The Province of Ontario plans to work with medium-sized auto parts manufacturers to see if it can “provide them breaks on their energy costs,” says Minister of Economic Development Brad Duguid.
“We would ignore the concerns of some of those medium companies at our own peril,” Brad Duguid told Automotive News Canada. “Our focus now is on the Class B consumers, medium sized companies, where some of the costs are now on their shoulders.”
Electricity rates in Ontario are higher than those in the 10 largest auto-producing American states, according to a study published by the Automotive Policy Research Centre at McMaster University in Hamilton, Ont.
It’s a concern from top to bottom in the auto industry.
Magna International CEO Don Walker told the Automotive News Canada Congress audience on Feb. 17 the company spends $80 million on electricity every year, “and those numbers are a couple years old,” he said.
At the same event, General Motors Canada President Steve Carlisle said of energy costs: “We’ve got to keep it top of mind.”
“I can’t talk about anything in Ontario without talking about electricity,” he said during his speech.
While large and small energy users qualify for a variety of incentives and discounts, mid-size manufacturers do not. So, Automotive Parts Manufacturers Association President Flavio Volpe called Duguid’s comment “a move in the right direction.”
“We have been lobbying for some time now to get some relief for companies who use a significant amount of power but don’t meet the large-power user descriptor,” Volpe said.
Different discount programs
On Jan. 1, Ontario tweaked the Industrial Conservation Initiative (ICI), an incentive program for larger electricity users. It now allows for about 1,000 more large energy users to qualify for incentives to reduce their electricity bills.
“By simply enrolling in the program, those 1,000 companies could each save 14 per cent on their bill. Depending on their ability to reduce peak electricity consumption, they could save up to 34 per cent,” according to the province’s website.
Because Ontario uses time-of-use pricing for its electricity, meaning it’s cheaper at night than during the day, manufacturers only receive the larger ICI discount if they shift their production to a time of day when electricity use is not at its peak.
“You can’t stop production to save on electricity,” Volpe said. “Your customer is expecting that product at their door. That’s the problem,”
Duguid insists the ICI program provides companies “with significant savings and puts them, at worst, in the middle of the pack in terms of electricity costs” when compared to other places.
Many mid-size manufacturers fail to qualify for the ICI because their monthly peak demand for electricity isn’t greater than one megawatt. And many of those same manufacturers don’t qualify for a new eight-per-cent discount that went into effect Jan. 1 because they use more than 250,000 kilowatt-hours of electricity per year and exceed a monthly peak demand of 50 kilowatts.
Volpe said his association has had conversations about electricity with the government for the last couple of years.
“The initial engagement was empathetic, but without action,” he said. “We did our part on education and they have done their part on giving us an understanding on how difficult it is to make changes in a real monolithic electricity delivery system.”
Volpe said the situation isn’t “make or break, yet” for most companies that don’t receive a discount or incentive.
Jocelyn Williams Bamford, head of the Coalition of Concerned Manufacturers, disagrees. She called energy rates “a crisis.”
She said her November electricity bill at Automatic Coating in Toronto, was $45,000 but that only $5,600 was for actual electricity. The rest was for delivery and global adjustment fees and more.
“We’re not cost competitive with other jurisdictions,” she said.
“They’re finally at a place where they’re saying, ‘yes, we recognize there is a problem.’ Which is half the struggle; to get them to admit there is a problem,” Williams Bamford said of the province. “I think they realize we’re not competitive.”
The coalition wants to see the government offer industrial electricity rates, renegotiate contracts with green energy producers, benchmark costs with other jurisdictions and use money generated through a cap-and-trade program to offset electricity costs, among other things.
Under cap-and-trade, the biggest-polluting companies must buy permits if they exceed provincially set limits on greenhouse gas emissions. The province also adds 4.3 cents per litre to gasoline under the program. The government expects to collect $1.9 billion annually from the program
According to a Toronto Sun report, the government intends to dedicate some of the proceeds from its cap-and-trade program to keeping electricity rates affordable for business.
The Ministry of Energy didn’t immediately respond to an interview request.