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Ontarians can expect higher hydro bills to repay short-term relief: FAO

Ontario Premier Kathleen Wynne is promising lower hydro rates for the province.


Ontarians will pay higher electricity bills for almost two decades as part of the government's plan to reduce power rates in the short term, according to a report from the province's Financial Accountability Office.

Premier Kathleen Wynne's proposal to cut hydro rates by 25 per cent this year while capping increases to the rate of inflation for the next four years will save consumers $24-billion. But it will cost the province $45-billion over the next 29 years, according to an assessment released Wednesday morning by the financial watchdog.

Ms. Wynne's popularity has plummeted over the past year as hydro bills have soared and become a political liability for her long-governing Liberals ahead of next year's general election.

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The Premier's Fair Hydro Plan would slash energy bills before the election and keep them low for much of the next government's mandate. However, to lower bills in the short term, the government would need to increase them in later years to pay off the debt needed to finance the plan.

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Ontario taxpayers will repay $21-billion more by 2045 than they will save on their bills, according to the FAO. The watchdog warned that the financing costs for the plan could increase rapidly in future years if interest rates change or if the government can't balance its budget over the next three decades. If Ontario were to fall into deficit and borrow additional funds to finance the plan, the eventual cost could increase to as much as $93-billion.

"We've always said that the proposed Fair Hydro Plan will cost more over the long term, but it will share the costs of our investments more fairly over a longer period of time and lower bills by 25 per cent on average starting this summer," Energy Minister Glenn Thibeault's office said in a written statement.

The Energy Minister added that the FAO report took into account a possible increase in interest rates and the need to borrow all the money for the plan, scenarios he called "extremely unlikely." And he said government moves to lower costs in the electric power system, perhaps utilizing technological developments, were not included.

The opposition Progressive Conservatives dismissed the government's hydro plan as a quick fix before the election that will do little to fix the long-term problems facing Ontario's power system. "It's fantasyland," said PC energy critic Todd Smith. "It's all about the next election."

After the 25-per-cent rebate, which could come as soon as this summer, the average monthly bill is expected to drop from $164 to $123.

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Bills should remain relatively low until 2021 under the plan. Rates are then expected to increase 6.8 per cent a year from 2021 to 2027. The FAO estimated that the average monthly bill will increase to $213 by 2028. To repay the cost of the rebate plan, the average consumer will pay thousands in additional costs – about $22 a month from 2028 to 2045.

"The impact is greater than we had feared," New Democrat Peter Tabuns told reporters Wednesday. He said Ontarians will turn against the plan when they learn that their bills will be higher for decades after just a few years of relief.

"What the Liberals brought forward is not sustainable and will be hugely problematic for ratepayers for decades to come," he said.

The billions of dollars in extra debt needed to lower rates will not appear on the government's books but will instead be raised by Ontario Power Generation (OPG), the Crown corporation responsible for generating about half the province's electricity.

The debt needed to finance the plan should peak at $26.2-billion in 2027, according to the FAO. The province will provide 45 per cent of the financing, with the rest raised from banks and other investors by OPG. If the province raised the full amount and did not involve OPG, $4-billion would be saved in lower interest costs, the FAO said.

Financial Accountability Officer Stephen LeClair planned to speak about the report Wednesday morning, but his news conference was cancelled without explanation 15 minutes after it was supposed to start.

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