Ontario’s hydro-bill cuts will cost $21 billion more than they save us — it’s terrible public policy

DAVID REEVELY

FIRST POSTED:

The jiggery-pokery the Ontario Liberals are using to cut hydro bills will eventually cost us almost twice as much as it saves, the province’s budget watchdog reported Wednesday.

This is the “Fair Hydro Plan,” the Liberals’ answer to the constant drumbeat of “hydro, hydro, hydro” from the opposition, the plan that Premier Kathleen Wynne hopes will save her party from annihilation next year. It cuts electricity prices by 25 per cent for residential and small commercial customers now, and the future is the future’s problem.The Liberal plan is more consequential than the desolate nothings offered by the opposition. But in this case, desolate nothingness would be better.

The metaphor the government is using is that it’s refinancing the mortgage on the electricity system, extending the payments on long-term energy contracts to lower prices right now. Refinancing isn’t free, though, and now the financial accountability officer Stephen LeClair and his staff have put numbers on the Liberal plan: It’ll save us $24 billion on our hydro bills now but cost us $45 billion in the end. So by the 2040s, we’ll be out a total of $21 billion.

That money will go to lenders, who’ll put up the money to cover the costs of the energy contracts as signed and then accept our extra payments over a decade or so. The whole thing will be managed through the government-owned Ontario Power Generation utility, which keeps it off the province’s books. (Auditor General Bonnie Lysyk, in a separate appearance before a Queen’s Park committee Wednesday, said this is deceptive but it’s legal.)

“Temporary savings are achieved for electricity ratepayers by moving costs to the province and by deferring $18.4 billion in electricity costs for 10 years,” LeClair said. “After 10 years, ratepayers will be required to repay the deferred electricity costs plus approximately $21 billion in interest, which will result in higher electricity bills than under the status quo.”

The provincial government will also forgo about $1.5 billion a year in sales taxes on electricity, the Wednesday report says. That’s money out of the provincial treasury but left in Ontarians’ pockets. Assuming the government never runs a deficit again that forces it to borrow, there’s no net cost to that. That’s an iffy assumption, obviously, but there’s nothing unique about cutting this tax versus any other tax.

By 2027, the budget officer figures, electricity prices will be four per cent higher than they would otherwise have been, gobbling up the lower contract payments, the sales-tax cut, and more of ratepayers’ money besides.

The Liberals never pretended their purported fairness was bought for nothing. What makes the plan “fair,” Wynne said in announcing it, isn’t that it makes electricity cheaper but that it makes future Ontarians pay more and today’s Ontarians pay less. What was unfair before, in Wynne’s formulation, was that today’s Ontarians were having to pay too big a share of the costs of modernizing the power system when tomorrow’s Ontarians will also benefit.

Of course, we’ve had to wait for this watchdog report to find out just exactly how badly our children will be screwed so that we can have an easier time of it for the next four years.

Energy Minister Glenn Thibeault responded to LeClair’s report by acknowledging it’s accurate but there’ll be a plan released this summer that lowers long-term expenses by reducing the amount of electricity we expect to buy. There’s some evidence that Ontario won’t need as much power as the currently operative plan calls for, so this is plausible, but don’t expect a very radical difference.

Here’s the thing. What would actually be fair would be to go back in time and make the Ontarians of the 1970s, ’80s and ’90s pay a little bit more for electricity, so as to keep the system in good repair. Power, in the glory days, was artificially cheap. Much too cheap. Unsustainably cheap. We paid too little then and we’re making up for it now.

Yes, part of what we’re paying for now is ill-considered green-energy contracts meant to spark a solar and wind industry in Ontario that never really caught. Part of it from is ditching dirty coal generation, which was a wiser decision but not a free one.

A lot of what we’re paying for, though, is simply dragging Ontario Hydro back from the brink of financial and physical collapse. Decades of self-indulgence achieved that decrepitude and decades of self-discipline are the only way to undo it.

The Fair Hydro Plan is the Liberals’ declaration that we’re not quite up to the self-discipline they thought we were, and it’s hard to say they’re wrong: the parties’ poll standings, a year out from the next election, are pretty good evidence for that. The Fair Hydro Plan addresses a big political problem for the governing party but it’s terrible public policy. It exemplifies the exact attitude that got us into trouble in the first place.

The opposition Progressive Conservatives and New Democrats, for all their drum-pounding, have no meaningful alternatives.

“It’s time for Kathleen Wynne to stop covering up the truth — under her plan, our hydro bills will go up,” Tory leader Patrick Brown said, pouncing gleefully on the LeClair report. “Everything will cost more. This will have a devastating impact on household budgets and the economy.”

This is true. And what will he do if he’s premier next summer? Durrrrr…

They complain about electricity prices and they have things they call electricity plans but those plans have less juice than a watch battery: Brown promises to review generating contracts to look for loopholes, as if the Liberals hadn’t thought of that. Andrea Horwath says an NDP government would buy back the Hydro One transmission utility, the sale of which has basically nothing to do with electricity prices. Each party’s plan has other elements but at most they amount to fiddling in the decimal places.

So that’s where we are: Ontario’s electricity prices are high and in complaining about them with Trumpian vapidity, the opposition parties have stampeded the government into buying temporary relief by making them much higher than they’d have to be if we just gutted the next few years out. Well done everybody.

dreevely@postmedia.com

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