Under pressure over rising hydro bills, the Ontario government unofficially launched its 2018 provincial election campaign today.
And, given the opposition parties are trying to make hydro bills the ballot box question, the province is responding to that challenge with the biggest hydro bill rebate plan of the three parties to date.
Starting this year, the Liberal government was already cutting the HST on hydro bills by eight per cent — something my colleague David Macdonald and I estimate will benefit Ontario’s richest households two-and-a-half times more than the poorest 10 per cent.
Why? Because the eight per cent HST cut is a flat rate cut, which means everyone gets the same percentage of savings, from the Conrad Blacks of Ontario to a low-income senior.
Richer households consume more electricity. They’ve got bigger houses, more bells and whistles like electronics. That contributes to the bigger hydro bill savings.
In our paper released today, we reconfigured the hydro bill rebate so that poor and middle class households would save up to 25 per cent on their bills but the richest — households earning $109,000 or more — would pay their full share. Just like they did before January 1st.
For the same amount of public dollars, the province could be delivering a bigger rebate to households who need the greatest relief.
But today’s news conference featuring Premier Kathleen Wynne just kicked the hydro bill rebate plan up a few notches. While the details seem scarce, here is what we know so far: the government is now promising to cut another 17 per cent from hydro bills.
It’s doing it by spending up to $2.5 billion on programs to support low-income hydro users and those in rural and remote areas by enhancing Ontario Electricity Support Program, broadening the Rural and Remote Rate Protection Program, providing relief for First Nations people on reserves, and introducing an affordability fund which seems to be aimed at helping hydro customers who cannot qualify for low-income conservation funds.
The effect of these measures will be to deliver greater benefits to low-income families, counter-balancing the regressivity of the HST rebate.
The premier also announced a refinancing of a portion of the global adjustment cost to spread the costs over a longer period. This will increase costs in future, both due to the increase in interest costs and the extended period of time for payments. So, $2.5 billion of annual costs are being pushed forward and there will be annual interest costs of up to $1.4 billion. It looks like these costs will be paid through the tax system, hydro rates, or both.
On the surface, looking at the options available, this proposal makes some sense, as accounting costs are often spread over the life of an asset.
How does the Wynne plan differ from the Progressive Conservatives and the New Democrats?
For all their belly aching, the Progressive Conservatives haven’t yet said what they will do yet to reduce hydro prices. They have committed to eliminating the Green Energy Act.
What Patrick Brown will say is that the current government has done a bad job on negotiating contracts with private providers of energy. That is likely true. But, it will be expensive (if not impossible) to renege or renegotiate them.
The NDP says privatization and private sector involvement in the electricity system is the problem, and that certainly gets closer to the root of things. It does reduce public control, and the policy flexibility to address issues like conservation, or to adapt to changing patterns of electricity demand.
But reversing the situation will be an expensive long-term process. Which means long-term political and public commitment.
The NDP and Progressive Conservatives have successfully backed this government into a corner on hydro.
Today’s announcement by Premier Wynne just upped the ante on the hydro file — one that has become as hot of a political potato as you can have.
There are flaws in all three parties’ approaches to resolving the hydro bill political nightmare, but Liberals are increasing the progressivity of their solutions, while the NDP has identified a fundamental problem, even if their solution comes up short.
Sheila Block and David Macdonald are senior economists with the Canadian Centre for Policy Alternatives.
