The auto industry is applauding Ontario’s plan to subsidize a portion of electricity rates for medium and large commercial and industrial businesses.
The Conservative government says the current cost of hydro for businesses, such automakers and their suppliers are making the province uncompetitive with other jurisdictions.
Starting Jan.1, 2021, the change will see industrial businesses save 14 per cent and commercial businesses save 16 per cent on their average bill, the government says.
The province estimates the program will cost $1.3 billion next year with costs gradually declining until 2040.
According to the Ontario budget released Thursday, an automotive parts manufacturer that uses 2.34 million kilowatt hours of electricity each year would reap about $382,000 in annual savings. “Those savings will not only make Ontario more competitive but can be reinvested by businesses to hire more employees, expand operations and grow the economy,” the budget reads.
Magna International and General Motors Canada applauded the subsidy.
Magna CEO Don Walker has been calling for lower electricity rates in Ontario for years, saying they were at least one factor making Ontario less competitive than other North American manufacturing hubs such as Michigan, Ohio and Mexico.
“I’ve long been a proponent of subsidizing hydro rates for manufacturers in Ontario and believe this is a positive step forward,” Walker told Automotive News Canada in an email Friday. “We applaud the province’s decision to address competitiveness in Canada.”
Brian Kingston, head of the Canadian Vehicle Manufacturers’ Association, which represents the interests of the Detroit Three in Canada, said the budget “addresses a number of longstanding competitiveness challenges.”
“Rising electricity costs and the tax burden have been key competitiveness challenges facing the auto industry for many years,” he said in a statement. “Reducing the costs facing auto manufacturers helps position the industry for success.”
General Motors Canada President Scott Bell said the relief “positions Ontario well for the future.”
“One of the key competitive negatives for manufacturing in Canada is the high Ontario cost of electricity … these are costs that our American factories don’t face,” he said.
The Conservatives blamed the former Liberal government and its Green Energy Act for the spike in rates over the years.
“Since 2008, the year before the Green Energy Act was established, the total cost of Ontario’s electricity system, including for the generation and delivery of power to consumers, has increased significantly,” the budget reads. “Electricity prices in Ontario rose as a result.”
For example, “the price of electricity for industrial employers increased by 37 per cent from 2008 to 2019.”