The following letter to the editor was published in the Toronto Star on March 17 2014
By APPrO President Dave Butters
Ontario paid $1 billion to dump excess electricity in 2013, NDP claims, March 11.
Much has been made recently about exports of electricity from Ontario. Some claim that we are subsidizing power for our neighbours, and something needs to be done, like adding some kind of additional costs on to them.
Why do we export (and import) electricity? Because it helps the province’s electricity system and market to be more reliable, cost-effective and competitive. Every hour of every day, Ontario imports and exports energy with neighbouring jurisdictions based on changing market and system conditions. The virtue of interconnectedness is that we can rely on our neighbours for energy when we need to, and they can call on us. And over the years, we have done both, many times.
Are exports subsidized? No. We build capacity (power plants) to make energy. All the generation investment is for the benefit of Ontarians, and we want to keep the benefit of that investment for Ontarians. Ontarians also have first call on its production. Given that we frequently have excess capacity, it makes sense to sell that extra energy for export when possible so that we can maximize the use of existing generation.
Besides the revenue from sales, this earns revenue in a number of other ways, for example in export tariffs, administrative fees and other costs, amounting to about $80 million a year. The companies selling energy are largely Ontario-based or Canadian companies. They sell electricity to make money, not lose it. So again, complaints about wolves and Wall Street traders are just rhetoric. The net result is that Ontario consumers pay about $300 million less for energy each year because of export sales and trading.
It is reasonable to question decisions relating to quantity and type of generation procured, the particular procurement processes, and the value to Ontarians, but it is clear that none of the capacity cost was incurred for the primary purpose of generating electricity for export.
Think of exports like a cottage that you own with a mortgage and taxes to be paid. You might only use the building a few months a year. But you still have to pay the entire years’ worth of costs. Renting out the space for a few weeks or months helps to reduce your overall ownership costs. But it’s still your cottage and you get first call on the space.
Also remember that we import power too. If you were to charge exports the cost of the investment, you would reasonably need to give people outside Ontario equal call on the production. Why should they pay the same for a lesser product? This would jeopardize the availability for Ontarians. Adding more costs to exports would have only one effect. It would kill exports.
In conclusion, Ontario is a trading jurisdiction and none of this should be baffling. Energy exports are like any other goods that move in and around the North American economy, based on prices. However, most political criticism of energy exports is simplistic and attacks the symptoms and not the causes of our current energy situation. Furthermore, most of the cures to this non-existent problem would make costs higher for consumers, not lower.
David Butters, President & CEO, The Association of Power Producers of Ontario (APPrO)