Hydro stranded debt climbs to $20.2 billion

Despite the province's stated intention of retiring the debt by 2012, taxpayers now owe $20.2 billion stemming from the province's ownership of Ontario Hydro, up from $20.1 billion a year ago.

The debt was pushed up in part by $665 million that the Ontario Electricity Financial Corp. had to spend to maintain electricity prices at 4.3 cents a kilowatt hour for householders and small businesses. The actual market price was closer to 6 cents a kilowatt hour, and OEFC had to make up the gap.

Despite the rising debt, a note in the financial statements says it should be retired by 2012, though no repayment plan is outlined.

The report left Tom Adams, a long-time critic of hydro financing, shaking his head.

"They say: `Relatively soon, the debt's going to be gone.' But every year the debt keeps going up," said Adams, executive director of Energy Probe.

"There's no reason to believe that we're going to achieve debt elimination by 2012," he said. "That's a completely fictitious claim."

The Ontario Hydro debt was set up in its current form when the financially troubled company was split into two operating units in 1999 — Ontario Power Generation and Hydro One.

In order to make them financially viable, the operating companies assumed only a portion of the Ontario Hydro debt. The remainder, much of it not supported by assets, was allocated to OEFC.

That unfunded debt, often referred to as the stranded debt, stood at $19.4 billion in 1999, and continues to grow. OEFC's repayment plan has never been made public.

The bad news in OEFC's statements has arrived very late. By law, the agency is supposed to file its financial statements by June 30 each year. The report shows provincial auditor Erik Peters signed off on the statements on July 25, but they were quietly posted on the corporation's Web site only recently.

That meant the statements were not public prior to the Oct. 3 provincial election that swept the Conservatives from office.

OEFC's statements show that the first year of the Conservatives' decision to freeze the energy component of the power bill, which makes up about half the total bill, cost OEFC $665 million.

OEFC's obligations continue to outstrip its income in spite of an extra charge of 0.7 cents a kilowatt hour imposed by the Conservatives on all customers starting in 2002 to pay down the stranded debt.

That charge raised $889 million in the latest year, but couldn't entirely offset OEFC's other costs.

OEFC's income was boosted by some one-time gains, without which the debt could have grown even more over the past year.

The company recorded a gain of $206 million from the sale of Hydro One notes on public debt markets. And it recorded a gain of $161 million by re-valuing the worth of long-term supply contracts the government has signed with some private power producers.

Those contracts aren't profitable, however. OEFC's books show that the province bought the private power for $786 million, but sold it on the wholesale electricity market for $635 million, recording a $151 million loss.