Ontario’s hydro plan terrible public policy

The jiggery-pokery the Ontario Liberals are using to cut hydro bills will eventually cost us almost twice as much as it saves, the budget watchdog reported Wednesday.

This is the “Fair Hydro Plan,” the Liberals’ answer to the constant drumbeat of “hydro, hydro, hydro” from the opposition. It cuts electricity prices by 25 per cent for residential and small commercial customers now, and the future is the future’s problem.

The metaphor the government is using is that it’s refinancing the mortgage on the electricity system, extending the payments on long-term energy contracts to lower prices now. Refinancing isn’t free, though, and the financial accountability officer Stephen LeClair and his staff say it’ll save us $24 billion on our hydro bills now but cost us $45 billion in the end.

That money will go to lenders, who’ll put up the money to cover the costs of the energy contracts as signed and then accept our extra payments over a decade or so. The whole thing will be managed through the government-owned Ontario Power Generation utility, which keeps it off the province’s books.

The provincial government will also forgo about $1.5 billion a year in sales taxes on electricity, the report says, leaving the money in Ontarians’ pockets. Assuming the government never runs a deficit that forces it to borrow, there’s no net cost to that. That’s an iffy assumption, obviously.

By 2027, the budget officer figures, electricity prices will be four per cent higher than they would otherwise.

What makes the plan “fair,” Wynne said, is that it makes future Ontarians pay more and today’s Ontarians pay less. What was unfair before, in Wynne’s formulation, was today’s Ontarians were having to pay too big a share of the costs of modernizing the power system when tomorrow’s Ontarians will also benefit.

Energy Minister Glenn Thibeault responded to LeClair’s report by acknowledging it’s accurate but there’ll be a plan released this summer that lowers long-term expenses by reducing the amount of electricity we expect to buy. There’s evidence Ontario won’t need as much power as the operative plan calls for.

What would actually be fair would be to go back in time and make the Ontarians of the 1970s, ’80s and ’90s pay a little bit more for electricity to keep the system in good repair. Power, in the glory days, was unsustainably cheap.

Yes, part of what we’re paying for now is ill-considered green-energy contracts. Part of it is from ditching dirty coal generation, which was a wiser decision but not a free one.

A lot of what we’re paying for is simply dragging Ontario Hydro back from the brink of collapse. Decades of self-indulgence achieved that decrepitude and decades of selfdiscipline are the only way to undo it.

The Fair Hydro Plan is the Liberals’ declaration that we’re not quite up to the self-discipline they thought we were. The Fair Hydro Plan addresses a big political problem for the governing party but it’s terrible public policy. It exemplifies the attitude that got us into trouble in the first place.

The opposition parties have no meaningful alternatives.

Progressive Conservative Leader Patrick Brown promises to review generating contracts to look for loopholes, as if the Liberals hadn’t thought of that. NDP Leader Andrea Horwath says an NDP government would buy back Hydro One, the sale of which has basically nothing to do with electricity prices. Each party’s plan has other elements but at most they amount to fiddling the decimals.

So Ontario’s electricity prices are high and in complaining about them with Trumpian vapidity, the opposition parties have stampeded the government into buying temporary relief by making them much higher than they’d have to be if we just gutted the next few years out.

Well done, everybody.