How big is Ontario’s hydro problem? And can the Liberals, NDP or PCs fix it?
No matter who wins next week’s provincial election – Kathleen Wynne, Andrea Horwath or Doug Ford – someone is going to have the unenviable task of leading Ontario into a decade in which already sky-high hydro bills are expected to climb even higher still.
Between 2006 and 2016, the amount an average household spent on electricity more than doubled in Ontario.
In 2006, the average household spent $40.03 per month on electricity usage. That’s before taxes, delivery and any other charges. By 2016, however, this amount had more than doubled to $83.18 a month, according to the Ontario Energy Board (OEB).
In some areas of the province where delivery fees are highest – particularly rural and northern communities – some residents said their bills have increased by as much as 200 per cent. Some customers profiled by Global News in the past two years during coverage of the province’s “hydro crisis” saw their bills jump to more than $1,000 a month.
How did we get here?
Depending on who you ask, the source of Ontario’s energy woes is either a) decades of neglect from previous governments – which left the province’s electricity system outdated, prone to blackouts and brownouts, and fouled by coal – or b) the 2009 Green Energy Act, which was meant to create a “green economy” in the province, but ended up costing electricity customers billions.
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The Liberals, including Wynne and Energy Minister Glenn Thibeault, have said the province had no choice but to invest heavily in infrastructure, renewable energy and upgrades to the province’s nuclear facilities to ensure Ontarians have a reliable supply of electricity and to rid the province of coal. But critics say the way the government set about accomplishing these goals was deeply flawed.
Thibeault has expressed regret over rising electricity costs – saying hindsight is 20/20 – while Wynne has said ignoring the impact of skyrocketing hydro bills was a “mistake.”
How bad is the problem?
In the summer of 2016, Ontario’s hydro crisis reached a fever-pitch.
Struggling to keep food on the table while paying ever-increasing hydro bills, many families in Ontario simply couldn’t keep up.
As Global News first reported, the number of customers seeking emergency funding to prevent disconnection of their electricity doubled in some communities between 2013 and 2016. Meanwhile, the number of customers cut off from their electricity by power companies during this period was more than 220,000 according to the OEB.
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Customers hardest hit by rising hydro rates were those in rural areas of the province, where the “delivery fee” portion of their bills often exceeds the fees for actual electricity use. Hydro One low-density customers – those who live in sparsely populated areas of the province – saw their bills increase the most.
At the end of 2015 – according to OEB statistics – more than half-a-million residential customers in Ontario were behind on their electricity bills, owing more than $170 million to their local distribution companies. Hydro One – which had the highest number of customers behind on their bills – was owed more than $105 million.
Government responds to mounting crisis
Wynne prorogued the provincial legislature in September 2016 so her government could return with a new Speech from the Throne, promising to remove the provincial portion of the HST from hydro bills and giving increased support for rural and low-income families struggling to make ends meet.
About three weeks later, Wynne’s government suspended the procurement of any new, large-scale renewable energy projects in the province, a decision the government said would save electricity customers roughly $3.8 billion in unnecessary spending.
Then, on Feb. 21, 2017, following a series of Global News articles featuring families disconnected from their hydro during the coldest winter months, the Liberals were pressured into issuing an ultimatum to electricity companies: either stop disconnecting hydro during the winter or the government will pass legislation banning the practice.
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Ultimately, the government had to legislate these changes because several companies did not end the practice voluntarily.
The government then announced even bigger changes in April 2017. The Fair Hydro Plan offered a province-wide rebate of 25 per cent on all electricity bills in Ontario, while also expanding subsidies to rural customers.
The government said this plan – which it compared to remortgaging a house – would add roughly $20 billion to the electricity bills of future customers, but was a fairer way to do things because it spread out the cost of investing in Ontario’s energy sector among multiple generations.
