CMS 23-10 Ontario Industrial Electricity Rates
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TOWN OF WHITBY REPORT RECOMMENDATION REPORT REPORT TO: Council REPORT NO: CMS 23-10 DATE OF MEETING: 10 May 2010 FILE NO(S): PREPARED BY: Community and Marketing Services LOCATION: REPORT TITLE/SUBJECT: Ontario Industrial Electricity Rates 1.0 RECOMMENDATION: 1. That Community and Marketing Services Department Report CMS 23-10 be received as information; 2. That Council endorse the following resolution: Whereas a goal of the Provincial Government’s ‘Open Ontario’ 2010 Budget is to protect and enhance job creation and economic growth through providing stimulus plans to increase investment, trade and global opportunities for Ontario companies; Whereas communities located throughout the Province have been affected by the global economic recession and the transformation of key sectors, especially manufacturing, resulting in plant closures, job losses and a heavy burden on families and communities; Whereas a competitively priced electrical energy supply is a critical component for the maintenance and growth of manufacturing in all of Ontario, including Whitby and Durham Region; Whereas the Provincial Government has announced as part of the ‘Open Ontario’ 2010 Budget the creation of a three-year Northern Ontario Electricity Rebate Program averaging $150 million annually that would provide electricity rebates of two cents per kilowatt-hour for qualifying large industrial users, resulting in a reduction of their electricity prices by approximately 25 per cent based on 2009 levels; Whereas large industrial manufacturers operating plants in southern Ontario are competitively disadvantaged since they are ineligible for the recently announced Report to: Council Report No.: CMS 23-10 Page 2 of 6 electricity rebate program that will be available to all large industrial users located in northern Ontario; Whereas the large industrial power users and manufacturers associations have proposed to the Provincial Government that power rates should be favourably adjusted to reduce and/or eliminate escalating electricity add-on charges to encourage and reward those industries that load shift thereby reducing electricity demand during peak periods; Therefore be it resolved that the Town of Whitby calls upon the Provincial Government to implement a similar electricity rebate program announced in the Province’s ‘Open Ontario’ 2010 Budget to all qualifying large industrial manufacturers no matter where they are located in Ontario; and further, that the Province undertake a review of the add-on charges such as the Global Adjustment and Debt Retirement Charges with the view of reducing or temporarily suspending those charges for large power users, so as to enhance the competitiveness of all Ontario manufacturers to compete globally and provide sustainable employment; and, 3. That the Clerk forward a copy of this report, once approved by Council, to the Honourable Dalton McGuinty, Premier of Ontario; Honourable Brad Duguid, Minister of Energy and Infrastructure; Honourable Sandra Pupatello, Minister of Economic Development and Trade; Honourable Dwight Duncan, Minister of Finance and Chair of the Management Board of Cabinet; Honourable Linda Jeffrey, Minister of Natural Resources; Christine Elliott, MPP Whitby-Oshawa; all other Members of Provincial Parliament in Durham Region; Durham Region Economic Development and Tourism Department; all other municipal economic development offices in the Region of Durham; Regional Municipality of Durham, Whitby Chamber of Commerce; all other Chambers and Boards of Trade in Durham Region; Durham Strategic Energy Alliance; Atlantic Packaging Products Ltd. and Gerdau Ameristeel Corporation Whitby. 2.0 EXECUTIVE SUMMARY: Most recently industry in Ontario has faced significant economic challenges, including a global recession, a stronger Canadian dollar, increased global competition, and higher electricity rates. The Province has introduced a new electricity rebate program in the ‘Open Ontario‘ 2010 Budget that is available to large industrial companies only located in northern Ontario. This staff report recommends that the Provincial Government be requested to make this program available to all qualifying large industrial facilities, regardless of where the plants are located in Ontario; and further, that the Province undertake a review with consideration to reducing or temporarily eliminating the add-on charges such as the Global Adjustment fee and the Debt Report to: Council Report No.: CMS 23-10 Page 3 of 6 Retirement Charge for large industrial power users in order to enhance the competitiveness and sustainability of all Ontario manufacturers to compete domestically and internationally. 