the wynne version of electricity rate relief

On April 24, 2014, Ontario Premier Kathleen Wynne announced that the Debt Retirement Charge (DRC), a 0.7 cent-per-kWh charge on Ontario electricity consumers, would be terminated at the end of 2015. The Premier described this as a move that would "bring significant rate relief". Is this true?

As background, the 0.7 cent charge may sound small, but it isn't. It collects about $900 million every year from Ontario electricity ratepayers. The charge was introduced in 2002 to pay for the "residual stranded debt" of the former Ontario Hydro. The original residual stranded debt, back in 1998, was $7.8 billion.

In the 2012 Ontario Budget, it was revealed that, up to March 31, 2012, the Ontario government (through the Ontario Electricity Financial Corporation) had collected $12.8 billion dollars as a result of the debt retirement charge. In the fall 2013 Update, the Finance Minister reported that, although about $1.5 billion more had been collected to that point in time, the remaining residual stranded debt was $11.3 billion. So, after paying about $14.3 billion to retire a $7.8 billion debt, Ontario ratepayers still owed $11.3 billion. This amazing arithmetic is due to the Ontario government's addition of interest to the original amount owing and its switching of certain costs incurred by Ontario Hydro's successor companies unto the "residual stranded debt account".

This is a story that the Ontario Auditor General may someday want to investigate. Let us return, however, to the claim that removing the DRC will result in significant rate relief.

By the end of December, 2015, the DRC will have collected $15.5 billion, so Ontario ratepayers will have paid almost double the original $7.8 billion owing.

Just one year ago, the Ontario Energy Board approved an electricity (i.e. commodity charge) rate increase that cost the average ratepayer $3.63 a month, or $44 annually. It followed that with another increase in November 2013 raising rates by $4.00 per month, or $48 annually. Then, on April 1, 2014, there was another increase of $2.83 per month, or $34 annually. Those increases did not include rate increases for the "delivery" or "regulatory" lines on our electricity bills, which also increased. So, in just one year, the electricity rates jumped $126 annually and Wynne's announced rate relief won't happen until the end of 2015.

2015 just happens to also be the year the Ontario Clean Energy Benefit (OECB) ends. The OECB reduces the average bill by $13.30 per month or $160 annually. Ontario's taxpayers pay it, so it is a subsidy from residents' right pockets to their left pockets. The average bill (electricity, or "commodity charge " only) at the start of 2016 will thus be $286 higher on an annual basis than it was as of April 30, 2013. Adding the HST brings the increase to $323. There will also be further increases from the Ontario Energy Board's scheduled rate setting on December 1, 2014, May 1, 2015 and December 1, 2015; those will add a minimum of $100 to homeowners' electricity costs.

In other words, the average residential bill will have jumped by approximately $425 per year. That represents a 25% increase in electricity rates in two years before Premier Wynne's "significant rate relief" of $160 per year occurs. Just as the DRC is ended, another scheduled charge from the recent announcement (aimed at reducing energy poverty) of $11 will be added.

By December 1, 2015, our electricity costs for residences will be charged out at over 21 cents per kilowatt (kWh). That will only get worse as more contracted wind and solar plants enter the grid. Add in expected increases in the "delivery" and "regulatory" lines, tack on HST and all-in costs will be in the neighbourhood of 30 cents a kWh! Ontario residents will be challenging Germany and Denmark for the privilege of having the most expensive rates in the industrialized world.

Some relief!