Ontario hydro bill reductions to ultimately cost ratepayers more

Soaring electricity bills in Ontario will see an average 17-per-cent cut this summer, a year before the provincial Liberals bid for re-election, but those savings will ultimately cost ratepayers billions in extra interest payments.

Ontario Premier Kathleen Wynne acknowledged Thursday that the bill for the across-the-board-relief will eventually come due for ratepayers.

“Over time it will cost a bit more. That’s true,” she said when detailing the plan. “And it will take longer to pay off. That’s also true. But it is fairer because it doesn’t ask this generation of hydro customers alone to pay the freight for everyone before and after.”

Electricity bills have roughly doubled in the last decade, rising faster than inflation since 2010, and have sparked increasing anger among Ontarians, leading to plummeting approval ratings for Wynne.

She said the increasing costs were due to investments in the grid, nuclear refurbishments and getting rid of coal. She also acknowledged that long-term contracts for green energy producers at above-market rates were “too generous.”

Ontario now has a clean and reliable system, Wynne said, but the entire burden of those investments was being shouldered by current ratepayers when the benefits will be seen over many years.

But Ontario Progressive Conservative Leader Patrick Brown said the new plan just shifts the burden between the same group of people — “robbing Peter to pay Paul, but in this case, both Peter and Paul are taxpayers.”

Most of the electricity generation contracts in Ontario are for 20 years, so refinancing them is like re-amortizing a mortgage over 30 years instead. But that will come with up to $1.4 billion a year in extra interest payments over 10 years.

In the near term, rates will also be held to the rate of inflation, and the plan is for the 17-per-cent cut to be reflected in the Ontario Energy Board’s May 1 rates so customers see it reflected on their June bills.

But those extra interest costs will be added back onto bills in the future.

Legislation will be introduced to enable the Independent Electricity System Operator and Ontario Power Generation to refinance a portion of the global adjustment charge.

That’s the charge consumers pay for above-market rates for power producers. The auditor general has estimated the global adjustment charge cost $50 billion between 2006 and 2015 and increased by 1,200 per cent between 2006 and 2013 — meanwhile, the average electricity market price dropped by 46 per cent.

The across-the-board relief of 17 per cent comes in addition to an eight-per-cent rebate that took effect Jan. 1. That cut is estimated to cost taxpayers about $1 billion per year.

Several other measures were announced Thursday to help low-income and rural residents at a cost of $2.5 billion over three years to taxpayers.

Customers under a program that gives a rate subsidy to those in rural and remote areas will be expanded, so that ratepayers covered by local distribution companies with the highest delivery charges will see those rates cut.

The Ontario Electricity Support Program for low-income ratepayers will be funded through government revenues instead of other taxpayers. The benefits are also being increased, so that someone who qualifies for the smallest credit — a single person earning less than $28,000 — would save $45 a month instead of $30.

The delivery charge for on-reserve First Nations residential customers is being removed. The province is also establishing an affordability fund for electricity customers who don’t qualify for low-income conservation programs to make energy efficiency improvements.

The government will still meet its goal of balancing the next budget, Wynne said, though she admitted the new measures puts the government “a lot closer to the line.”

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