Watchdog questions rate cut’s true cost

Auditor general says province faces extra $4B in interest

Ontario’s financial watchdog is sounding the alarm over the Liberal government’s 25-per-cent cut in residential electricity rates.

Auditor general Bonnie Lysyk estimates the scheme, unveiled last May, could cost Ontarians an additional $4 billion in interest charges over the next 30 years.

In Lysyk’s latest salvo against the provincial government in her ongoing accounting dispute with Queen’s Park, she expressed outrage at how the hydro rebate will appear on the books.

“The accounting proposed by the government is wrong,” said the auditor general, decrying the use of U.S. accounting standards that enable the Liberals to bankroll the rate cut through the new governmentowned OPG Trust.

Because the trust will have to borrow money at a higher interest rate than the province pays, Lysyk estimated there will be an extra $4 billion in charges over 30 years for a total of $39.4 billion.

But that is not reflected on the provincial treasury’s annual bottom line because electricity ratepayers, not taxpayers, will cover the tab.

“They had to come up with something that would not derail the government’s promise to present balanced budgets for 2017-18 and the next few years,” she said Tuesday.

Energy Minister Glenn Thibeault insisted “there was no fast one being pulled at all.”

Thibeault noted the government wanted electricity subsidies to be charged to the rate base, not the tax base, and stressed the similar accounting practices used in Alberta, Texas, New York, Minnesota and other jurisdictions.

“Electricity financing should remain within the electricity system,” he said.

Facing a massive outcry over soaring hydro rates in many parts of the province, Premier Kathleen Wynne moved forward with generous rebates.

Last Jan. 1, Wynne removed the 8per-cent provincial portion of the harmonized sales tax from electricity bills.

That was followed by an additional 17-per-cent cut that took effect over the summer.

The government has justified borrowing money to pay ratepayers by likening it to refinancing a mortgage to enjoy lower payments over a longer time.

Thibeault, who will unveil Ontario’s long-term energy plan on Oct. 26, said the hydro rate cut merely “smooths the costs of those investments out over a longer period of time.”

But Progressive Conservative Leader Patrick Brown accused the Liberals of using “shady accounting methods and cooking the books for politically motivated reasons.”

Brown said the hydro cut was a “re-election ploy” to help the Grits in the June 7, 2018 campaign. NDP MPP Peter Tabuns (Toronto Danforth) said Lysyk has exposed “an Enron-style accounting scheme whose sole purpose is to hide this truth from the public.

“The auditor general has confirmed that Kathleen Wynne’s hydro borrowing scheme will cost Ontarians $40 billion and that Kathleen Wynne will charge families $4 billion just for the accounting tricks she’s using to cover up just how bad this plan is,” said Tabuns.