In the Financial Post, Lawrence Solomon says Doug Ford can’t risk abandoning his promises about Ontario electricity costs, despite his cabinet’s worries about provincial reputation damage:
Ford has every reason to return the power system to some semblance of economic sanity. Ontario is now burdened by some of the highest power rates of any jurisdiction in North America, throwing households into energy poverty and forcing industries to close shop or move to the U.S. The biggest reason by far for the power sector’s dysfunction is its renewables, which account for just seven per cent of Ontario’s electricity output but consume 40 per cent of the above-market fees consumers are forced to provide. Cancelling those contracts would lower residential rates by a whopping 24 per cent, making good on Ford’s promise to aid consumers.
[…]
To date, Ford has stopped renewable developments that haven’t been completed, which will prevent things from getting worse, but he has failed to tear up the egregious contracts of completed developments, which will prevent things from getting better. Based on conversations that I and others have had with government officials, it appears that Ford is inclined to cancel the contracts and honour his signature promise, but he is being thwarted by cabinet colleagues who fear that Ontario’s reputation will take a hit in the business community if they don’t play nice.
Except, there’s nothing nice about betraying a promise to the voters who democratically put you in power in order to avoid pressure from lobby groups who think governments are entitled to hand out sweetheart deals to their favoured cronies. There’s also nothing democratic about it. It is an axiom of parliamentary government that “no government can bind another.”
Canadian governments, including Ontario governments, have in the past torn up odious contracts, including those in the energy sector. When they did, upon passing binding legislation, they were able to reset the terms, offering as little or as much compensation as they wished. Outraged business lobbies’ claims that the reputation of governments would be affected were not borne out. Moreover, such rightings of political wrongs serve the interest of small government and free markets, because businesses have always understood that there’s an inherent risk in contracting with governments that are able to unilaterally rewrite contracts. To overcome that inherent risk, businesses add a risk premium when getting in bed with government, helping to explain the rich contracts the renewables developers demanded. That risk premium acts to make business-to-business dealings more economic than business-to-government dealings.
