Ontario's Fair Hydro Plan Announcement

  • 03 Mar 2017 10:43 AM
    Message # 4645807
    Deleted user

    Yesterday, the Ontario government announced a plan to reduce electricity rates for Ontarian's. 

    Here is a brief summary of the main elements of the plan. I invite you to share your thoughts and concerns about this plan in this discussion forum.

    Ontario's Fair Hydro Plan - Providing Relief for Consumers

    1. The plan will lower electricity bills in average by 25%, which includes the 8% reduction of the GST rebate that came into effect at the beginning of this year. 
    2. The government will hold rate increases to the rate of inflation (around 2%) for four years.
    3. The plan also extends to small businesses and farms.
    4. The plan will introduce further measures to reduce electricity cost burdens for low-income ratepayers (ie. those served by local distribution companies with the highest distribution costs, OESP recipients and on-reserve First Nation households).
    5. The two main levers for this will be:
      • Moving some of the cost to the tax-base
      • Refinancing the Global Adjustment 

    Details on the plan to move costs to the tax-base:

    • Broadening the Rural or Remote Rate Protection (RRRP) program for distribution charge relief
    • Enhance Ontario Electricity Support Program (OESP) and ensure program uptake of close to 100%
    • Establish a new First Nation On-Reserve delivery credit
    • Establish a new Affordability Fund to enable access to energy efficiency improvements

    Details on the plan to refinance the Global Adjustment:

    • Refinance the GA over 30 years
    • Refinance an average of $2.5 billion per year for the first 10 years
    • Expected annual interest cost: $1.4 billion

    Rationale:

    • Share costs more fairly
    • Align finance cycle with asset life-cycle
    • Share cost burden with future ratepayers, as assets continue to be of value for those ratepayers

    Implementation:

    • Introduce legislation to implement the proposed Global Adjustment refinancing mechanism and to enable the IESO and OPG to work together and to outline the role of the OEB.

    Other Initiatives:
    • Enhance Competitiveness for small manufacturers and industrials by expanding the eligibility threshold for the Industrial Conservation Initiative to help save costs and reduce peak demand
    • Improving Electricity Sector Efficiencies through the OEB and the IESO

    Implications:
    for the tax-base, to cover:
    - 8% GST reduction = $1 Billion (already implemented - as of January 1, 2017)
    - $2.5 billion over 3 years = $833 million per year

    for the rate-base, to cover:
    - refinancing of the GA will provide relieve immediately
    - amortization means paying more over a longer time frame

    Timeline:
    - The plan is supposed to be introduced starting with the introduction of the summer electricity rates (May 1st)

    Resource: Official News Release



    Questions for Discussion (Please feel free to raise your own):
    1. How does this announcement affect you and your business?
    2. How do you feel about the plan to move some of the cost to the tax-base?
    3. Does this plan address the issues of the energy sector effectively?
    4. What measures could/should the government have taken instead or in addition?
    5. Is this an effective long-term measure or merely a band-aid fix?
    Last modified: 03 Mar 2017 10:54 AM | Deleted user
  • 03 Mar 2017 11:56 AM
    Reply # 4645963 on 4645807
    Deleted user

    You may also find the article "Towards a better understanding of electricity prices" by Jake Brooks from APPrO helpful for the discussion.

  • 09 Mar 2017 10:11 AM
    Reply # 4656844 on 4645807
    Deleted user

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