Hydro rate increases will be held to rate of inflation after 25-per-cent cut
Government says books will be balanced in spring budget despite $1.83-billion cost of rate cut.
March 2, 2017
Rob Ferguson and Robert Benzie
Hydro ratepayers will save 25 per cent on their bills starting this summer, but face an extra $25 billion in interest charges over the next 30 years under the Liberal government’s electricity relief plan.
The additional cost is the trade-off for easing prices now, said Premier Kathleen Wynne, who is struggling in the polls with an election just 15 months away.
Wynne compared her plan to a homeowner extending a mortgage term to get lower monthly payments.
“I don’t expect a celebration as we make these announcements today. People are struggling with electricity costs that are too much for their families to bear,” she told reporters Thursday.
“For too long, governments — my own included — have made mistakes in the way we’ve structured Ontario’s electricity system.”
Billions in new hydro system investments were being billed to ratepayers over 20 years, and the government has decided to amortize those costs over 30 years, at an annual cost to the treasury of $1.83 billion.
Hydro bills will increase no more than the rate of inflation, about two per cent, over the next four years, and this spring’s budget will be balanced as forecast, Wynne pledged.
The average residential hydro bill has jumped from $91 a month in 2005 to $156 last year.
Many consumers in rural and northern areas, who rely on electric baseboard heat, pay hundreds more.
Opposition parties said the plan amounts to short-term gain for long-term pain as the Liberals try to revive their political fortunes — and Ontarians will foot the bill.
“I want to see a drop in hydro rates. I think that everyone that pays a hydro bill wants to see a drop. But . . . the majority of people are going to be disappointed that this is just for show,” said Progressive Conservative Leader Patrick Brown.
“This is a Band-Aid on a bullet wound.”
New Democrats questioned why the government is borrowing billions for the rate relief after Wynne insisted new subways and other infrastructure couldn’t be built unless money was raised by privatizing Hydro One.
“It makes no sense,” said Deputy NDP Leader Jagmeet Singh, whose party released a plan Monday promising rate relief of 17 per cent to 30 per cent, in part, by renegotiating hydro generating contracts and buying back Hydro One shares.
Brown, who is ahead of Wynne in public opinion polls, said his Conservatives will finally unveil their hydro platform within the next few weeks.
It could be a scramble for a party that, until Wednesday, was saying Ontarians would have to wait until after a November policy convention for details.
As first revealed by the Star, the 25-per-cent hydro rate cut includes an eight-pe-cent rebate of the provincial portion of the harmonized sales tax that took effect Jan. 1.
MPPs must pass legislation on the further rate relief, which will average 25 per cent for the typical homeowner, but could reach “40 to 50 per cent” in rural and northern areas with high delivery charges, said Energy Minister Glenn Thibeault.
Hydro One customers, including cottagers, will enjoy bills that average 31 per cent less, said Ferio Pugliese, the utility’s executive vice-president of customer and corporate affairs.
Brown said it’s too early to say whether his party would support the rate cut legislation, while Singh said the NDP will give it “thoughtful consideration.”
Not mentioning him by name, Wynne blamed her Liberal predecessor, former premier Dalton McGuinty, for making a “mistake” in the way energy investments were financed after 2005.
“We asked one generation, today’s generation, to unfairly shoulder the burden of nearly all of those costs. We had to play catch-up and we asked today’s ratepayers to cover nearly the whole tab,” the premier said.
The impact for customers will be noticed on the “global adjustment” line of hydro bills after legislation passes at Queen’s Park this spring
That’s the levy McGuinty added to bills in 2005 to bankroll $50 billion in power contracts with public and private generators, who are paid more than the market price for the electricity they produce.
The global adjustment also covers the premiums paid to green energy generators, such as wind and solar companies that sell power to the electricity grid.
There will also be new measures to subsidize rates, including offsetting the cripplingly high delivery charges in rural areas. These steps will cost the government’s treasury, and taxpayers, $2.5 billion more over the next three years, or about $833 million annually.
These subsidies will no longer come out of hydro bills.
About 350,000 rural customers are now getting help, but that will rise to some 800,000 households in areas with the highest hydro costs.
As well, low-income families will benefit from a 50-per-cent increase in subsidies under the Ontario Electricity Support Program, raising monthly credits on the low end to $45 and $68 at the high end, for households with the largest families and electric heat or medical devices that must be plugged in.
First Nations households on reserves will have their delivery charges covered.
Ontarians in arrears on their hydro bills must still find a way to settle up through longer-term payment plans, Thibeault said. About 60,000 people had their hydro disconnected last year for non-payment, but the Legislature passed a bill last week banning winter disconnections.
Customers who are not now eligible for low-income conservation programs will be able to apply for help from a new “affordability fund” to help with improvements to ensure energy efficiency, he added.
A budget for that fund has not been set, but officials said it would be designed so that people can get assistance without having to put substantial amounts of their own money on the table to qualify.