Grits’ hydro shell game unmoored from reality

Hiding billions of dollars the Ontario government is borrowing to lower electricity bills for a few years will cost hydro users an extra $4 billion, the province’s auditor general reported Tuesday.

Maybe worse, Bonnie Lysyk said in a special report on the Liberals’ “Fair Hydro Plan,” the tricks the government is using throw doubt on all the province’s books. The government, citizens, auditors and institutions that lend the province money are pretty much operating in a post-truth universe, where what the Liberals say is going on with Ontario’s finances has begun to drift from any previously understood shared reality.

What the Liberals have done “would be unacceptable in the private sector, and we maintain that this is also unacceptable in the public sector,” Lysyk reported. “If the consolidated financial statements are so unreliable that an adverse opinion is warranted, terms like ‘balanced budget,’ ‘deficit,’ ‘asset’ and ‘net debt’ will be meaningless.”

Here’s what’s happening. Earlier this year, Premier Kathleen Wynne gave up defending the increases in the price of electricity since the Liberals took over in 2003. She and her cabinet put together a plan to cut bills that amounted to paying today’s costs with borrowed money and repaying it with interest later. It has already cut residential bills by an average of 25 per cent, beginning last summer. And it will increase them by a combined total of $21 billion over time, when all that interest has to be paid, according to a previous report by Ontario’s financial accountability officer.

The argument is the investment in cleaner, more reliable power will benefit us for a long time, so we should pay for it over more years. That “fairness” is costing $17 billion in interest, spread out over years.

The Liberals really wanted to keep that debt off their books, so they could also go into the next election saying the provincial budget is balanced. Borrowing billions in an election year would get in the way. So they did some advanced financial engineering to put the debt on Ontario Power Generation instead. The Crown corporation is publicly owned but it doesn’t get interest rates as good as the provincial government itself, so that’s where the $4-billion premium comes in.

The essence of the scheme is to say Ontarians are borrowing these billions of dollars as hydro ratepayers, not as voting citizens. Same people, different hats, different rules.

All of which is bull, Lysyk says. The point of accounting is to tell you how much money you have, how much you owe and how much you are owed.

“These standards are there to ensure that the financial reporting of government policy decisions reflects common sense: borrowings are debt, unearned revenue is not an asset today and when your expenses exceed your revenues, you incur a deficit,” Lysysk said Tuesday. Nobody has used electricity in 2025 yet, let alone 2040. You can’t count guesstimates of use and prices 20 years down the line as an asset today.

Energy Minister Glenn Thibeault and Treasury Board President Liz Sandals think the $4-billion estimate for the cost of hiding the debt is high.

They could be right — we won’t know for sure till the 2040s. So it’s a bit weird to account for it as if it’s a fait accompli.

The government even went shopping for different accounting standards it might use, Lysyk’s report says, trying out rules used for private businesses in the United States. Consulting firm Deloitte told the government this was OK.

Maybe reasonable accountants can disagree about this. But the ground they’re fighting over is whether the trick the Liberals used to keep the debt off the books at a cost of billions of dollars is an acceptable trick, not whether they’re keeping the debt off the government books or whether it’s going to cost billions of dollars.

Which is just what you want from your government, right?