The government has promised to get the electricity bills down…but at what cost? Where is the money coming from? The answer is simple: taxpayers and ratepayers are picking up the costs.
Last fall, Energy Minister Glenn Thibeault announced that the 8% provincial portion of the HST would be rebated to “residential, small business and farms as of January 1, 2017”.
The Energy Minister’s press release went further stating the government would be “Providing eligible rural ratepayers with additional relief, decreasing total electricity bills by an average of $540 a year or $45 each month”.
That was somewhat ambiguous in several areas so I looked for clarification from the Ministry.
After several phone calls and e-mails with messages left for the Ministry’s media spokespeople, and even a phone call to the Minister’s office, I received no response other than to confirm (via e-mail): I had “reached out to us [the ministry media contact] in regard to one of our September press releases”.
So, with no actual clarification, here’s what I get from the press releases, a mail insert from Hydro One, and a search on the Ontario Energy Board’s “bill calculator”.*
What is the real hydro bill relief?
Energy Minister Thibeault’s September 13th press release suggested an average savings of $130 per year for the rebate, and also announced “eligible” rural ratepayers would see “additional relief” amounting to $540 a year. My query to the Ministry asked, what were the requirements for “eligible” rural ratepayers, and how many were there? I also asked what the estimated overall cost of the 8% rebate would be for the province, and where the money was coming from to cover the lost revenue. Those questions remain unanswered by the government, so here are my estimates in respect to the anticipated costs of the 8% relief.
►Out of one pocket into the other
The Ontario Energy Board’s 2015 Yearbook of Electricity Distributors indicates Ontario had 4,564,835 Residential Customers and 434,999 General Service (50kW) Customers, 54,295 General Service (50-4999kW) Customer and 124 Large User (5000kW+). The “General Service” customers consist of farms and the small and medium sized businesses.
Gross revenue for the year including delivery costs was reported as $17,526 million, so rebating 8% would represent approximately $1.4 billion.
About $600 million would be earmarked for “Residential” Customers. Based on the specific information received from Hydro One, whose media team were responsive to my questions, the only group listed but not on the “rebate” list is the 124 Large Users who would consume (estimated) 5.2 terawatts (TWh) of the 124.6 TWh reported as “supplied” in the OEB report. Again, based on an estimate, the value of that 5.2 TWh would be approximately $735 million of gross revenues (including delivery) and reduce the rebate of the provincial portion of the HST by only $60 million to $1.340 billion. It is assumed the difference of $740 million would represent the rebate to the small businesses and farms.
The full $1.340 billion cost will be picked up by the Ontario taxpayers!
►Out of ratepayer’s pockets into ratepayer’s pockets
That same press release also said, “Providing eligible rural ratepayers with additional relief … by an average of $540 a year”. The Hydro One application filed with the OEB notes the total additional amount required under the RRRP (Rural or Remote Electricity Rate Protection Program) is $116.4 million (rounded) for 334,500 (rounded) Hydro One “low-density” customers. That works out to $29.19 per customer each month and annually to $350.28, not the additional $540.00 Minister Thibeault claimed in the press release. Even if you add the 8% PST rebate to the rural ratepayer relief it comes to $500.40 in total so is below the $540 claimed by Minister Thibeault.
The $116.4 million cost of the “additional relief” via the RRRP will be a part of the “regulatory” line on all ratepayers’ bills, increasing that cost. All ratepayers share in the payment of the RRRP which with this increase now totals approximately $280 million.
Thibeault’s quote at the end of the press release said “Many rural and northern customers would receive significant rate relief”. Yet there is nothing additional proposed in this press release for “northern customers.” The rate relief for them appears to be the same as the rest of the province, except for those who are “low-density” Hydro One customers.
The spin of the press release is captured in the first sentence: “Ontario is taking action to reduce electricity costs and intends to introduce legislation that, if passed, would rebate the provincial portion of the HST from the electricity bills”.
Very nice sentiment, except we know that funding to “reduce electricity costs” is from taxpayers who will pick up the costs of the 8% rebate and ratepayers who will pick up the costs of the “eligible rural ratepayers” reduction.
Almost $1.5 billion shifted to make government look good
The almost $1.5 billion was not obtained from a reduction in spending or by instructing the OEB to reduce the return on capital of the power generators or the local distribution companies—it’s coming from the pockets of taxpayers and ratepayers. The “action” being taken does nothing to defer future rate increases by canceling wind and solar contracts or by taxing them — it simply passes the costs to those who have been affected by the steady and unrelenting rise in the cost of electricity. To claim, as the press release does, that “consumers will be positively impacted” is pure spin!
Had the Wynne government been brave they would have reduced the TOU rates on the first 750 kWh of consumption by a significant amount. As it is those residential ratepayers who have been most impacted by the price climbs will not reap the monetary benefits of residential ratepayers who use more energy — 8% of a $150 monthly bill is $11 versus $24 for a $300 monthly bill.
This cost shift of almost $1.5 billion looks amazingly like another “mistake” by Premier Wynne.
* The OEB “Bill calculator” fails to note any reduction in the “delivery” line for Hydro One’s “low-density” ratepayers but does highlight the 8% reduction in the HST.