Buckle up, Ontario Liberals want to reform hydro

Well, here we go. The Ontario government is preparing to make large-scale reforms to the electricity system in an effort to reduce rates. Buckle your seatbelts; if the past is any guide, this will be a bumpy ride.

The Liberals have been backed into a corner on this file.

These days, the most popular thing you can do at any public gathering or on your Facebook page is to bash electricity prices. The opposition parties are milking the outrage for all it’s worth.

And there’s no escaping the conclusion that Liberal policy decisions since 2003 — however meritorious you might find some of them — are a major cause of the steep rate increases.

So then, backed into their corner, the Liberals need to act. Premier Kathleen Wynne has been laying the groundwork for an electricity relief program that will land sometime before the spring budget. It will almost certainly involve a huge taxpayer-based subsidy.

This will mean committing hundreds of millions in government revenue that then can’t be used to help pay teachers and doctors, build roads, hospitals and schools, or relieve the congestion in over-stuffed jails. It may mean plunging Ontario back into deficit. But your hydro bill will be smaller.

Wynne has publicly identified a clear target for reform: the delivery charge. This is the cost put on your bill to pay for the wires connecting power stations to the consumer, and the crews that get the lights back on when a storm hits. It constitutes about 30 per cent of your bill.

Depending on who your local distributor is, the delivery charge you pay varies widely. The highest charges are in rural areas, but there are big discrepancies between cities, too. Toronto Hydro’s delivery charge is about 30-per-cent higher than Ottawa Hydro’s, which in turn is 20-per-cent higher than Kitchener Wilmot Hydro’s.

The variation is sometimes simply due to geography or population density, but it also comes down to how well the distributors are run as a company.

What can be done about this? Based on conversations with people inside and outside government, we’re likely to see a program to ease the delivery charge in the places it hits hardest.

This already happens to a small extent: The Rural and Remote Rate Protection program puts a surcharge on everyone’s hydro bill to subsidize delivery charges in low-density parts of Ontario. But this new, larger program, if it comes to pass, would draw money from general revenues. This is on top of the removal of HST, which now costs the province $1 billion per year.

Ontario has a long history of using tax dollars to offset the real cost of electricity. Rates were frozen by NDP premier Bob Rae in the early 1990s, and stayed frozen under Progressive Conservative premiers Mike Harris and Ernie Eves (except for briefly in 2002, when they skyrocketed).

Dalton McGuinty’s Liberal government then paid for a 10-per-cent rate rebate dubbed a “clean energy benefit.”

And with the constant attacks on electricity prices from the opposition, does anyone doubt they’d do the same if they won the election? In fact, given the nature of political opposition, they’ll be obliged to declare whatever Wynne does now to be insufficient, and will promise more tax dollars.

It’s the closest thing we now have to a political consensus in Ontario: Raid the treasury to make electricity bills smaller. You may notice this does nothing to lower the cost of our system as a whole.

But if we’re going to do it, let’s at least do it right. Here are the questions to ask when the Liberal program lands: Is the relief going to the people who need it most? Will it underfund the electricity system, creating more costs down the road?

Is it paired with sensible, long-term policy reforms that will address the problem of highcost electricity and eventually wean us off these endless subsidies?

There will be lots to criticize in whatever the Liberals bring forward. But the political climate has made inaction impossible. In politics, be careful what you wish for.