Provincial watchdog estimates Ontario subsidies to cost nearly $120-billion over 20 years

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The government of Ontario Premier Doug Ford failed to deliver on a 2018 election campaign promise to lower electricity bills by 12 per cent, according to numbers released Wednesday by the province’s independent financial watchdog.

A report from the Financial Accountability Office of Ontario (FAO) examining the province’s electricity subsidy programs found that hydro bills rose 4.3 per cent under the current Progressive Conservative government, and will increase an additional 2 per cent annually between now and 2040.

The FAO said it was “informed that the government does not intend to lower electricity bills by 12 per cent from 2018 levels.” It added that the government now says it will reduce bills by 12 per cent when compared with the projected higher charges under the previous Liberal government. This revised commitment is expected to be met by 2025, the FAO said.

In 2018, the Progressive Conservative Party said it would cut electricity rates by 12 per cent if elected. That was to be achieved partly by redirecting the province’s share of dividends from Hydro One, a transmission utility. The reductions were to begin by Jan. 1, 2019.

In 2019, the office of then-minister of energy Greg Rickford told The Globe and Mail that the government “continues to search for savings within the electricity system” to deliver the cuts.

In March, 2020, Mr. Ford again vowed to keep the promise to reduce rates by 12 per cent but said it was a very “complicated issue.”

On Wednesday, Financial Accountability Officer Peter Weltman said Ontario’s nine energy and electricity subsidy programs will cost a combined $6.9-billion during this fiscal year. “From a purely accounting point of view, on a $178-billion spend, it’s not huge,” he said in an interview. “But it is a lot of dollars on an absolute basis. It’s about the same amount of money we spend on long-term care.”

He added: “And because we run deficits in this province, effectively, these programs are deficit-financed.”

The FAO estimated Ontario’s energy subsidies will cost a total of $118.1-billion between 2020 and 2040. The most expensive programs are the Ontario Electricity Rebate (which provides a 19-per-cent rebate on electricity bills to households, small businesses and others) and the Renewable Cost Shift (which moved the cost of wind, solar and bioenergy contracts from ratepayers to the province).

Those programs will cost taxpayers $52.9-billion more over 20 years than the previous Liberal government’s proposal, known as the Fair Hydro Plan, which was to have been funded largely by electricity ratepayers. That plan would have caused hydro bills to rise steeply beginning this year.

Energy Minister Todd Smith said in a statement that the FAO report confirmed “what Ontarians have known for years – the failed policies of the former Liberal government resulted in skyrocketing hydro rates.” On Wednesday afternoon, Mr. Smith’s office did not respond to questions from The Globe on the fate of the Hydro One dividend promise and the decision to run deficits while subsidizing electricity consumption.

NDP energy critic Peter Tabuns said the FAO report is proof that Mr. Ford’s 2018 campaign promise to lower rates was “always a sham.” He said the government clearly broke the promise.

To lower hydro prices, he said, the government could have expanded grants and loans for energy conservation programs, instead of “downgrading” them. Successfully encouraging companies and people to find ways to save energy, he said, is cheaper than building new power plants.

Mr. Tabuns also said the PC government continues to turn away from solar and wind, which he said are now the cheapest forms of power available.

“Unless you actually go after the fundamental problems in the system, then you are not going to have a system that’s affordable,” Mr. Tabuns said in an interview. “Their path forward is one through ultimately, higher costs, bigger subsidies, higher prices.”

He said he supported public ownership in the power sector, noting that NDP policy is to re-nationalize Hydro One, the transmission utility that was partially privatized under the previous Liberal government of Kathleen Wynne. Mr. Tabuns said the billions in subsidies now being pumped into the system far outpace any money raised by the sale.

In 2018, NDP Leader Andrea Horwath campaigned on a multibillion-dollar promise to buy the utility back, while pledging to cut Ontarians’ hydro bills by up to 30 per cent.

Benjamin Dachis, associate vice-president of public affairs with the C.D. Howe Institute, said the subsidy costs laid out in the FAO report were “eye-watering,” and blamed successive contracts with natural gas, nuclear and “green” energy producers. (Mr. Dachis worked as Mr. Ford’s policy, budget and fiscal planning director in 2018 and 2019.) He added that Ontario needs a serious plan for reducing electricity sector costs, rather than relying on taxpayers to lower bills.

“Where we are now is the outcome of many, many policy decisions,” he said. “It took a generation of policy to get us into the mess, and it will literally take a generation of taxpayers to get us out.”

Rapidly rising hydro bills were a key factor in the voter anger that resulted in the near-complete wipe out of Ontario’s Liberal Party in the 2018 election, which left it with just seven seats in the legislature. Late in the campaign, Ms. Wynne told The Globe editorial board she regretted not acting sooner to try to lower electricity bills.

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