In the run up to the Ontario provincial election, I participated in a televised debate the subject of which was the electricity bill. (You can view the video at the bottom of this post.) The Ontario power bill is full of confusing and contentious line items. Few are more confusing and contentious than the “Debt Retirement Charge” or DRC. The DRC is every bill recipient’s contribution to paying off the $7.8 billion “residual stranded debt” that was left over from when Ontario Hydro, the provincial electric utility, was split up in 1999. The actual charge is tied to each customer’s electricity consumption over the billing period. It is set at 0.7 cents—that’s seven-tenths of one cent— per kilowatt-hour.
So if you use 1,000 kWh over a billing period, the DRC line item on your bill will be $7.00.
Very few people know what DRC stands for, let alone understand the precise nature of the debt it is supposed to pay off. Among those who are familiar with it, the DRC is often used as a rhetorical device.
For example, those who oppose nuclear energy claim that the sole purpose of the DRC is to pay off Ontario Hydro’s nuclear debt. That’s wrong, but for the moment let’s assume it is right. Two things stand out:
- Compared with the energy sources most anti-nuclear people would prefer to nuclear, nuclear energy is cheap—ranging from 5.5 cents per kWh to over 6 cents. Apply the DRC only to nuclear output, and that range becomes 7.2 to over 7.4. The cheapest wind energy, under the Standard Offer, is 11 cents per kWh. “Renewable” sources go north from there: wind energy under the Feed-In Tariff is 13.5 cents; solar begins at 44.3 cents.
- Nuclear represents by far the cheapest route to major pollution emission reductions from electric power generation. Wind and solar, ostensibly emission-free sources, must be backed up with a parallel fleet of fossil-fired generators. That is the only way they can operate on a modern electricity grid. Every kWh of electricity from wind actually comes with at least 368 grams of carbon dioxide (CO2). That’s because wind only produces a third of its rated capacity. Natural gas-fired generators, the least CO2-intensive fossil generation, would produce the actual power 67 percent of the time; gas emits roughly 550 grams per kWh.
Why are we paying at least 11 cents per kWh for wind? Because it is allegedly CO2-free.
Well, nuclear is not allegedly CO2-free. It is actually CO2-free, period.
So here’s the actual choice when it comes to CO2-free power:
- Wind: Pay at least 11 cents for a source that comes with 368 grams of CO2.
- Nuclear: Pay at most 7.4 cents for a source that comes with 0 grams of CO2.
It’s pretty clear. If we want cheap, carbon-free electricity we need more nuclear.
How could we finance new nuclear plants? They are, after all, highly capital intensive. You have to put a lot of money down just to build one. And under Ontario’s Power Corporation Act, you cannot pay for the construction of a plant through the current rate base.
But with a guaranteed dedicated revenue stream, you could borrow enough money, at a decent interest rate, to build one.
The Standard Offer and FIT programs provide exactly that kind of guaranteed, dedicated revenue stream for wind and solar generators.
What if we created one for nuclear? Keep the current DRC rate of 0.7 cents per kWh and apply it to nuclear output. The Florida state electricity regulator recently approved a rate increase for precisely this purpose. This would add $1.87 for every 1,000 kWhs that are consumed.
Could that happen in Ontario? Yes, but the Power Corporation Act would need an amendment to permit construction financing from the rate base.
And how could such an amendment pass in the current minority legislature? Frame it as a climate change measure. Then change the “Debt Retirement Charge” item on our power bills to read “Climate Change Contribution,” as I suggested in the televised debate (at around the 26:40 mark).