The McGuinty government is giving electricity consumers a temporary, 10% rebate on their hydro bills, a politically motivated strategy that is at odds with a province struggling to erase a record deficit as the economy shows new signs of slowing in the lead-up to next year's election.
The government acknowledged on Thursday in its fall economic statement that hydro rates are set to climb 7.9% each year over the next five years. The rebate, which will be in place for five years beginning Jan. 1, will cut the average household’s monthly bill to $115.20 from $128. But it will not take all of the sting out of soaring hydro rates. It will still cost the average household 3.6% more each year to keep the lights on.
"Every little bit of assistance helps during lean times," Finance Minister Dwight Duncan said in the legislature.
Electricity prices have become a heated political issue in Ontario. The rebate is aimed at ensuring that residential and small business consumers do not bear the entire cost of building a cleaner energy system.
"Any politician who suggests or tries to tell people that the price of electricity is going to go down over the next five years is simply not telling the truth," Mr. Duncan told reporters.
Even though Ontario has emerged from the economic recession, Mr. Duncan said, it still feels like lean times for many residents. He warned that growth will be slower over the next few years.
There are several signs that the province’s fortunes are much gloomier than they were just eight months ago, according to the economic statement. Retail sales, housing starts, personal income, corporate profits and employment will be lower next year than what was forecast in the budget last March. Overall, the economy will grow 2.2% next year, down from an earlier forecast of 3.2%.
Revenue from personal income taxes is expected to be $1.1 billion lower than the forecast in the budget.
The hydro rebate will cost the province $1.1 billion a year. But the government is borrowing $2 billion less in fiscal 2010-11 than the $40 billion it initially forecast.
Mr. Duncan cited two reasons: The province is getting a $1-billion windfall from its electronic land registry system. Teranet, owned by Borealis Infrastructure, will provide land registration and writ services for another 50 years beyond the 2017 expiry date of the contract. As well, the deficit for this year is now expected to be $18.7 billion, down from $19.7 billion.
Progressive Conservative Leader Tim Hudak criticized the government for treating hydro policy like a social program.
"He’s playing a shell game with people’s own money," he said. "This so-called benefit will be erased in short order."
New Democrat Leader Andrea Horwath said the temporary rebate won’t help families over the long term.
"Families are struggling," she said. "People are not having a robust economic experience these days."
