Financial Accountability Office of Ontario Reviews Ontario-Quebec Electricity Trade Agreement

The Financial Accountability Office of Ontario (FAO) recently concluded that Ontario ratepayers will save approximately $38 million under the Ontario-Quebec Electricity Trade Agreement (ETA).

Ontario and Quebec entered into the ETA in 2016 (see our previous discussion here). Under the ETA, Ontario agreed to purchase two terawatt hours of electricity from Quebec annually from 2017 to 2023. Quebec’s hydroelectric power displaced electricity that would have been produced in Ontario by natural gas-fired generation facilities. The Government of Ontario originally projected that the ETA would reduce electricity system costs for consumers by about $70 million.

The FAO was created in 2013 to provide independent analysis of the state of the Province’s financials. MPPs may direct the FAO to estimate the financial costs and benefits of any proposed bill. The FAO reviewed the ETA and determined that the combined impact of the electricity purchases, electricity cycling and capacity sales will lower the cost of electricity payed by Ontario ratepayers by a net total of $38 million from 2017 to 2023.

The FAO also concluded that the while the electricity imported from Quebec under the ETA will reduce natural gas generation and associated GHG emissions, the agreement will not increase the overall level of electricity imports from Quebec. Ontario was already displacing this natural gas generation through purchases from Quebec in the open market:

In summary, the FAO concludes that the ETA will not have a significance effect on natural gas generation in Ontario or GHG emissions. The Province is already displacing close to the maximum amount of natural gas generation possible during on peak demand with the current transmission infrastructure. To the extent that Ontario needed to address the risk that imports from Quebec would decline in the future, carbon pricing via the cap and trade program will provide an incentive for imports from Quebec to displace natural gas by offering Quebec higher market prices for its exports in Ontario.

The FAO undertook the analysis of the ETA upon the request from a member of the Legislative Assembly.