Pay less now, pay more later
Plan to cut hydro bills will cost Ontarians $21B over 30 years: Watchdogs
TORONTO — Ontarians will be paying a net $21 billion over the next three decades to get shortterm savings under the Liberal government’s hydro plan, which is designed to make the province’s bottom line look better, two watchdogs said Wednesday.
Both the financial accountability officer and the auditor general weighed in on the plan to lower hydro rates, which have roughly doubled over the last decade.
A report from the budget watchdog found the government will spend $45 billion over the life of its hydro plan to save people $24 billion on their bills over the next approximately 30 years.
The $45 billion, however, is mostly the cost of funding an eight-per-cent rebate that took effect in January and assumes balanced budgets. If the government has to fund that rebate through debt, the cost could soar up to $93 billion, the report said.
Premier Kathleen Wynne promised to cut hydro bills after anger over rising costs helped send her approval ratings to record lows. Under the government’s plan, Ontarians will see lowered hydro bills for the next 10 years, but then higher costs for the following 20 years.
Legislation to cut electricity bills by 17 per cent on average — on top of the eight-per-cent rebate — is currently before the House.
The hydro plan will lower time-of-use rates by removing from bills a portion of the global adjustment, a charge consumers pay for above-market rates to power producers. For the next 10 years, a new entity overseen by Ontario Power Generation will take on debt to pay that difference.
That means there will be no impact on Ontario’s net debt — currently at about $312 billion — or annual surplus/deficit, said Auditor General Bonnie Lysyk. The auditor told a committee studying the hydro legislation Wednesday that it “sets a dangerous precedent.”
“There are a lot of people investing a lot of time and money to set this up, structured in such a way that it doesn’t affect bottom line,” she said.
Energy Minister Glenn Thibeault has said OPG has expertise in managing hydrorelated debt.
The OPG Trust is financing 55 per cent of that borrowing, with the province financing the rest. But the OPG Trust borrows at an average rate of 5.4 per cent, compared to the province’s 4.5 per cent, the FAO noted. So if the government took on all of the refinancing, ratepayers could save $4 billion, the FAO concluded.
NDP critic Peter Tabuns called the financing structure “puzzling.”
“It may make provincial debt look better because it’s been moved off (the government books), but that can be the only advantage. It’s going to cost us a lot of money.”