Randall Denley: Ontario can’t afford to keep helping pay for everyone’s hydro bill

There are two things you can count on when Premier Doug Ford’s government updates Ontarians on the state of the province’s finances. First, the deficit will be higher than what was projected just months before, and second, the date when the budget will be balanced will be pushed back, again.

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Finance Minister Peter Bethlenfalvy delivered exactly as expected in his fall fiscal update Thursday.  He says the deficit will be up this year and next, and the elusive budget balance will be delayed.

Given the government’s deteriorating financial position, one would have hoped to see some rational action on its ridiculously expensive power-bill subsidies, which cost $6.9 billion last year. Instead, baby steps were taken.

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Bethlenfalvy announced Thursday that the government would cap its biggest single subsidy, the Ontario Energy Rebate (OER), at 1,200 kilowatt-hours monthly for residential users. Given that the average residential consumer uses 700 kilowatt-hours per month, that’s a modest step indeed.

The change at least limits the size of the energy rebate for those who have the biggest houses and use the most power. Since the energy rebate is paid as a percentage of the bill, people who consume a lot of power get more help every month than those who conserve. That doesn’t make sense.

The Ford government has also quietly made one additional change to the power-bill subsidy that might be beneficial if it proves to be the start of a trend.

The government has cut the power-rate subsidy from 23.5 per cent of the bill this year to a still substantial 15.7 per cent next year, but optimism might be premature.

A year ago, the Ford government sharply increased the power subsidy rate, boosting it from 13.1 per cent because power rates had just jumped 29 per cent due to higher nuclear costs. Rather than trying to sell that challenge to the public, the government doubled up on the subsidy.

This year, the provincial government got a break. Power rates over the next 12 months are expected to be lower. It’s a temporary downturn in prices, but the government took advantage of the moment to cut the OER, keeping consumer bills stable.

The question is, what happens next? So far, the government has no apparent strategy on power-rate subsidies, other than to take the most politically expedient course in the short term.

Energy Minister Stephen Lecce said during a discussion of his department’s estimates earlier this year that he wants to “bell-curve” the subsidy, but it’s not a battle he has won yet.

The subsidies are nothing more than an ill-conceived effort to shield consumers from the real cost of power by using tax dollars to subsidize their bills. In effect, the government is “saving” people money by taking less money from one pocket and more from the other.

With its long string of deficits, the Ford government is, in effect, borrowing money so people don’t have to pay their real power bills.

For the average power user, the savings are paltry, about $36 a month. For the government, the cost of its various subsidy programs is huge and rising steadily as real power prices increase. In 2020, total subsidies amounted to $4.2 billion. Last fiscal year, the number was $6.9 billion.

That’s unsustainable now and, as power prices continue to rise with the introduction of expensive new nuclear generation, it’s going to get worse.

Ontario’s power-bill subsidies are rationally indefensible but politically attractive. If it were to cut subsidies, the Ford government would be accused of increasing power bills, even though all it would do is make people pay the actual cost of their bill. That doesn’t seem like too much to ask.

Power-bill subsidies might seem odd, but they have a long history in Ontario.

Going into the 2018 election, the cost of electricity was a hot issue, with an Ipsos poll showing 61 per cent saying it would affect their vote. Despite bringing in power-bill subsidies in 2017, then premier Kathleen Wynne and her Liberal government were on the hot seat.

Ford and the PCs saw an opportunity and promised to reduce power bills by 12 per cent, the sort of non-round figure that makes it sound like a real plan.

Once in power, the PCs found cutting power bills wasn’t so easy. They did try, pulling the plug on the Liberals’ green energy approach and cancelling more than 700 renewable energy contracts. Bills still edged up.

By 2019, the PCs decided that borrowing money to subsidize power bills wasn’t such a terrible idea after all and brought in the OER. It was a bad idea then. It’s a worse one now.

National Post

randalldenley1@gmail.com

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