Ontario’s Power Rates Are Going Up How Much?

Over the last two weeks, there have been a dizzying swirl of announcements and reports on various aspects of Ontario electricity prices. With official Ontario working hard to keep the issues confused and impacts spread out over time, it is challenging for consumers to follow the multiple shell games going on at once. Here are a few suggestions on where to turn for information and analysis.

Keith Leslie of the Canadian Press has presented a fascinating and insightful article on the Debt Reduction Charge and the underlying costs it was meant to service. Among the outlets carrying Leslie’s article are CBC, CTV, CP24, the Hamilton Spectator and the Toronto Star.

One aspect of Leslie’s article that makes it difficult for non-experts to follow the points he very helpfully documents is that the article doesn’t clarify the relationship between Stranded Debt and Residual Stranded Debt. Here are two paragraphs that are accurately stated but might be tough for ordinary folks to figure out:

Only a portion of that debt was supported by the assets of the new hydro companies — Ontario Power Generation, Hydro One and the Independent Electricity System Operator (IESO) — leaving $20.9 billion in so-called stranded debt.

Households and businesses paid out more than $11.5 billion in a residual stranded debt charge on their electricity bills between 2002 and 2014 — the last year for which statistics were available — with the outstanding balance still over $2.5 billion.

Two little sentences of additional explanation might help.

While Stranded Debt was originally $20.9B, $7.8B of that was a subset called Residual Stranded Debt. The government promised that Residual Stranded Debt would be recovered from the Debt Reduction Charge but we now know that Debt Reduction Charge payments got diverted to other purposes.

No one following Ontario’s electricity travails will be surprised to see the Ontario Finance Minister Charles Sousa cleaving to the vacuous Lib talking point of blaming former Premier Mike Harris for all the problems in the power system today. The allegation that Mike Harris and the PCs created all the net debt of Ontario Hydro is not a claim worth discussing.

The comments Leslie reports from Dr. Bryne Purchase, now an associate professor of economics at Queen’s University and a former deputy minister of both finance and energy under the Tories, are very significant. Purchase refers to the Debt Retirement Charge income to the government as a “giant slush fund”. Having set up OEFC, Purchase knows what he is talking about. Purchase’s comment sounds harsh but he is exactly correct that the DRC is a slush fund.

The Ontario government says it is taking Debt Retirement Charge off residential power bills, but a bigger power tax will soon replace it. By both committing the proceeds of any sale of Hydro One assets to subways and cutting the residential Debt Reduction Charge, the government is taking away two key revenue streams that the shadowy Crown corporation Ontario Electricity Financial Corporation relies on today to service its debt of $27 billion and rising. Hopefully, the Auditor General of Ontario will soon start to pay attention to the coming insolvency of OEFC.

Chris Vander Doelen at the Windsor Star has been doing an awesome job tracking recent rate announcements from the Ontario government. His column on April 1 includes a particularly insightful comment, “Your power bills have become a shadow tax system.” The government can fiddle with the levers of administrative power in the power system and move tens of billions of dollars into pet projects — “Smart Meters”, “Smart Grid”, Big Becky, Lower Mattagami, Lac Seul, biomass conversion of Atikokan GS, wind, solar, biogas, conservation PR and on and on — without appearing to impact government expenditures.

Vander Doelen’s most recent electricity rate commentary draws on the work of Bruce Sharp, who has written guest posts on this site. Bruce explains the near term implications of losing the residential Debt Reduction Charge, the Ontario Clean Energy benefit and impending Time-of-Use commodity price increases.

In coverage by their own reporters, the Star and the Globe these days never tire of claiming that the Ontario government can realize a “windfall” from the sale of Hydro One. Is it too much to ask that Globe or Star back up their many claims that the Libs have suddenly discovered a treasure trove in the midst of Ontario’s fetid electricity swamp?

Here are three podcasts of recent interviews I have done trying to explain what the Debt Retirement Charge is (a few times I may have referred to it incorrectly as the Debt Reduction Charge), why OEFC is heading towards insolvency, and why the provincial Auditor General needs to pay closer attention to OEFC.

Dale Goldhawk (Zoomer Radio 740AM) April 6

Scott Thompson (900CHML) April 6

Business News Network April 7


  1. There is a private discussion going on FaceBook about this this post. I would encourage folks with substantive comments for or against to make them on this site where they are accessible to public viewers. With apologies for the lack of context, here are my responses in that FaceBook discussion:

    As for Dave’s remark about there never being stranded debt, I would point to the more than $4B lost to the Ontario Clean Energy Benefit as an example of debt well and truly stranded.

    As for Dave’s remark that only the residual stranded debt went to OEFC, I point out that all of Ontario Hydro’s debts went to OEFC and that OEFC has taken on new debt since. The Auditor General says that OEFC is paying down the stranded debt. I say the AG is not getting the jokes.

  2. I have long understood the elecrical supply chain in Ontario is a racket run by a corrupt government. Thank for giving clarity to a very complex system. Your work is essential. Where are the opposition parties?

  3. Debt Retirement Charge is a huge amount of any monthly hydro bill – even if it’s billed by a another utility company, a Public Utility Company – i.e. Midland PUC … Question where is that money going, if it was / is ‘diverted’ ? Secondly where is the money for the DRC for Ontario Hydro diverted ?

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