Erik Peters
Financial Post
December 4, 2000

This article contains a number of factual errors and, as a result of these errors, it makes several baseless allegations.

The authors’ allegation that rolling the OEFC loss into the province’s financial statements would have resulted in a $47 million deficit for the year is not based on generally accepted accounting principles. Rather, it appears to be the result of the authors of the article cobbling together numbers to suit their purposes.

The Ontario Electricity Financial Corporation and the Ministry of Finance ultimately recorded OEFC’s loss both in the financial statements of OEFC and of the Province for the year ended March 31, 2000. My auditor’s reports on each set of financial statements indicate that the financial statements are fairly stated in accordance with applicable generally accepted accounting principles.

Regarding economic dependence, OEFC’s financial statements also disclose the following in note 3 to OEFC’s Financial Statements:

OEFC does not have its own credit rating and is, therefore, dependent on the Province to borrow and on-lend the funds required to refinance maturing debt and to cover any cash shortfall in the Corporation. It is also dependent on the long-term plan to defease the unfunded liability (stranded debt) described in Note 9. Based on the Province’s support in refinancing maturing debt and the long-term plan, OEFC is considered a going concern.

As well, Note 1 to the Province’s financial statements refers to the fact that because the long-term plan is based on assumptions, it is subject to uncertainty.

The statement that "the provincial auditor’s report showed a much smaller loss" is simply wrong. Such an auditor’s report does not exist.

In summary, the surplus of the province for the year ended March 31, 2000 is fairly stated and includes OEFC’s loss. In note 1 to the financial statements of the Province, the reader is informed that the long-term plan is subject to uncertainties and therefore the reader is referred to OEFC’s complete set of financial statements, which clearly disclose the corporation’s dependency on cash from the province and the future success of the long-term plan.

I will be commenting on various aspects of the electricity sector restructuring, including the potential risk to the taxpayer, in my upcoming Annual Report to be tabled on December 5, 2000.

Erik Peters, FCA
Provincial Auditor