Review of Ontario PC Leader Tim Hudak’s Speech to Association of Power Producers of Ontario

Mr. Hudak’s presented a contradictory performance at APPrO. On one hand, his main points were brave, thoughtful, and informed. On the other hand, he criticized McGuinty for building the deficit, yet failed to distance himself from energy policies the PC’s have endorsed and are now pursuing in the legislature that would make the deficit worse.Reminiscent of his outstanding presentation to the Ontario Energy Association in October 2010, Hudak set out three principles to build out his commitment to energy policy as economic policy: competition to drive value for consumers, a stable regulatory environment to promote investment, and the benefits of trade.

Hudak knew going in that a large fraction of the over 1,000 delegates at the conference were, or sought to be, direct beneficiaries of McGuinty’s policies of energy protectionism, massive subsidies to power producers, waiving competitive procurement rules for government contracts, and generous handouts to government-friendly NGOs. Rather than pander, Hudak committed to “re-introducing the basic principle of competition” for the express purpose of driving down consumer cost.

Hudak is obviously knowledgeable of electricity subjects. He was particularly impressive in noting that power prices in the U.S. are trending downward, a point deeply threatening to careless green power advocates. He described the 55,000 applications to the McGuinty government’s FIT program as an “unsustainable…goldrush”. He noted that Alberta procures wind power competitively and that prices consumers pay for it there are less than in Ontario. He also noted that McGuinty continues “to build new capacity, and then pay to get rid of the surplus with no concern for how this affects consumers.”

However, while rightly criticizing McGuinty’s for building the province’s massive deficit, Mr. Hudak failed to recognize how deeply conflicted the PC’s are in promising energy rate relief measures to voters that would expand the deficit. In his speech, Hudak criticized McGuinty’s “Ontario Clean Energy Benefit” which adds in the order of $700 million per year to the deficit without acknowledging that his party pledged to continue this policy during the election. Mr. Hudak was silent on his party’s first parliamentary initiative — supporting the NDP’s initiative to cut the provincial portion of the HST from household energy bills and transfer it to the deficit. Mr. Hudak said nothing to distance himself from his ill-considered election platform commitment to cut the Debt Reduction Charge (DRC) from the bills of some consumers. The PC’s policy ignores the fact that the debt being serviced in part by the DRC revenue is today about $13 billion and that cutting the DRC as they have proposed would add about $400 million per year to the deficit.


  1. Can’t say that I agree with your closing paragraph!

    McGuinty has done a great job of reducing corporate taxes in Ontario which has had a direct effect on the ratepayers and should not be overlooked. As a small example Hydro One in 2005 earned $681 million and paid PIL (payments in lieu) taxes to OEFC (to go to reduce the stranded debt) of $198 million for a tax rate of 29% yet in 2010 they earned $647 million and they only paid PIL of $56 million for a tax rate of 8.6%. The winner in this was not the ratepayers as the tax break afforded Hydro One and all of the other PUBLICALLY owned electricity generation, transmission and distribution companies in the province paid a lot less money to reduce the “stranded debt” and yet all of their rates increased by significant multiples of the inflation rate. Maybe the ratepayers are simply getting back what they deserve eh? Me thinks the $700 million is chump change when compared to the benefits that the Province got from big dividend payments from Hydro One and municipalities got from dividend payments from their wholly owned local distribution companies.

    • McGuinty deserves full credit for a number of tax measures that will benefit the Ontario economy in the long term. He lowered the corporate tax rate, implemented the HST, cut some personal tax rates, and eliminated the distortions arising from differential tax rates on manufacturing, resource and other profits. In recognizing McGuinty’s contribution to more efficient and fairer taxation, I am in no way defending his spending record. Advocating higher corporate taxes because of a tiny portion of those taxes once helped to pay the stranded debt seems disproportionate. We already have the NDP to advocate for higher corporate taxes.

      Lower corporate tax rates on regulated gas and electricity utilities directly flowed through into the rates of those utilities. It is true that one indirect effect of the lower corporate taxes rates was a reduction in revenues to pay down the stranded debt, but to claim that consumers “deserve” the Ontario Clean Energy Benefit ignores the fact that consumers directly benefited from the lower tax rates already. The Ontario Clean Energy Benefit (10% of the bills of households, farms and small businesses transferred from ratepayers to taxpayers) directly impacts the deficit. Like the NDP/PC’s proposed reduction in HST on energy and the PC’s proposed cut in the Debt Reduction Charge, the OCEB is anti-conservation.

      The stranded debt left over from the old Ontario Hydro, which is now around $13 billion, must be serviced. All of the profits from Hydro One are applied to servicing that debt, whether the profits are dividended or not.

  2. I think you are all pretty smart, so I’ll just aim for different …

    The OCEB is neither here nor there.
    Rates were driven up by stupid expenditures done on a smart grid without a business plan – pushed forward unchecked by a disinterested regulator.
    Rates were driven up by a political decision to replace coal plants with CCGT plants – lured as excess capacity to the market with capacity payments.
    Rates were driven up by a political decision to spend over $300 million dollars a year to communicate to people using too much electricity is a sin.
    Rates were, and continue to be driven up, on grid spending assuming distributed generation can, and should, replace centralized generation.
    Rates are being driven up by city folks rejection of the distribution of generation.
    The increases were political. Of course the mitigation measures are too.

    Assuming $13 billion is a defensible figure, the interest charges would be under $650 million annually (as per current OFINA figures) – which isn’t much different than what is now the OCEB costs. It’s also notable that much of that debt came from the political angst involved in multiple stops and starts to large builds, specifically Darlington, in a period of declining increases in electricity demand – including a conflict between encouraging heating with electricity or using abundant natural gas to do so.
    The OCEB sure looks like more of the same, albeit without the accumulation of those burdensome public assets

    I’m all for taxing natural gas … I don’t have it running into my home.
    Being a dog person, I’m also in favour of taxing cats
    but … Energy is necessary spending for most, and taxing energy will reduce disposable income.
    This is the question of whether the government is more capable of spending those funds than the consumers.

    It seems to me Hudak’s speech talked about relevant value issues and ignored the unpleasant pandering of current taxation/financing vote-buying policies.
    That struck me as a great start to break out of the silly discussion on the moral righteousness of taxation/revenue taxes, because Conservatives aren’t supposed to think the government is more able to spend the voters money.

    That could be wrong … in which case the Soviet Union is thriving and my vodka delivery is at the door.
    Do svidaniya

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