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Premier Kathleen Wynne to cut hydro rates by 25 per cent
Most of the reduction will come from the Ontario government stretching out the costs of electricity generation contracts. The savings impact should be immediate.
Robert Benzie and Rob Ferguson
March 1, 2017

Premier Kathleen Wynne will slash electricity rates by 25 per cent this year, the Star has learned.

In a dramatic move to be finalized at cabinet Wednesday, Wynne’s government is poised to unveil sweeping measures to rein in the soaring hydro bills that currently have the Liberals’ popularity plummeting.

Sources say the massive reduction in rates will come mostly by “smoothing out” the financing costs of electricity generation contracts over longer periods.

It’s the equivalent of refinancing a mortgage to enjoy lower payments over a longer time on nuclear reactors, natural gas-fired power plants, and wind turbines.

Wynne’s office refused to confirm details of the 25 per cent solution Tuesday night.

But cabinet ministers are expected to approve the plan during a noon cabinet meeting at Queen’s Park with an announcement coming as early as Thursday.

The 25 per cent reduction includes the 8 per cent rebate of the provincial portion of the harmonized sales tax that took effect on Jan. 1.

While the provincial Liberals have not convinced Prime Minister Justin Trudeau to eliminate the 5 per cent federal share of the HST on hydro bills, they have found other savings.

“We’re taking it to the next level,” Energy Minister Glenn Thibeault told the legislature during Tuesday’s question period.

“We do recognize the system that we built — eliminating coal, rebuilding the grid — that cost billions of dollars. We know that cost actually came at the expense of many families,” he said.

"We do recognize the system that we built — eliminating coal, rebuilding the grid — that cost billions of dollars. We know that cost actually came at the expense of many families," Energy Minister Glenn Thibeault told the Legislature.

Speaking to reporters later, Thibeault said he “would obviously like to have this out as soon as possible.”

“We’re looking right now at doing some very quick, tangible rebates that people will see in the very, very near future,” he said.

Extending the amortization periods for the life of nuclear, natural gas and wind and solar projects instead of the standard 20-year time period could cut the expense of contracted generation by more than $1.5 billion a year.

Ratepayers should soon see the positive impact on the “global adjustment” line of their monthly hydro bill.

The confusing global adjustment was added to bills in 2005 and is charged to cover the $50 billion cost of contracts with both public and private power generators who receive more than the market price for their electricity.

It is required because most power producers in Ontario are paid more than the going rate so they can build and maintain enough gas-fired power plants and nuclear reactors to ensure a reliable long-term electricity supply.

It also helps cover the controversial green energy premiums — or feed-in tariff payments — to those who generate wind and solar power for the grid.

The benefit of essentially refinancing the global adjustment is that consumers will see a break almost immediately on their bills.

Another smaller measure the government will adopt is to stop electricity ratepayers from bankrolling the Ontario Electricity Support Program, which gives up to $65 a month to low-income earners struggling with hydro prices.

Instead, the cost will be transferred to the broader tax base.

The changes should not affect Finance Minister Charles Sousa’s goal of balancing the books in the spring budget.

The Liberal plan comes days after NDP Leader Andrea Horwath pledged to reduce rates by between 17 per cent and 30 per cent by allowing ratepayers to opt out of time-of-use pricing and capping profits for private power producers supplying the grid.

Horwath also promised to buy back the Hydro One transmission utility, though that privatization has not had any effect on electricity rates that are set by the independent Ontario Energy Board.

The NDP leader’s plan included a pitch to Trudeau to remove the 5 per cent federal share of the HST on bills.

Progressive Conservative Leader Patrick Brown, who is well ahead in public opinion polls, has been coy about what he would do if he won the election set for June 7, 2018.

On Tuesday, Brown would not set a specific percentage he’d like to see in hydro bill savings, but said “there needs to be a significant reduction to achieve affordability.”

“I’m not going to get into hypothetical numbers,” he said.