Richard Mackie
Globe and Mail
November 7, 2002

Premier Ernie Eves is expected to announce tomorrow a package to protect Ontario consumers from soaring electricity prices in response to the unprecedented political pressure his government is feeling on the issue.

The Premier told the legislature yesterday that the government also will protect people who risk having their power cut off because they cannot afford to pay the increases in their bills.

The package to help consumers will include rebates to cover some of the steep increases in electricity prices since the market was opened to competition on May 1.

The government also is looking at placing a cap on electricity prices and at ways to encourage private companies to build new generating plants.

The prospect of increasing rebates and capping on electricity prices was strongly criticized yesterday by experts in the industry.

"Ultimately it all comes back to taxpayers" to subsidize rebates, Tom Adams of the watchdog agency Energy Probe said.

"A rate freeze would increase the risk of blackouts this winter," he warned, and would discourage investment in new generating plants.

Since May 1, the basic wholesale price for electricity has averaged 5.17 cents a kilowatt-hour, according to the Independent Electricity Market Operator, which is responsible for ensuring the province has enough power to meet demands. When the market was being set up, the price was supposed to average 4.3 cents.

At times the prices have hit six cents and seven cents, and even exceeded eight cents.

As bills have risen sharply, members of the legislature have been swamped by complaints that even Progressive Conservatives admit exceed anything they have experienced in the past.

Enterprise Minister Jim Flaherty said yesterday that when he talked with voters in his riding of Whitby-Ajax, he was inundated by demands that the government do something.

"It’s a genuine concern, particularly by small businesses and individuals in their homes. So we have to address it," he said.

Even without government action, consumers are in line to receive rebates averaging $52 a household as of Oct. 31, according to Mr. Adams.

But government sources acknowledge this would be inadequate to calm the wrath of the four million consumers who pay electricity bills in the province, especially from a Premier who used his last budget as finance minister to send out tax-rebate cheques of $200 to every taxpayer.

The rebate program will be enriched by drawing more money from Ontario Power Generation or from the general revenues of the province.

Mr. Adams complained that in either case taxpayers would end up paying more in taxes, either to top up revenues or to cover the increased debt at the Ontario Electricity Financing Corp., which is responsible for debt run up at the old Ontario Hydro.

A similar complaint came from John Wilson, formerly on the board of directors at Hydro One. "The big problem with paying out rebates to everyone is that those rebates are not really rebates. They’re taking our own money and paying us with it. So we’re not really gaining. It just looks like something is happening."

The idea of freezing the rates people have to pay for electricity also drew negative comments.

Keith Stewart of the Ontario Electricity Coalition said that taxpayers, again, would eventually have to cover any difference between the capped rate and the price paid to generating companies supplying the electricity.

"If you are capping how much people pay on their bills, but not how much the private producers are getting, there is a difference there that has to come from somewhere. . . . If that is coming from the public purse, as it probably would, then what we are doing is we’re essentially giving a massive subsidy to private producers out of tax dollars."

Mr. Adams said a rate freeze increases the risk of blackouts because higher prices force consumers to cut back on their use of electricity, curbing demand.