Is power rebate best use of $1 billion?

Ontario 10% Electricity Rebate offers rate relief on hydro bills for five years, as the provincial government funds a subsidy costing over $1B annually, amid energy policy debates and opposition criticism over rising power costs.

If the provincial government has $1 billion available, is an across-the-board cut in everyone's electricity bill the best way to spend it? Probably not.

Yet that is what Finance Minister Dwight Duncan offered up in the Legislature in his annual fall economic statement. "Every little bit helps," said Duncan, as he announced a 10 per cent cut in electricity bills for the next five years, at a cost of more than $1 billion a year to the provincial treasury.

Also in the statement were a $1 billion windfall from the extension of the Teranet deal and legislation to regulate trading in derivatives. But the new electricity subsidy was clearly the highlight of the day.

This comes after the government has been insisting for months that Ontarians, having been sheltered by a succession of "irresponsible" governments that kept hydro rates artificially low through a price cap that held down costs, need to face up to the reality that electricity isn't cheap.

"We know that there are costs associated with investing heavily in the modernization of our electricity system," said Premier Dalton McGuinty just a few weeks ago. "But it's a plan that we absolutely need to move forward with so we have the reliability."

Apparently the government decided that this message was being swamped by public anger over rising electricity bills across Ontario, so it opted to spend borrowed billions to hold prices down.

The opposition parties bear much of the blame for this. For months, they have been whipping up hysteria about electricity bills, even though it's not all about HST in Ontario, while offering no credible solutions of their own for addressing Ontario's energy problems. They were still at it following the economic statement, with NDP Leader Andrea Horwath saying the hike in electricity bills was "off the Richter scale."

As for the Liberal government, it might have considered spending $1 billion-plus annually on restoring the cuts in funding for transit expansion in the Greater Toronto Area or on advancing its plans to reduce poverty. Both measures would have made more sense than giving the rich, poor and everyone in between an average $153.60 break in their annual electricity bills, unlike tax relief for seniors that targets need. But there wouldn't have been the same political bang for the buck.

Related News

• Electricity Forum News

• T&D Business News