Food and beverage manufacturing sector no longer sustainable with soaring electricity rates
March 4, 2017
Today, Food and Beverage Ontario (FBO) – the food and beverage processing sector's professional organization – released a report addressing the serious impact rising electricity costs are having on food and beverage manufacturing businesses in the province.
The report, Restoring Ontario's Competitiveness by Reforming Electricity Pricing reviews the current state of play with respect to rising electricity costs and how food and beverage manufacturing businesses have been implicated. Details of the report identify how electricity prices are rising to unsustainable levels at unsustainable rates, represent a significant regulatory burden and are unpredictable. The outcome is permanent and structural damage occurring to businesses of all sizes due to the volatile costs of this one input.
Within the report, a recommendation is made on remedying the loss in competitiveness for Ontario businesses by immediately removing the Global Adjustment from commercial and industrial electricity bills. The rationale for this approach follows:
- The Global Adjustment finances infrastructure. Like roads, transit systems and post-secondary institutions that the province finances to create a strong and dynamic economy, electricity generation is an economic driver and should be included in the province's fiscal plan.
- The government has the fiscal sophistication and the provincial treasury is in a much better position than the Independent Electricity System Operator and electricity ratepayers to manage these extraordinary and unpredictable costs.
- The government has the fiscal means vis-à-vis its long-term investment in infrastructure – $160 billion over 12 years starting in 2014-15. In Budget 2016 the government stated it is making these investments in public infrastructure such as roads, bridges, public transit, hospitals and schools. Eligible projects should also include those currently funded through the Global Adjustment such as electricity generation.
"The sector has endured a period of increasing electricity costs but the situation is no longer sustainable for food and beverage businesses," said Norm Beal, CEO of FBO. "There are 3,000 manufacturing businesses in the province directly employing over 126,000 Ontarians. What we have is an untenable situation for the Ontario food and beverage manufacturing sector which happens to be a top employer in the province."
The Ontario government's recent announcement on March 2, 2017 concerning measures to lower household electricity rates did not address the challenges faced by Ontario's manufacturers.
"The latest announcement by government is welcome if in fact Ontario households do benefit from rate relief, unfortunately, announced changes do not make food and beverage manufacturers more competitive," said Mark Josephs, President of Kisko Products. "Job creators should be a top consideration for this government, reducing electricity rates to competitive levels translates to job growth and economic development in the province."
About Food and Beverage Ontario
Food and Beverage Ontario is a not-for-profit, leadership organization dedicated to advancing the interests of Ontario's food and beverage processors. FBO's focus is on the success, prosperity and growth of the food and beverage processing sector – a $40 billion industry and major contributor to the province's economy.
Food and Beverage Ontario