Auto assemblers and mold makers in Ontario aren’t impressed with the provincial government’s latest attempt to give them a break on rising energy costs.
The Ontario government tweaked its Industrial Conservation Initiative (ICI) program to allow even manufacturers to enrol. It’s designed to lower energy costs, but only if factories shift production to a time of day when electricity rates are cheaper.
The government also announced it will reduce electricity bills for small business by 17 per cent by rewriting contracts with energy producers. It will shift payment to them to longer terms, like how a home owner might opt for a 50-year mortgage over a 25-year one. Add that 17 per cent discount to the eight per cent HST rebate small manufacturers receive and it could mean some small suppliers would save 25 per cent on their monthly bill.
But the Canadian Vehicle Manufacturers' Association *CVMA), which represents Ford, General Motors and Fiat Chrysler in Ontario, called the entire plan essentially useless to big manufacturers. They don’t qualify for the HST rebate and most of the association’s five assembly plants run at near capacity, meaning they can’t shift production.
CVMA President Mark Nantais called the changes a “major disappointment for vehicle assemblers and their parts and component manufacturing operations.”
The association said the changes “appear to do nothing to address a climate of investment uncertainty related to what has been our number one request to the Province of Ontario: the urgent need to address out-of-control Class A industrial electricity rates that can be two to three times higher in Ontario than in competing auto jurisdictions.”
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.
Nantais said the association will continue to reach out to the province to see what can be done about rising energy costs, which have doubled in the last 10 years.
The Canadian Association of Mold Makers, while appreciates the effort, also had problems with the plan.
President Jon Azzopardi said small parts makers who export already get an HST rebate and many mid-size operations “can’t use ICI either.”
“The 17 per cent is a great move, don’t get me wrong. I’m going to take it because we need it.”
But Azzopardi said the gap between Ontario’s energy costs and those in competing U.S. jurisdictions is so large, “the 17 per cent is just scratching the surface.”
Azzopardi praised Ontario’s energy portfolio, which includes hydro, solar, wind and nuclear generation.
“The real problem is bad management,” he said.
Ontario often generates surplus energy and then sells it at a discounted rate to the states of New York, Michigan, Pennsylvania and Ohio.
Ontario Conservative Leader Patrick Brown said in December that Ontario has “given away” $6 billion in surplus electricity since 2009.
Losing on exports
The Canadian Press reported on Dec. 8, 2016 that Ontario Energy Minister Glenn Thibeault said the province made $230 million in 2015 by selling excess electricity to neighbouring jurisdictions.
“The year before that we made $280 million, the year before that we made $300 million, which we put back to put downward pressure on rates,” he said in the story.
But in the article, Brown accused the energy minister of being disingenuous, saying the minister knows it cost the province $9.4 million to produce the power it sold for $144,000 on Nov. 10, 2016 alone, and that it loses money on its electricity exports.
Azzopardi wants to see the province come up with “unique opportunities where energy is not sold at a premium” to manufacturers but sold to them, instead of American states, at a discount.
“Then we start to create jobs in the area and increase the GDP. Use that income tax money to subsidize energy improvements,” he said. “It’s a circle that’s self-fulfilling.”