However, Ontario’s auditor general, Bonnie Lysyk, questioned the government’s numbers, saying the plan would actually cost $40 billion. She also criticized the government’s accounting practices, saying the “needlessly complex” structure of the plan burdens ratepayers with roughly $4 billion in unnecessary interest payments.
How does each party plan to fix hydro and who do Ontarians trust?
The Liberal plan to clean up hydro is clear. In fact, it’s already in play.
The initiatives launched since the fall of September 2016 have, according to Wynne and Thibeault, reduced the burden on electricity customers while ensuring the reliable supply of energy well into the future.
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Between billions of dollars in new subsidies, eliminating the provincial HST, banning winter disconnections and borrowing to reduce bills today, Wynne has consistently reiterated her newfound commitment to protecting electricity customers in Ontario.
But according to new Ipsos polling data collected exclusively for Global News, only 13 per cent of Ontarians believe Wynne and the Liberals have the best plan going forward to lower hydro costs. Twenty-nine per cent said the Ford and PCs had the best plan, while roughly 20 per cent said it was the NDP. In total, more than one-third of Ontarians surveyed said none of the parties have the best plan.
The NDP, meanwhile, says the Liberals’ plans to fix hydro are too little, too late.
If elected, the NDP says it will cut hydro bills by 30 per cent. This will be largely accomplished by buying back Hydro One. The NDP says this move won’t add any cost to electricity bills and will produce billions in annual revenue once the buyback is complete.
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But returning Hydro One to public control won’t come without a fight – it also may not reduce hydro bills.
Buying back a privately-owned company from individual shareholders, mutual funds and large pension funds will be challenging, especially if investors, knowing the government is so keen to buy, hold out for a better deal.
“I can see many hurdles the government would have to overcome,” said Peter Dey, chairman of Paradigm Capital and an expert in corporate governance.
He says while it’s “technically possible” for the NDP to buy back the company, it would be difficult and could trigger other consequences – like “change in control” mechanisms that would automatically trigger tens of millions of dollars in payouts to Hydro One’s senior management team.
Horwath has also said she would scrap the Liberals’ Fair Hydro Plan, equalize delivery fees across the province and consider renegotiating or cancelling – when possible – some of the long-term renewable energy contracts the government signed over the past decade.
But according to the government, cancelling any contracts would almost certainly lead to lawsuits and hundreds of millions of dollars in damages, which it says would make electricity bills rise even higher.
When it comes to how Ontarians feel about the Fair Hydro Plan, the Ipsos polling shows only 22 per cent of respondents say they’ve noticed a decrease in their bills.
Meanwhile, 61 per cent of Ontarians said the rising price of hydro will impact the way they vote on June 7. In Northern Ontario – where bills have gone up the most – 74 per cent of respondents said hydro will impact their vote.
In total, less than half of Ontarians said they can easily afford their hydro bills, while 38 per cent said they have difficulty finding the money to pay at the end of the month.
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The PCs, meanwhile, say if they’re elected, they’ll cut hydro bills by 12 per cent. They’ll achieve this by returning dividend payments the province receives from Hydro One directly to electricity ratepayers, shifting responsibility for conservation programs from electricity bills to taxpayers and by cancelling any future deals to buy electricity the province doesn’t need.
Ford says his hydro plan will save customers an average of $173 a year. The math behind this is vague, however. And with roughly five-million residential customers in the province, dividing the $248-million annual dividend payment the province receives from Hydro One would only amount to about $50 a year in savings per customer.
Also, Ontario already cancelled the procurement of new, large-scale renewable energy in 2016, so it remains unclear how Ford’s promise to cancel future deals would result in any additional savings for customers.
Ultimately, without addressing the underlying cause of Ontario’s hydro problem – extremely high costs for energy production – fixing sky-high electricity bills may be something no party can achieve.
“None of the major parties have presented a serious proposal really for how to help,” said Tom Adams, an energy consultant and expert in Ontario’s electricity sector. Let alone “manage the electricity crisis that’s going on here,” he said.
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