Another Blow to Manufacturers: Rising Energy Costs

Report says rates will soar 5-8% over five years

Manufacturers in Ontario can expect electricity rates to jump five to eight per cent over the next five years according to a report for the Canadian Manufacturers and Exporters prepared by Aegent Energy Advisors.

The report includes data for household electricity rates; consumers can expect their electricity bills to increase 6.7 to 8 per cent annually for the next five years.

The report follows submissions by Ontario’s energy suppliers such as Hydro One and OPG ,which have applied for energy rate increases for residential and non-residential markets.

For Symtec Specialty Alloys based in Cambridge, ON, the potential electricity rate increases will impact the company’s bottom line, says Hopeton D’Aguilar, general manager.

“We’re concerned about the rate increases because it will affect our operating expenses. The laser cutting machines in our shop consume a great deal of hydro, so an increase in our electricity rates will impact us. We’re looking at alternatives; I’ve joined a group in the Waterloo/Kitcher area that’s involved in solar and wind turbine markets and I’m exploring the use of alternate energy to offset rising electricity costs.”

He adds that he’s joined from a business point of view because there is potential growth for laser and waterjet cutting of precision parts on wind turbines.

He’s also considering a new solar energy incentive program from the government that provides partial reimbursement for costs associated for converting to some solar power.

Despite the incentives for moving to alternate energy sources, some energy experts say it won’t offset costs much because rates are increasing on all sources of power. A September 1 Toronto Star online story notes the “Ontario Power Authority has signed a series of contracts with electricity suppliers, many of them producing power from renewable sources, at prices higher than current market rates.”

And the government supports the rate increases. In the same Toronto Star article, Brad Duguid, Ontario’s Minister of Energy, says that higher rates are needed to boost investment in the power system.

“It’s the cost of building new generation we need to have reliable system,” he said. “It’s the cost of building a cleaner system and replacing dirty coal.”

When David Deskur, president and owner of Guelph, ON-based CGL Manufacturing, hears comments like the one from Duguid saying he supports rates increases, he is dismayed.

“Energy rates are like taxes in that there’s not much we can do to reduce our costs. It’s one reason why, aside from our dollar, you’re seeing a lot of manufacturers leaving the market. It’s unfortunate that the government would support these rate hikes and it seems to be disjointed as far as the government supporting industry. I find it frustrating.”

He adds that rate increases of five to eight per cent are a big issue.

“We can’t recoup these costs from our customers. We can’t ask for price increases based on utility costs going up for us. It’s hard enough to do this on commodity based items like steel, let alone any other cost-related issue we’re dealing with.”

Like Symtec in Cambridge, CGL is exploring alternate energy sources to offset rising costs of hydro electricity.

“We’re exploring solar power because we have a very large roof which apparently lends itself well to hooking up a solar system. But there is a significant investment and risk attached to doing this.”