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Ontario cuts hydro bills—in a move that will ultimately cost more

Relief of 17 per cent comes in addition to eight-per-cent rebate, expected to cost taxpayers about $1 billion per year


 

TORONTO – 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.”

MORE: Five things Kathleen Wynne is doing to save her political skin

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.”


 

Ontario cuts hydro bills—in a move that will ultimately cost more

  1. Hydro has always been a problem in Ont……..and every now and then it gets rejigged.

    • Come on! Really Emily? Just a brush off? You must have more criticism than that? Are you really that partisan?

      The interest on Ontario’s DEBT is our 3rd largest expenditure at nearly $1 billion a month. Only health care and education cost us more. If debt was a program — it would be our 3rd largest program! Do you even understand the shear mismanagement of the Ontario Liberals? Can you imagine the programs we could finance if we weren’t buried under interest payments? You got to get your head out and breath some air sometime.

  2. Pity the poor sod who inherited the steaming pile known as Ontario’s electricity supply. Back in the day, Mike Harris decided that a Frankenstein arrangement of half a dozen public and private organizations would somehow be more efficient; it wasn’t and even with little privatization and mainly reorganization (disorganization more like) electricity prices shot up until Ernie Eves put an artificial stopper in place claiming that a substantial price increase was actually a reduction confirming Conservative party dogma. All along the way, nuclear power continued to be a burden while governments managed to explode the cost of
    one plant by 2-1/2 times, strip the cost of another into a ratepayer funded debt pool which was then augmented by dumping in maintenance costs for some other plants, negotiating a contract for nuclear fuel way above market price and developing firm capacity above minimum demand. Currently, nuclear is the single largest component of rate adjustment with that portion steadily increasing – projected to rise to 65% of the total. In general the system is in a condition of non-economic disarray with nuclear power contracted at 2.8X the competitive price for hydro in Ontario and 3X that in Quebec, 2X Quebec’s typical export contract, and even contracted Ontario hydro at 1.8X the competitive price. For Canada, the pattern is clear: residential prices are lowest where hydro generation is highest. A look at transmission networks in Ontario and Quebec tells a tale: Ontario’s main trunks are a fraction of Quebec’s leaving north central and north western Ontario largely stranded; Quebec has many efficient long-haul high voltage AC and DC trunks while Ontario has none and transmission losses are twice as bad in Ontario. It’s also clear from the data that Ontario relies rather heavily on residential rates to subsidize industrial rates. While much is made of wind power costs, wind power is cheapest when backstopped by dispatchable capacity such as hydro, and Quebec with 3/4 as much wind as Ontario has average cost of generation that is 1/3 of Ontario. The Ontario Conservative’s restructuring and privatization initiatives broke the system.

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