Ontario businesses stuck with hydro debt retirement charge until April 2018

Businesses in Ontario to stop paying debt retirement charge on electric bills in 2018 under proposed legislation

Thestar.com
Nov. 18, 2015
By Rob Ferguson

Businesses will have to wait almost two years longer than homeowners to stop paying the debt retirement charge on their electricity bills, saving large industries about seven per cent.

Finance Minister Charles Sousa said Wednesday the proposed change - to pay off red ink left over from the old Ontario Hydro - will come off business, commercial and other non-residential hydro bills on April 1, 2018 if a new budget measures act is passed.

“We’re now providing certainty,” Sousa told reporters after Premier Kathleen Wynne’s cabinet approved the expiry date.

The timing is nine months earlier than expected. As previously announced, residential customers will stop paying the debt retirement charge on June 1.

Small businesses will save about four per cent. For a household using 800 kilowatt hours of electricity a month, the charge adds $5.60 to the bill.

Keeping the charge in place will cost businesses another $1.2 billion in total, said New Democrat MPP Peter Tabuns (Toronto Danforth), who blamed lost revenues from the government’s partial sell-off of Hydro One as “the only reason” for the delay.

With the government working on a cap-and-trade system to put a price on carbon pollution, and details expected next spring, businesses have been concerned about higher costs.

But Sousa said knowing when the debt retirement charge will end is going to help companies make investment decisions and said Ontario has a low corporate tax rate compared to other jurisdictions.

Opposition parties were caught off guard by the budget measures bill, which is as thick as a phone book, that would also put tighter controls on raw leaf tobacco to fight contraband and amend several other pieces of legislation.

“We’re going to be looking through this budget act very carefully because it’s fair to say ... that there are serious trust issues with the finances and the economic projections that are coming from the Liberal government,” said New Democrat MPP Catherine Fife (Kitchener-Waterloo).

The NDP and Progressive Conservatives blame high electricity costs in Ontario for scaring businesses away, and have long called for an end to the debt retirement charge.

Electricity users have paid an extra 0.7 cents per kilowatt hour on every hydro bill since1999, when the old Ontario Hydro was broken up into Ontario Power Generation and Hydro One, now the subject of a controversial privatization to raise money for transit and reduce debt.

Hydro One and OPG were each assigned a portion of the Ontario Hydro debt, leaving about $20 billion to pay down. While some of that was offset by electricity revenue streams and assets, $7.8 billion was not. It was called residual stranded debt and assigned to electricity bills as the debt retirement charge.