Ontarians could end up paying significantly higher electricity bills over two decades in exchange for short-term relief, according to an early draft of a government plan to cut hydro rates by 25 per cent this year.
The average Toronto Hydro consumer would save almost $2,500 through to 2025, at which point they would pay an extra $4,800 over the following 22 years, according to the six-page draft provided to reporters by the Progressive Conservatives Thursday.
The cabinet paper is stamped “confidential” and was released only hours before Energy Minister Glenn Thibeault was set to unveil the government’s plan to cut hydro rates and cap increases at the rate of inflation for the next four years. Mr. Thibeault’s office said the document was outdated but did not provide more current numbers.
Premier Kathleen Wynne’s popularity has waned over the past year as rapidly increasing hydro rates have become a political liability for the Liberals only a year out from the next general election. To reduce rates, the government has decided to refinance electricity costs over 30 years, lowering bills in the first few years but increasing costs in later years.
“This fair hydro plan will cost more and it will take longer to pay back,” Mr. Thibeault said Thursday. He dismissed the release of the cabinet document as a political ploy by an opposition that has yet to announce its own hydro plan. “The documents that we provide to cabinet are topics for discussion,” he said. “And, you know, plans change.”
Todd Smith, the PC Party’s energy critic, told reporters the plan was leaked by a disaffected Energy Ministry employee. “We’ve seen this government interfere time and time again in the electricity sector. They can’t keep their fingers out of the pie,” he said, blaming the Liberals for high power prices.
New Democrat Peter Tabuns also said that the plan, which the government hopes to move through debate at Queen’s Park by the end of next week, is a mess. “This is a ‘get through the election’ plan. That’s what this is all about,” he said.
The leaked plan shows the average monthly bill in Toronto falling from $158 last year to $123 this year. The plan would keep hydro costs off the political radar for years, potentially through to the following general election in 2022, at which point monthly costs would have grown to just $142. The relief for consumers ends after that, with bills increasingly quickly to $215 a month by 2028. For the following two decades, Ontarians would see a charge of about $20 on monthly bills to repay the almost $28-billion in debt accrued to lower rates for almost a decade.
Mr. Thibeault vowed there would be no rapid increase in rates like those envisioned in the leaked plan and said prices would remain low for years to come. “We will continue to work to pull costs out of the system to ensure that any graph, that any line, will continue to plateau,” he said.
The cabinet document charts electricity prices out to 2050, and many of the assumptions in the plan could change to lower future costs borne by consumers, according to a senior official who spoke to The Globe and Mail on condition of anonymity. A number of factors, including interest rates and natural gas prices, could alter hydro prices decades from now.
The billions of dollars in extra debt needed to lower rates after 2017 will not appear on the government’s books but will instead be raised by Ontario Power Generation, the Crown corporation responsible for generating about half the province’s electricity. While the province and OPG will provide some of the money for the plan, most of it will be raised by selling debt to private investors, said Jeff Lyash, OPG’s chief executive.
Mr. Lyash said OPG can assure access to capital markets and “act like a financial services manager to make sure that whatever gets implemented here has the right underlying basis. … I would expect nominal rates to be fairly low. We think of this as nominally 5-per-cent interest rate depending on how this develops over time.”Report Typo/Error