinking  Water and Swish Maintenance Ltd spoke about their energy saving stories.  Recently, Chamber member Boston Pizza was recognized for installing an energy-efficient piece of equipment through a provincial program that will save the restaurant over $2500 in electricity costs, and save on the amount of power the restaurant consumes.   There are many more stories just like these in our community.  Peterborough Distribution Inc (PDI), our local distribution company,  delivers these provincial programs that help businesses conserve energy.  More information can be found at www.pdiconserves.ca

However, reducing energy use is only part of the story for businesses.  The additional line items on electricity bills such as the Global Adjustment (GA) and Debt Retirement Charge are variable and could cost a business upwards of $600 or more per year.  Yet there is little official clarity on how the GA is calculated.  Recently the government announced that residential customers will no longer be paying the Debt Retirement Charge.  This approach to paying off the debt is not a true solution.  While there will be some relief for residential customers starting in 2016, businesses will continue to pay, once again impacting on the competitiveness of the Ontario economy.  

It’s not simply the cost of electricity businesses are paying on their bill.   The OCC in a 2013 report called “Energizing Ontario” describes the system as being shaped by “competing visions” from historical issues to labour issues to transmission and infrastructure needs to how to move forward with renewable energies.  

In his address to the Peterborough Chamber AGM in March 2015, Canadian Chamber Senior Director of Economic, Finance & Tax Policy Hendrik Brakel identified Ontario as being the growth leader for Canada in the next year or so.  If Ontario is to fulfill this goal the province will need to be firing on all cylinders and an uncompetitive energy regime is unacceptable. 

Comment through the "Peterborough Chamber" group of LinkedIn.