Rapid Policy Update
Government Announces New Energy StrategyMarch 2, 2017
Today, the Government of Ontario responded to the Ontario Chamber of Commerce’s (OCC) call to support the growth of the provincial economy through the reduction of electricity rates. The Fair Hydro Plan will seek to mitigate the rising cost of electricity in Ontario. Expected to take effect in summer 2017, the Plan will provide an approximate savings of 17% (25% when including the previously announced 8% HST rebate) to Regulated Price Plans (RPP) eligible consumers hydro bills. Ontario’s Fair Hydro Plan will also link future rate increases to the rate of inflation over the next four years and provide further rate relief to the province’s most vulnerable citizens.
Key Details of the Announcement
1. Refinancing the Global Adjustment (GA)
The proposed plan will refinance the costs associated with the Global Adjustment (GA), providing immediate relief to Regulated Price Plans (RPP) eligible consumers, by “smoothing out” the payment of energy contracts over a longer time period. The Ontario government predicts that this refinancing will achieve an average of 17% savings for the individual ratepayer (25% when including the previously announced 8% HST rebate). The government intends to introduce legislation that would, if passed enable the Independent Electricity Operator (IESO) and Ontario Power Generation (OPG) to refinance the GA over a longer period of time, ultimately lowering the current cost paid by consumers. Under current forecasts, the immediate reduction in the GA would be approximately $2.5 billion per year on average over the first 10 years, with annual interest costs not exceeding $1.4 billion.
2. Helping Vulnerable Consumers
The Fair Hydro Plan includes initiatives to help Ontario’s most vulnerable consumers. The province plans to pass legislation to enable these new measures. Together these new initiatives will cost the government up to $2.5 billion over the next three years to be funded through provincial revenue. These initiatives include:
Broadening Rural or Remote Electricity Rate Protection (RRRP)
Currently, the RRRP provides a rate subsidy to rural/remote customers who are faced with higher distribution costs compared to urban areas. The new program will increase the number of qualifying customers from approximately 350,000 customers to 800,000 customers.
Enhancing the Ontario Electricity Support Program (OESP)
The proposed OESP enhancement would see monthly credits increased by 50%, expanded to cover more low-income Ontarians and increase uptake to as close 100%.
First Nations On-Reserve Delivery Credit
The on-reserve credit will remove the monthly service charge for customers saving approximately 21,500 on-reserve First Nations a monthly amount of $85.
Establishing a New Affordability Fund
The proposed affordability fund will provide Local Distribution Companies (LDC’s) an additional tool to help customers in need. The province will work with Hydro One, in consultation with other LDC’s to establish a Trust to serve as the administrator of the Affordability Fund.
3. Enhancing Competitiveness for Small Manufacturers and Industrials
Due to our ongoing advocacy work, the OCC is pleased to see that the Fair Hydro plan will expand the Industrial Conservation Initiative (ICI) extending eligibility to small manufactures and industrials (North American Industry Classification System (NAICS) codes 31-33), with an average peak demand of over 500 kilowatts
The OCC has repeatedly heard from Ontario’s business community that energy rates are unsustainable. In fact, 51% of businesses ranked energy concerns among their top three policy priorities.
Once implemented, Ontario’s Fair Hydro Plan will bring immediate relief to residential consumers by “smoothing” the GA rate over a longer time period and tying rate increases to inflation over the next four years. While this will alleviate challenges associated with the cost of electricity in the near-term, the Ontario Chamber Network advocates for further amendments to the province’s energy strategy that address the needs of the business community. Further rate mitigation strategies must be developed that are aimed specifically at the business sector.
Later this year, the OCC will release a report that will provide recommendations to further enhance the long-term sustainability of the energy sector.
As part of the Fair Hydro Plan, the OCC will partner with the Ministry of Energy to deliver a targeted outreach campaign to help business better understand and participate in provincial programs such as the ICI.
In spring 2017, the government is expected to release its Long-term Energy Plan. The OCC will continue to advocate for the reduction of input costs on businesses and looks forward to working with the government to deliver on its energy priorities. In addition, we encourage the government to continue to find ways to update provincial legislation in a way that supports Ontario’s economic growth.