With the provincial Liberals struggling mightily at the polls and an election a year and a half away, it would be easy to dismiss the hydro rate cut announced last week as a cynical move designed to improve the party's fortunes rather than help consumers.
Prices will drop another 17 per cent this summer, Energy Minister Glenn Thibeault announced, added to the eight per cent drop that took effect Jan. 1. When asked at a news conference Friday at Greater Sudbury utilities whether this was a ploy to win back voters, Thibeault responded that “it's never too late to do the right thing.
"For us, recognizing that the relief that we've been bringing to the people of Ontario in the past, while it was helpful, it was very targeted," he said. "Really what people were looking for was substantial relief with structural changes to make sure that these rates wouldn't all of a sudden just spike back up again."
To accomplish that, Thibeault said they have remortgaged the debt they have built up reforming the system over a longer period. While that will cost $25 billion to $40 billion, depending on interest rates, he said it's a fairer way to proceed.
"We had to rebuild a system that was in tatters, that didn't have the capacity for its own generation,” Thibeault said. “That's why we had the system breakdown in 2003 -- the rolling brownouts, the blackout. It takes decades to rebuild a system and it takes a lot of money. That cost us $50 billion over a decade and a bit.
"When we finance these contracts for new generating assets, and putting lines in, we finance that over 20 years. That means we pay it off quicker, but also that our rates go up a lot quicker."
Refinancing that debt over a longer period means the next generation of users will help pay for it, he argued, which is fair because they will also benefit.
“What we're saying is, let's actually extend our mortgage, make it 30 years, which is what we've done. Now we've made sure that the assets that will be used by future generations of Ontarians, we all now can make sure that we've lowered our rates and at the time time, make sure everyone has paid for the useful life of these assets."
This is a long-term solution, he said, and future increases have been frozen at two per cent for the next few years. Meanwhile, Thibeault said he'll work to improve the system and find more savings, as much as $200 million.
"So yes, this does come with a cost, but we do recognize that this is worth it to provide relief now, relief in the future and change the way the energy sector has been structured."
But Nickel Belt MPP France Gélinas said the move is a classic example of the provincial Liberals using public funds for their own benefit, with long-term pain for the rest of us.
"It's like trying to pay your mortgage with your credit card – that's not good financial planning," Gélinas, a member of the NDP, said. "Anyone who has ever had to remortgage their home knows that you end up way paying more in interest. This is what's going to happen to us.
"We're in the realm of $40 billion of interest that we, our children and grandchildren will have to pay. Yet the system will continue to need upgrades if we don't change the path that we're on."
What the Liberals haven't done is deal with the structural problems of the electricity system, she said. For example, they keep signing contracts for more power generation that we don't need. Last Thursday, for example, Gélinas said Ontario needed 18,000 megawatts of power. But we generated 32,000 megawatts, meaning we had to sell the excess at a loss.
"We have generating capacity way beyond peak demand, but they keep signing contract after contract," she said. "Some of them are coming up for review.
Let's look at each and every one of them. Let's tailor our generation of electricity to our needs and stop selling it at a loss."
"Instead they are throwing a $40 billion pricetag on the back of each and every one of us, our kids and our grandkids."
She's also disappointed the rate cut won't take effect until the summer, long after Northerners have had to pay their winter hydro bills, the highest of the year.
“If they were serious that they wanted to help the North, it would be now,” Gélinas said. “Our high hydro bills in the North are happening now, in the middle of the winter. We're paying for January and February hydro.
"But no, they're waiting for the summer when Toronto pays their highest bill. I find this really sad to see. They see their base is in Toronto, they will make sure Toronto remembers what they have done."
