We are about a week away from the election and the mudslinging has ramped-up between the three main political parties. It is difficult to weed through the distractions generated during the debates so I put together some additional notes with supporting facts.
The Progressive Conservatives
The PC party has successfully dodged the bullet and will likely not share anything material on what they will do to ‘fix the hydro mess’ if elected on June 7th. The difficult issues about debt, rising long-term energy costs, sustainability and ‘energy poverty’ are not being addressed. They have very little to say with only 3 commitments to voters. Two of the three commitments amount to nothing and the third (rebate Hydro One dividends) has the potential to cheat Hydro One customers. The commitments must add up to an additional 12% reduction in bills.
There is no mention of bill reductions for customers ‘in need’ so presumably the subsidy will apply across the board to everyone.
A light-bulb moment
The Hydro One dividend is actually a distraction. The truly big payout is available from the $860 million profit from OPG in 2017 that surprisingly has not been offered up as relief to ratepayers. This represents more than 3 times the Hydro One dividend and is totally available for the provincial government to do as they please.
Bait and switch
Rather than deal with specifics, Doug Ford deflects to the firing of the Hydro One CEO and board of directors. Unfortunately, that will have absolutely no impact on rates. It doesn’t help people who cannot afford their bills. It simply plays on people’s emotions and is a complete sucker punch.There are processes to deal with this situation that need to play out. For the ‘off with his head’ crowd, there is a steep price to be paid for acting prematurely. It is quite clear – this has nothing to do with rates and everything to do with ideology and mob mentality. So much for having a business approach.
Try to stay focused
I have heard references to the Hydro Quebec model from the PCs. Quebec and Ontario are at the opposite ends of the spectrum when it comes to how they do business. Quebec has maintained public ownership and has mostly hydro-electric power. Ontario is more private than public and has nuclear power. No comparison there.
The takeaway
Either this party lacks the expertise to put together a plan or they are unwilling to show it to the voters as it will jeopardize the election.
Take your pick.
They are mostly focused on discrediting their competition.
The NDP
The NDP seems more transparent about their plan and have provided some high level references in their platform document.
A first pass on these items makes it apparent to anyone familiar with the electricity sector that some of the goals will not be achievable without serious slash and burn to existing plans.
It has come to light that part of that slash and burn is the early closure of the Pickering nuclear station. Re-purposing of the site will create jobs, however you probably won’t see nuclear maintenance and operations staff filling those roles. The estimate of 4,500 jobs lost is being tossed around.
The nuclear plant closure won’t be the only thing required to meet the NDP targets. Other job cuts, deferrals and cancellations will be necessary.
Rate support – for free – a multi billion dollar oversight
The NDP calls for the cancellation of the Fair Hydro Plan and the expansion of the Ontario Electricity Support Program. Their fiscal outlook only shows an annual spend of $35 million for the next 4 years as rate support.
Their platform calls for the leveling of rates for rural customers as some consider it unfair. The existing rate structure requires customers to pay the cost of the infrastructure to deliver power to rural areas.
Rural distribution has always cost more than urban areas. There have always been rate subsidies to offset the difference.
The only debate should be about who receives it, who pays and how much. We already spend $1.4 billion dollars a year to achieve rate support. The $35 million in the plan is a massive underestimation of the necessary funding.
According to a 2018 report by the Environmental Commissioner of Ontario we presently spend $3.9 billion a year on all subsidies to achieve what the Liberal Government says is a 25% rate reduction.
The NDP target of a 30% rate reduction will require more than the $3.9 billion dollars a year we currently spend, however it doesn’t appear in the fiscal outlook.
The rate reduction as presented is not based on ‘need’ and is expected to apply equally to all ratepayers. That would suggest that there will still be rate subsidies required for low-income families.
There is a commitment to end time-of-use rates. That requires an industry-wide change impacting existing contracts, manufacturers, consultants, every Local Distribution Company and the IESO. The cost-benefit does not appear in the plan.
The takeaway
There are some good ideas in the NDP platform but it has some serious financial oversights. Expect to have the NDP either renege on their commitments or slash and burn to meet them.
The Liberals
The Liberals have the most information about their plan since they are the current governing party.
Currently in place is a provincial tax rebate and global adjustment subsidy. As with every party’s plan the rebate is not based on ‘need’, only consumption. There are however separate rate support programs to cover ratepayers who meet specific criteria.
The plan is short-term rate relief through subsidies. The subsidies are proposed to last just past the next election.
The long-term cost will rise again once we burn through the subsidies. It simply pushes off the pain of paying the actual cost of electricity yet again.
Rate support programs
Over and above the provincial tax rebate and global adjustment subsidy to all residential, farm, small business and other eligible customers, there are:
- subsidies for distribution rates for about 800,000 customers in rural and remote areas
- the Ontario Electricity Support program which provides rate relief to vulnerable customers (FAO says ratepayers cover this)
- an Affordability Fund for conservation measures for customers who are slightly above the low-income threshold, and
- the Northern Industrial Electricity Rate Program which reduces electricity rates for large industrial customers in northern Ontario.
These add up to $3.9 billion per year of direct funding. The cost will be partially offset by the $1 billion or so that will come from OPG profits and Hydro One dividends.
The Financial Accountability Office (FAO) estimates that the Fair Hydro Plan will cost the Province approximately $45 billion over 29 years while providing overall savings to electricity ratepayers of $24 billion. This results in a net cost to Ontarians of $21 billion. Read the full article here.
The takeaway
Like it or not, the Liberals have the most comprehensive plan for electricity. Unfortunately it spreads out debt payments and costs more over the long-term. Apparently this is what ratepayers want. Not me, but nobody asked for my opinion.
They have a very large amount budgeted for ratepayers ‘in-need’. In spite of what the campaign ads say for other parties, there is nothing specific identified to pay for this coming from any other party.
The election
I hope everyone takes the opportunity to look into what each party is offering and casts their vote.
Early polls are open now.
“You can fool some of the people all the time, and all of the people some of the time, but you cannot fool all of the people all the time.”
Abraham Lincoln
Derek
