September 14, 2016
Global TV News reported how Ontario Premier Wynne heard the cries from rural communities about the high cost of electricity and how they affect people’s living standards. Premier Wynne said: “One of the things that we heard most consistently was hydro rates. I heard about electricity rates in the north. It is not something that is isolated in one riding in Toronto. This is a concern across the province. I recognize that.”
“It’s an urgent issue for the minister of energy,” the premier also said, adding that her government will look at “further mitigations” to offset the high cost of electricity in the province.
The Throne Speech of September 12, 2016 disclosed what those “further mitigations” are to be — they are a “finger in the dike” approach to stopping climbing electricity rates.
Specifically what the Throne Speech suggested was: the provincial portion of the HST on all residential electricity bills will be rescinded and a direct credit will appear on electricity bills each month advising us what the credit was. This action was described in a press release from Energy Minister Glenn Thibeault as: “Reducing Ontario residential electricity bills by 8 per cent on the amount before tax, an average savings of about $130 annually or $11 each month”.
The next major action proposed in the press release indicated rural customers experiencing well above “average” electricity bills will be helped by a 20% “on-bill” monthly savings credit: “Providing eligible rural ratepayers with additional relief, decreasing total electricity bills by an average of $540 a year or $45 each month”. No mention of when that might occur. And, no definition of what an “eligible” rural ratepayer is.
The third action says “commercial and industrial” customers will benefit from lower electricity costs via a reduction in qualifications to enter the “Class A” rate class. This is suggested to reflect in substantial rate decreases of as much as 34%: “Empowering businesses to reduce their bill by up to 34 per cent through the expansion of the Industrial Conservation Initiative”.
Presumably the above three actions are supposed to comfort Ontario’s ratepayers in the knowledge that Premier Wynne and her Energy Minister have not only recognized the problems created by rising electricity prices, but will do something about stopping it.
- Provincial Sales Tax Rebate: moving the burden around The first action of removing the Provincial Sales Tax portion of the bill was originally placed there by the Ontario Liberal Party (OLP) in 2010. Later they offset it by granting ratepayers a 10% credit via the Ontario Clean Energy Benefit (OCEB) so those two actions reduced the bill by 2% temporarily; the OCEB ended January 1, 2016. Now they claim the rebate of 8% will save the average residential ratepayer $11.00 per month commencing January 1, 2017 which, coincidentally, is when the new tax for the cap and trade plan will kick in and hit the average ratepayer heating with gas with a $5.00 monthly tax. In short, the net gain will be $6.00 per month. Note the two most recent rate increases (Nov. 1, 2015 & May 1, 2016) hit the “average” ratepayer $8.00 per month for the electricity line only.
- Rural ratepayer relief; who gets it? Who pays? The second action they suggest will occur will supposedly “relieve eligible rural ratepayers” of $45.00 each month but the press release does not define “eligible”. We should suspect that to be eligible the rural ratepayer will have to qualify for the rebate and the inference is that it will be related to household income under the Ontario Electricity Support Program or OESP. If that is what is planned the Ontario Energy Board’s estimated cost of the OESP will easily surpass their estimate of $200 million per annum. The OESP is a part of the GA (Global Adjustment) bill all of the non-eligible ratepayers pay for, so any increase via the “rural relief” proffered in the Throne Speech will increase hydro bills. Logically their funding should be from the Ministry of Community and Social Services budget.
- Class B to Class A transfer: more energy poverty will resultThe ICI (Industrial Conservation Initiative) was initially established in 2011and transfers a portion of the GA from Class A to Class B ratepayer subject to the Class A ratepayers agreement to curtail their demand during peak hours. In the first six months of 2016 the extra portion of the GA picked up by Class B ratepayers was $495 million or about 3.6 cents per kilowatt hour of the 13.83 TWh (terawatts) consumed by Class A ratepayers. Increasing the number of Class A eligible clients will increase the amount being absorbed by the remaining Class B ratepayers. It will simply create more energy poverty. Once again neither the Throne Speech or the press release notes when the implementation of this will occur.
The end results of the “mitigations”
What the Wynne government plan likely means is that rate relief for residential ratepayers will be short lived, if at all, as the cap and trade costs and the increased costs of the OESP and the Class B to Class A transfers click in. The “finger in the dike” announcement from the Throne Speech will be short lived and residential ratepayers should expect the flood of rate increases to reappear in the very near future.
NEXT: Some of the ways the government could immediately reduce the current costs of electricity and also reduce any future rate increases.