Why Ontario’s Clean Energy Benefit Makes Sense – Sort Of

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We hesitate to admit it (because we dislike anything that distorts the true cost of energy to ratepayers), but in a roundabout way, the Clean Energy Benefit (CEB) announced by Ontario’s Government on November 17 makes economic sense.

Although the CEB appears to simply be a way of keeping electricity bills from climbing too fast (which surely is the political purpose of the CEB ) – it actually reflects the reality of how renewable energy creates benefits for taxpayers and ratepayers.

Just to be clear:

- Taxpayers pay for public expenses through the multitude of taxes most of us have to pay

- Ratepayers pay for the electricity we consume and the grid that delivers the electricity to us

Fossil and nuclear fuels we use have always been highly subsidized by the taxpayers. Before Ontario’s Government began phasing out coal this fall, the healthcare and environmental economic impacts from coal in Ontario were estimated at an amount equal to 20% of the average Ontario household bill.  In other words, the taxpayer is covering an (indirect – but actual) expense caused by the production of electricity. That means that if it wasn’t for this taxpayer subsidy, ratepayers should have been paying an additional 20% on each bill.  And that is just one example of how taxpayers have been giving ratepayers a break for Ontario electricity.

Now that coal is being replaced, in part, by renewable energy and electricity conservation programs, ratepayers are being asked to pay more for their electricity but taxpayers will no longer have to shoulder the cost of coal’s economic externalities. Put differently, the new electricity rates more accurately reflect the true cost of the electricity.

Because this shift away from coal is happening so quickly, it may make sense to ease in the change through a rebate from the taxpayer to the ratepayer over a period of time.  The rebate of 10% seems reasonable at first glance given that not all of the coal has been phased out.

Clearly, there is much more going on – politically, economically, and practically – with the CEB than can be examined in a short article such as this one.  But with all of the political bluster and media sound-bites going around it often feels as if the true benefits of renewable energy are being lost in the political ambitions of all sides in Ontario.

Whatever its political purpose was, perhaps an unintended benefit of the Clean Energy Benefit is that it could raise awareness for the taxpayers’ long-standing electricity burden. And in the meantime, Ontarians will have a new line, and a rebate, on their electricity bills that (sort of) makes sense.

Illustration photo by quinn.anya

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