A small step toward power rate sanity, but there’s far to go
In Ontario, any rational act concerning electricity rates has to be carefully disguised, so as not to upset the fantasy that power bills are quite reasonable. That’s why this week’s change in power rates was billed as the “COVID-19 recovery rate,” and Premier Doug Ford’s talking points were about rate stability, consumer choice and help for those struggling to pay their bills.
The somewhat larger news, not explicitly mentioned, was that the PC government was raising the cost of electricity by 27 per cent. That’s just the kind of thing a politician doesn’t want in a headline, but the power increase was the right thing to do, a correction of an over-enthusiastic price cut.
In its rush to endorse every conceivable idea that might help pandemic-stricken Ontarians, the provincial government in late March suspended the province’s three- tiered time- of- use power system and made the cheapest of those three rates the standard.
The move saved the average household about $ 20 a month on its power bill, which doesn’t seem like a terrifically useful amount of aid. That’s the problem with government programs that benefit everyone, even those who continued to earn a full salary. Such programs don’t help anyone much, but they do cost a lot of money. For Ontario, the bill for just over two months was $ 175 million. Had the program stayed in place until the end of the year, the province’s Financial Accountability Office estimates it would have cost $849 million.
It would be difficult to think of a more useless way to spend money, especially for a government facing a deficit that the financial accountability people estimate at $ 41 billion. Shoring up long- term care and health care will cost more than the government wanted to spend pre-pandemic, and restarting the schools is going to entail extra expense, as well.
Under the new Ontario plan, power consumers will pay 12.8 cents per kilowatt hour, up from 10.1 cents. The good news is the 12.8 cents is the real average cost of power, so it seems like people are paying what they should.
If only it were so. In 2017, the Liberal government, facing heat over high electricity prices, came up with a creative solution. It would reduce electricity bills by 25 per cent, and borrow money to do it. The Liberals set up an elaborate scheme to borrow through a Crown corporation, so we didn’t have to see the awesome cost. The auditor general estimated the interest on the borrowing would be $21 billion over the 10-year life of the plan.
The so- called Fair Hydro Plan stands out as the second- worst policy of the Liberal regime, dwarfed only by the decision that made it necessary, which was the Green Energy Act. Regardless of any inherent merits of green energy, the province’s big expansion into wind and solar provided power that Ontarians don’t need, but must take at a high cost. The Liberals doubled down by adding gas- powered plants to back up the unneeded wind and solar.
When Doug Ford and the PCS came in, they kept the fake 25- per- cent discount and promised to add a further 12 per cent. They haven’t quite hit that goal, but this week’s announcement did remind Ontarians that they were getting a 31.8-percent power bill subsidy, now called the Ontario Electricity Rebate. That and some smaller price reduction programs will cost taxpayers $5.6 billion this fiscal year.
Monday, the government said it would provide two new programs related to the pandemic. One will deliver $ 9 million to consumers struggling to pay electricity bills. A second program will direct $ 8 million to small businesses. This is on top of an existing program that subsidizes power for low-income families.
Back when they were in opposition, the PCS used to know that turning power bills into a social program didn’t make sense, especially when the discounts were funded with debt. No doubt they still know it, but a return to power rate rationality would position the PCS as the party that increased electricity bills, after promising to cut them. When returning power to the average rate in effect as recently as March is seen as so controversial as to require a good deal of concealing smoke, you know there is extreme political concern.
Nevertheless, Premier Doug Ford and his caucus members need to ask themselves if the $5.6 billion that goes to subsidize power bills would be better spent on pressing long- term care and health needs. Now is the time to prioritize what’s important, not what’s politically expedient. Ontarians need to realize that, too. Ontario has expensive power and borrowing to avoid the fact just makes it cost more in the end.