3.0 ORIGIN: This report arises from discussions with Whitby’s large power users including Atlantic Packaging Products Whitby and Gerdau Ameristeel Corporation Whitby, and correspondence forwarded to the Province of Ontario from the Coalition of Ontario Manufacturers for Competitive Industrial Power Rates, which includes a representative from Atlantic Packaging. Atlantic Packaging has a large newsprint plant in Whitby, but has recently closed due to economic challenges, including the increasing cost of power. Gerdau Ameristeel operates a large steel mill in Whitby and has also reduced operations due to the global economic recession. 4.0 BACKGROUND: The Province’s 2010 Speech from the Throne and 2010 Budget sets out a five-year plan to ‘Open Ontario’ to new jobs and economic growth. Included in the most recent Budget is a program that will permit qualifying large industrial users in northern Ontario to receive an electricity rebate that would reduce industrial electricity prices by almost 25 per cent based on 2009 levels. The rebates would help qualifying industrial facilities achieve electricity efficiency and sustainability. This new initiative is not available to large industrial companies that have facilities in other parts of Ontario, including Whitby and Durham Region. Large power users in Ontario have also lobbied and requested the Province consider revamping electricity rates to encourage and reward large industrial users to load-shift to off-peak power periods. 5.0 DISCUSSION/OPTIONS: Atlantic Packaging has recently closed their Whitby newsprint mill, in part due to the large and rising cost of electricity. Gerdau Ameristeel, another Whitby based company, has also expressed great concern about the overall cost of power, and as a result that company has adjusted their operations. In order to sustain manufacturing, critical to the economies of Whitby, Durham Region and Ontario, initiatives to help industry restructure to improve operations and enhance productivity must be developed. The Province has done exactly that by announcing a $150 million program for the next three (3) years that would reduce industrial electricity prices by two cents per kilowatt- hour, or on average by about 25 per cent based on 2009 levels. The rebate would be available to qualifying large industrial users that commit to an electricity efficiency and sustainability plan. However, this program is only available for companies located in northern Ontario. A similar program is currently available for only pulp and paper mills in northern Ontario (i.e., north of Parry Sound), and this program will continue until Report to: Council Report No.: CMS 23-10 Page 4 of 6 September 2010 when it will be replaced with the program announced in the 2010 Budget (the new program in the Budget is available to all industrial sectors). Industry wants to be able to compete, but there must be a level playing field to do so. The electricity rebate program announced just for northern Ontario fails to address the same cost issues and electricity rate increases that large industrial users face in southern Ontario. The Coalition of Ontario Manufacturers for Competitive Industrial Power Rates is an industry led group of manufacturers associations from southern and eastern Ontario, and the Ontario Forest and Southern Paper Mills associations. This Coalition has petitioned the Province, specifically the Minister of Economic Development and Trade, the Honourable Sandra Pupatello, and the Minister of Energy and Infrastructure, the Honourable Brad Duguid, indicating that the rising cost of electricity is negating the benefits of aggressive conservation efforts that industry is implementing including plant retrofits and load shifting to off-peak times. The Coalition is seeking from the Province a review of electricity pricing to help manufacturers remain competitive in a growing globally competitive marketplace. Many USA states are using energy rebate programs or other energy pricing initiatives to lure manufacturers to locate in their jurisdictions. Other industry associations such as the Association of Major Power Consumers of Ontario, of which Gerdau Ameristeel Whitby is a member, have also lobbied the Provincial Government to address the critical issue of rising electricity rates. Industry groups are requesting the Province consider reducing, re-allocating and/or eliminating many of the add-on charges such as the Global Adjustment and the Debt Retirement Charge (DRC) in order to reward large users that consume energy during off-peak hours and extending the DRC amortization period to reduce the current level of payments. Many industries and manufacturers have the ability to shift their production to take advantage of lower electricity prices during off-peak periods. The problem is that the market price of electricity is being masked by the Global Adjustment Charge, because the final