Speech by Tim Hudak, MPP
Ontario PC Leader
Association of Power Producers of Ontario (APPrO)
Annual Power Conference
November 16, 2011
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Thank you, Stephen [Somerville, Conference Chair].
Good morning everyone.
Before I start, I want to thank Stephen Somerville, Dave Butters and APPrO for having me back at their power conference this year. And thanks to all of you for joining me this morning.
I want to introduce to you my new Critic for Energy, who is here today. The member for Nipissing – Vic Fedeli. Vic is a former mayor and highly successful businessman. As a previous chairman for North Bay Hydro, he will bring practical experience to his new role.
I encourage you, within the next few weeks or months, to seek him out. Meet with him. Get him plugged in to the sector and your key issues. I’m confident he will do an outstanding job, like John Yakabuski before him.
I know a lot of you met with John when he served in this role for the PC Caucus. He was an outstanding critic and contributed greatly to the energy policy that helped us pick up 12 additional seats in the recent election. He now takes on a key role in our stronger, more experienced Ontario PC Caucus as the Chief Whip.
Ladies and gentlemen, this is an early morning address, most of you are probably still on your first cup of coffee, so I’ll state plainly what I would like you to take away from my remarks this morning.
I see energy as an economic fundamental. I believe electricity policy should be focused on creating an efficient supply of power at affordable prices. Period.
This has long been the blueprint for success in Ontario, but we’ve abandoned that practice under the current government.
They’ve instead taken a much more short-sighted approach.
It reminds me of the old joke about the economist who visits the Soviet Union and finds thousands of workers with shovels building a massive new dam.
The economist turns to the foreman and says, “What are all these men doing with shovels, don’t you have a bulldozer?”
The foreman says, “You don’t understand – if we were to use a bulldozer, then all of these men would be out of work.”
To which the economist replies, “Ohhh, I thought you were trying to build a dam. If you want to create jobs, why don’t you give them all spoons?”
Can you tell I did my Masters in Economics? It’s a funny joke (at least to an economist), but the point it makes is an important one.
You build a dam to provide reliable, low-cost hydro to the broader economy – not to create temporary jobs in building the dam. Electricity infrastructure is economic infrastructure.
This is what I’d like to talk about today – treating our province’s electricity policy as a cornerstone of economic growth, and not using it as another means of accomplishing social goals.
We can do this by re-establishing three fundamental economic principles this government has lost sight of:
COMPETITION
Let’s start with re-introducing the basic principle of competition.
To hear Dalton McGuinty talk about it, you’d think there’s no other approach to procuring renewable energy than his Feed-in Tariff.
While we use competitive RFPs to guarantee the best price when building a new hospital, highway, or power plant – when it comes to wind and solar projects, we throw this principle right out the window.
Dalton McGuinty likes to refer to Ontario as a leader on this front. He certainly jumped in with both feet. But there’s a good reason no one is following that lead. This approach is simply unsustainable.
The Feed-in Tariff is barely two years old, and yet the OPA has already been flooded with 10,000 FIT applications, and another 44,000 microFIT applications. Nearly 55,000 applications in 2 years.
But as we all know, this level of participation isn’t the sign of a successful program – it’s the telltale sign of a gold rush. And like all bubbles, they eventually burst.
Which is why I suspect no one else in North America has followed Ontario’s lead.
Whereas did you know that Alberta, using a competitive process, has brought online more wind energy as a proportion of its supply – at a lower cost – than Ontario has using the Feed-in Tariff?
And it’s not just Alberta. Texas and much of the mid-western United States are finding wind power can compete in the open market on its own merit.
50 US states and 9 other provinces procure renewable energy using the principles of competition. And I’m sure there are many of you in the room this morning with experience competing in these other jurisdictions.
Only in Ontario do we pay developers a flat subsidy. Decided by bureaucrats and politicians. Locked in for 20 years. Just sign on the dotted line.
And what does Economics 101 tell us will happen when we take this approach? Prices go up.
According to the Ministry of Energy, electricity prices in this province will double over the next two decades, while the U.S. Energy Information Agency actually projects electricity prices in the United States to decrease over the same time period.
You tell me, if you were an entrepreneur looking to start a business, where would you choose?
Every jurisdiction we’re competing with for jobs and investment is after the same thing – a reliable and diversified supply of power at the lowest cost.
Instead of Ontario’s current approach to procurement, I would let the market – in a fair, competitive, transparent process – dictate the price for new contracts.
