The Ontario government is slashing electricity rates by an additional 17 per cent in an effort to provide immediate relief to ratepayers ahead of a fast-approaching 2018 election, but the rate cut comes with an estimated $1.4 billion per year in added interest costs.
Ontario’s Fair Hydro Plan would see electricity rates reduced for ratepayers across the province, amounting to 25 per cent when compounded with Ontario’s eight per cent HST hydro rebate that took effect Jan. 1, and will hold with the rate of inflation for four years.
“This is the largest cut to electricity rates in the history of Ontario,” Premier Kathleen Wynne said during a press conference Thursday.
“In dollars and cents, the exact benefit will vary by household. But if, for example, your monthly bill adds up to $135, this cut will drop it down to around $101.”
The rate cut is expected to take effect this summer, with ratepayers to see the effect of the reduction on their June 1 bill.
WATCH: Ontario hydro customers to see additional 17% price cut on bills. Sean O’Shea reports.
Wynne said the province would achieve the rate reduction by “refinancing” long-term power generation contracts to even longer terms, not unlike extending a mortgage over a longer amortization period, but said it would not affect the government’s ability to maintain a balanced budget in 2018.
“Over time, it will cost a bit more. And it will take longer to pay off. But it is fairer – because it doesn’t ask this generation of hydro customers alone to pay the freight for everyone before and after,” she said.
“The burden will now be shared more evenly and more appropriately.”
WATCH: Ontario Liberal hydro price cut comes with unknown cost. Alan Carter has more.
Progressive Conservative Party Leader Patrick Brown criticized the Liberal government’s “shortsightedness” and “mistakes” on the hydro file, adding that interest costs would amount to at least $14 billion over 10 years.
“That’s a hard pill for Ontario to swallow, that this government’s errors in energy is going to cost them $14 billion in interest,” he said, adding the Liberals continue to move forward with green energy contracts that he said should be reviewed.
“You think they would have learned about these bad contracts and now they’re doing the same mistake again? How can you ask for Ontarians to accept your apology when you’re going to do the same thing all over again?”
Brown added the PC party would announce hydro relief measures in the coming weeks and that electricity rates had risen to among the highest in North America under the Liberal party.
“I think that there is still a lot of people who aren’t going to be buying these Liberal lines,” he said. “The reality is on the watch of this government hydro bills have gone up 400 per cent and now they’re saying we’re going to offer you 25 per cent relief, it’s still a 400 per cent increase we’ve seen on their watch.”
NDP energy critic Peter Tabuns said that despite the rate cut the province will face higher costs long-term, as the debt incurred from the plan will add up over the next decade.
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“It looks like we’re talking in the tens of billions of dollars to buy down hydro rates in advance of the election … We don’t know what is going to be the total cost for doing this, we have their guess and we’re talking in 1o, 20 and 30 billion dollars. It’s a lot of money,” he said.
“She’s put a very large Band-Aid on this problem, a very expensive Band-Aid, but she hasn’t dealt with the structural issues, she hasn’t even talked about them.”
Additional measures were announced Thursday to give low income, northern and rural Ontario consumers additional savings, at a cost to the province of $2.5 billion over the next three years.
“We can all agree that we have to help people who need that extra support. But ratepayers have been carrying the cost of those programs, not taxpayers. And that simply is not fair,” Wynne said.
“As I have said, electricity is a necessity. So it only makes sense that we share the cost of making sure no one has to make those difficult decisions between heating their home and feeding their family.”
WATCH: Ontario government cuts hydro rates but will future generations left with burden?
Ratepayers in rural parts of Ontario would also see their distribution costs from local utility providers reduced and First Nations residential consumers would see the on-reserve delivery charge removed completely.
Ontario hydro rates have been the most contentious issue for the Wynne government as it moves closer to a 2018 election campaign.