Hydro rates to drop 17%, but Ontarians will pay for it later

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Ontario Liberals' hydro rate cut plan did little to spark voter support, new poll suggests

Residential and small business hydro bills in Ontario will drop by 17 per cent on average this summer under a new plan released Thursday by Premier Kathleen Wynne.

The plan will lift billions of dollars in costs off customers this year, and load them onto future hydro bills and taxpayers. 

The dramatic move comes as Wynne's Liberal government trails the PCs by some 14 points in a range of polls and finds itself nearly even with the NDP ahead of next year's election. 

Wynne acknowledged the bill for the across-the-board-relief will eventually come due for ratepayers.

"Over time, it will cost a bit more. That's true," she said when detailing the plan.

"And it will take longer to pay off. That's also true. But it is fairer, because it doesn't ask this generation of hydro customers alone to pay the freight for everyone before and after."

The Liberals say the plan will cut 25 per cent off the average residential and small business bill. That figure includes an eight per cent reduction that kicked in Jan. 1, when the government exempted residential electricity costs from the provincial portion of the HST.

"Everywhere I go I hear from people worried about the price that they are asked to pay for hydro and the impact that it has on their household budgets," Wynne said Thursday at Queen's Park.

The changes mean that hydro bills will not only drop, but "stay down and everyone will benefit," she said.

Medium-sized businesses will also be eligible for some relief. More of them will qualify for a preferential electricity rate that is currently given to larger industrial businesses. 

'The bill will come due'

As first reported by CBC News in February, the centrepiece of the plan involves stretching the financing costs of building and refurbishing power plants over a longer period of time than was previously planned.

It means some $28 billion in costs projected to be paid over the next decade will be refinanced. Officials say the maximum amount of interest per year would be $1.4 billion, with those interest costs to be paid by hydro customers in future years.

The plan would keep electricity rates at or below the rate of inflation over the next four years, but government officials said they can't predict the size of the electricity rate increases after that period.   

After hammering the Liberals over hydro prices for months, the opposition parties are now faced with the prospect the government has figured out a way to bring bills down.

But on Thursday, they remained unimpressed with the plan.

"I've got two teenage girls at home," Progressive Conservative energy critic Todd Smith said Thursday. "Their kids are going to be paying for this."

NDP energy critic Peter Tabuns said: "The bill will come due another day and it will be a very big bill."

The PCs have not put forward a plan for cutting hydro bills.  

Earlier this week, the New Democrats released an electricity plan they said would reduce rates by as much as 30 per cent for some households. A centrepiece of that plan is buying back shares of Hydro One that the government has sold to private investors. 

"Public ownership of the hydro system benefits everyday Ontarians, and it benefits all of us," deputy NDP leader Jagmeet Singh told the Legislature Wednesday.

"The NDP has no idea how our energy system in this province works," Thibeault responded.

Extra support for low-income residents

The bulk of the hikes in electricity costs since the Liberals came to power in 2003 are due to long-term contracts that pay private power producers guaranteed prices for their electricity. Some $50 billion is being spent on the building of new power plants and refurbishing old ones, including nuclear, hydro, natural gas, wind and solar plants. 

"The way we financed those investments was a mistake," Wynne said during her news conference. "We asked one generation, today's generation, to unfairly shoulder the burden of nearly all of those costs."

Other changes were announced Thursday. 

For instance, low-income households will also see a 50 per cent increase in a rebate program designed to make their hydro costs more affordable. The government will expand that program to give an extra rebate to low-income households who heat with electricity.

The changes mean the credits will save low-income households about $35 to $60 a month. The low-income support program will cost taxpayers $2.5 billion over the next three years.