STABLE REGULATORY ENVIRONMENT
Which brings me to my second point.
Once we have re-established this level playing field, then the best way to attract new investment is with a stable regulatory environment, where everyone knows the rules of the game and they only change in predictable ways.
When I talk to those in the energy sector – whether their business is in generation, transmission, or distribution – the one thing I hear over and over again is that the rules of the game are constantly changing.
Friends, it’s simply not fair to make it all the way to overtime only to have the referee tell you, you have to pull your goalie.
From ministerial directives to social engineering to secret deals to high-profile backtracks, the tinkering never stops.
You know what I’m talking about – it’s not enough for the Premier to create the clean energy benefit; he’s got to tell municipal utilities what messaging they have to print on the envelope.
This approach signals that Ontario has no long-term vision, or plan to get there. It sends the wrong message to investors and developers, small businesses and families alike.
And as we all know, the result is that it drives up the cost of doing business. It puts a chill on job creation and investment.
None of us want to see a consumer backlash from rising energy bills. None of you want to deal with abrupt or structural changes after every election. And none of us want communities in an uproar every time we need to build a new power plant or pipeline.
It’s a downward spiral – as one intervention invites another, and another, and another.
It’s not the role of the government to micro-manage the day-to-day technical decisions in any sector of the economy. It’s the role of the government to create the right conditions for investment and job creation, and then get out of the way.
That’s what I’m focused on. That’s what the Premier of Ontario needs to be focused on.
EVERYONE BENEFITS FROM TRADE
And this brings me to my final point – a Premier should be focused on the big picture, including how Ontario consumers stand to benefit from greater trade with our neighbours.
Ontario is not an island. We should stop looking at our supply and demand in isolation, and recognize that we’re part of a highly interconnected, North American system.
That may sound obvious to the people in this room, but these days there are those at Queen’s Park having trouble seeing the obvious.
We have Niagara Falls, we’re the cradle of Canada’s nuclear power industry, the Dawn Hub is one of the largest natural gas storage facilities in North America, and we’re bringing on board thousands of megawatts of new renewable power.
We’re also in a unique geographic position, sitting between massive amounts of hydroelectricity in Quebec and Newfoundland and Labrador to our east – and Manitoba to our west. We’re located above the United States and what looks like a hundred-year supply of new sources of natural gas.
We already import and export electricity every day, but there is no long-term vision for how this can be leveraged to our advantage. There is no long-term plan for how our existing partnerships will be maximized or how new alliances will be formed.
We’ve ignored the fundamental principle of trade, and how an efficiently working import-export market improves reliability, lowers costs, and leads to a more affordable supply of power.
Today these issues are an afterthought at best. We continue to build new capacity, and then pay to get rid of the surplus with no concern for how this affects consumers.
This government is so focused on the here and now that it’s failed to think about this bigger market, our location in it, and how we stand to benefit in the decades to come.
Ladies and gentlemen, Ontario is suffering through an economic malaise with no clear end in sight.
Just yesterday, another report – this one from the Task Force on Competitiveness, Productivity and Economic Progress – found Ontario’s productivity and standard of living continue to lag behind our North American competitors. And the gap between us is getting wider.
We face a growing deficit that is double the size of all the other Canadian provinces combined, and has been for 4 years now.
We have been losing 100 full-time jobs every hour, on the hour, since last month’s election – as over half a million Ontarians remain out of work.
This, of course, is contributing to Ontario’s jobless rate – which has remained above the national average for 58 straight months, or just under five years.
And it’s not just the fragile state of today’s global economy that’s solely to blame. The recession hit everyone. We’ve simply been pursuing the wrong economic policies here at home.
If we continue on this path, London Economics International estimates Ontario will have the absolute highest electricity prices in all of Canada by 2015.
These electricity prices will be combined with the absolute highest regulatory burden in all of Canada.
Matched by the worst government spending and debt problem in all of Canada.
Even through our darkest days, Ontario’s tremendous potential has always been there. It’s not too late to take a different path… to restore Ontario as an economic leader in Canada.
That means creating the conditions for new growth, new investment and new jobs. It means creating an efficient energy supply at prices we can afford.
We achieve that by re-establishing three fundamental economic principles: Competition. Stable regulatory environments. And trade.
Working together, we can restore energy as a cornerstone of Ontario’s economy.
Friends, thank you and enjoy the rest of your conference.
Authorized by the CFO of the Progressive Conservative Party of Ontario
