May 212011

updates-blog-entryFreedom Party receives letters on a daily basis. Party leader Paul McKeever reads all of them, and tries to respond to all of them (though he could not possibly answer all of them).

In the last few days, Progressive Conservative party leader Tim Hudak announced that he would remove the debt retirement charge from Ontario electricity bills. Like his promise to make time of use billing optional, it is a proposal lifted from Freedom Party of Ontario’s far more substantive electricity plank for the 2011 provincial election; a plank that was released way back on October 12, 2010. You can read it here: In true Progressive Conservative style, Mr. Hudak decided to lift these planks only because his party discovered, through polling, that these Freedom Party proposals are popular. His desire to lead by following the polls (i.e., his desire to be the Follower in Chief), has – of course – also led him to lift a plank from Ontario’s socialist New Democrats, who have proposed to remove Ontario’s 8% portion of the HST from electricity bills (the NDP says they’ll make up for the $1.2B loss by taxing corporations, whereas Tim Hudak’s PCs want us all to believe that he’ll be paying for his promises by “cutting red tape” and finding “waste in the system”: we’ve all heard that ridiculous song before).

Not surprisingly, Hudak’s unprincipled and irrational (some might say “liberal”) poll-following ways are losing him supporters. Today, we feature a letter from an Ontario conservative who has had enough of Tim Hudak and the PCs. His letter follows immediately below, and is followed immediately thereafter by Freedom Party leader Paul McKeever’s reply.

From: M [address and name removed to preserve writer’s anonymity]
Sent: Thursday, May 19, 2011 12:45 PM
Subject: Electricity prices

I’m a conservative who is fed up with the PC party and came to your site for a view. The first thing I saw was your plank on electricity prices, which I read. In many ways you are right, but in certain substantial ones, you are as dumb as Tim Hudak.

For instance: Why would you get rid of the stranded debt costs? In a free-market system, those costs should be attached to their source – nuclear power – so that when and if consumers get to choose their power, as you advocate, they will know the true costs of that type of power.

Baseload over-capacity is mostly caused by a 10% drop in electricity demand in the province, which has to do with the recession and McGuinty’s tax policies. But planning for electricity is a 10-year exercise. These periodic overruns are unavoidable, unless, of course, you are willing to face shortages from time-to-time. Getting rid of TOU pricing sounds nice, but it is stupid. Power costs more to make at peak times – if only because the capital costs of the plants are amortized over shorter running periods. Policies that reposition the demand to soak up some of the excess baseload power, i.e., TOU rates, make economic sense.

You apparently assume that surplus power is caused by the <3% of Ontario's power that comes from wind and solar. Most surplus occurs at night, right? How much solar power is produced at night? Even wind typically is much calmer at night as it is caused by sun-heated air movements. "Private investors could now make a killing on otherwise money-losing solar and wind power generation." Really? I suggest that you have no idea if private producers are "making a killing" or not. Can you quote expected rates of return? I didn't think so. I would also be surprised if you have any idea what the true replacement costs are for nuclear, water, coal, gas or any of the other sources that you are touting. If you don't know these things, you are being as irresponsible as Hudak. No private producer will poor hundreds of millions of dollars into a power plant without a contract and be at the whim of succeeding governments. Only a government-owned utility would do that, because they never have to worry about going belly-up. OPG has requested an increase from the OEB of more than 9% this year on existing plants. That is what you would be condemning Ontario's power consumers to. Certainly no smaller entrepreneurs can participate in this type of market. This isn't freedom; this is a plank that favours the existing government/union power monopoly. M

Date: May 21, 2011

Dear M:

Thank-you for your e-mail, [above].

The debt retirement charge was one of three components brought in to pay for stranded debt. Specifically, it was introduced to pay for *residual* stranded debt of about $7.5B. The DRC has brought in well in excess of $7.5B: it is no longer serving its original purpose. It now has become just another tax. There is no rational reason for a tax tied specifically to electricity consumption. Moreover, there is no rational reason to charge HST on an alleged debt payment. Eliminating the DRC will eliminate both of these problems.

We do not propose to get rid of TOU pricing. We propose choice over social engineering. Baseload can be ramped up or down relatively quickly for day/night differences *if* the technology provides for it. Technologies such as gas and coal gasification do. Nuclear does not, hydro spilling is not acceptable, wind and solar output is controlled by mother nature.

What makes “economic sense” depends upon ones ethical and political position. To Freedom Party, lumping individuals into a collective so as to theoretically minimize the cost of some good or service – i.e., central planning, government limits on human reproduction, oppressive regulations to minimize the use of a socialized health care system, etc. – is both wrong and anti-freedom. A Freedom government will work toward a society in which every individual is free, first and foremost, to pursue his or her own happiness. Those looking to be treated like communal cattle owned by the government are free to vote for the Greens, Progressive Conservatives, or Liberals.

We make no assumption that all surplus baseload events are caused by wind and solar. However, experts expect periods of surplus to be more frequent and prolonged as unpredictable quantities of power are introduced to the system via wind and solar.

Under the plank we have put forward, the costs of replacement, and issues of return on investment, are not a concern directly for the government, because the government is not the party buying the generation facilities: under our proposal, the private sector is the investor. We are not proposing condemning anyone to the whims of the OEB. We are proposing a free market for electricity, not the investment of billions of taxpayer dollars into government-owned facilities. We care not whether the persons who choose to invest their own money are “smaller” or “bigger”. We care only that they be subjected to the contest imposed by supply and demand in a free market. If big or small players cannot succeed, that is their problem, not the taxpayer’s or the consumer’s.

As for investor confidence: it was destroyed by the PCs’ decision in 2002 to put a 4.3 cent cap on electricity. McGuinty – for about a week – argued that such that thing could not responsibly be done. Then he jumped on board the price cap band bandwagon with Eves. Together, they and their respective price regulation experiments scared off private sector power generation investors. The PC and Liberal governments’ utter lack of credibility with respect to free market pricing made it necessary for McGuinty to enter into contracts with the private sector in which extraordinary prices were promised to overcome the Liberals/PCs’ lack of credibility. Hence our item 3, which would provide investors with a contractual guarantee that the Ontario government has no power to regulate prices and thereby interfere with supply and demand in a free market.

Incidentally, I, and Freedom Party, have a consistent history on the electricity file. Here is a collection of snippets from talk shows – dating back as far as 2002 – in which our opposition to price regulation and government monopoly is set out.


Paul McKeever
Leader, Freedom Party of Ontario