Budget watchdog to examine Ontario hydro relief plan
PCs question Liberal math, wants a full costing analysis.
TORONTO — Ontario’s budget watchdog will examine the Liberal government’s plan to lower hydro bills, with the opposition parties questioning its estimated $25-billion in interest costs.
Progressive Conservative Leader Patrick Brown wrote to the financial accountability office, asking them to investigate the plan with a full costing analysis, but a spokeswoman for the office said they had already been planning a report on it.
A recently announced 17% reduction in hydro bills comes this summer thanks to a move the Liberals say is like refinancing a mortgage over a longer period of time.
Premier Kathleen Wynne has acknowledged it will cost ratepayers more in the long run, but she says savings are needed now because people are struggling.
She has said the extra interest costs related to the plan would amount to $25 billion over 30 years, but the Tories say they’re not clear on how the Liberals arrived at that number.
Wynne’s $25-billion figure does not appear in the hydro relief announcement’s background documents, which say the plan will involve “annual interest costs not exceeding $1.4 billion.”
The premier said the financial accountability officer has already been briefed on the hydro plan, but the government can bring more technical information forward, if need be.
“We have used assumptions about interest over the next number of years, the next decade, and those are fairly conservative projections, so we’ve been very careful as we’ve laid out the plan,” she said.
A spokesman for the energy minister said that based on a “conservative” estimate of a five-per-cent interest rate, they “see that number amounting to approximately $25 billion over 30 years.”
PC Leader Patrick Brown said in the letter to the financial accountability officer that Ontarians may ultimately have to accept those added costs to get savings now “given the extent to which people are struggling,” but the impact should at least be clear.
“To be candid, this government has a habit of deliberately using false numbers to cover up their worst policy failures,” Brown wrote.
NDP Leader Andrea Horwath said Monday that several figures have been bandied about, so the FAO will help sort that out.
“(The Liberals are) rolling things out on the back of the napkin,” she said. “When you do the math stretching it over 30 years they’re saying it’s $25 billion, when you do straight-line math it’s over $40 billion.”
A spokesman for Energy Minister Glenn Thibeault said Ontario has a track record of managing debt “responsibly.” The province’s net debt is more than $300 billion. Colin Nekolaichuk also noted that credit rating agency DBRS has said it views the hydro relief plan as “credit neutral.”
The 17% cut in bills – in addition to an eight-per-cent rebate that took effect Jan. 1 – means ratepayers will pay about $2.5 billion less per year of the global adjustment charge for the next 10 years, the government has said.
The global adjustment is the charge consumers pay for above-market rates for power producers, which the government says ensures a reliable supply.
The auditor general has estimated the global adjustment charge cost $50 billion between 2006 and 2015 and increased by 1,200% between 2006 and 2013 – meanwhile, the average electricity market price dropped by 46%.
Eventually the costs of refinancing will be added back onto the global adjustment charge, which the energy minister has said won’t happen for at least 10 years.
In the meantime, producers will continue being paid the same, so Ontario Power Generation has been tapped to oversee the debt that creates.
Brown also questions why that is being handled by OPG, and not the Ontario Electricity Financial Corp., which manages hydro debt.
While the 17% cut will be paid for by future ratepayers, it’s taxpayers who are footing the bill for the aforementioned social programs as well as the previously announced 8% cut – to the tune of $5.5 billion over the next three years.