Ontario Liberals pledge eight per cent tax cut on electricity bills

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The Ontario Liberals are bringing in a new 8-per-cent subsidy for residential electricity bills – less than a year after ending a 10-per-cent subsidy – in a bid to cool voter anger over one of the province's most persistent pocketbook issues.

The move, which will cost the treasury an estimated $1-billion annually, marks an abrupt pivot toward everyday concerns for Premier Kathleen Wynne as she begins planning a long arc toward her re-election campaign in 20 months' time.

The subsidy is equal to the provincial portion of the harmonized sales tax, and the government is branding it as an HST rebate. The reduction will automatically be taken off consumers' bills, with a line reminding them of the discount.

It is almost identical to the Ontario Clean Energy Benefit, a 10-per-cent rebate the Liberals started in 2011 to ease the higher cost of green electricity contracts, and which expired at the start of this year. That benefit was criticized for disproportionately rewarding rich people who consume a lot of electricity, and for discouraging conservation by subsidizing energy use with tax dollars and debt.

The government's scramble to revive the policy under different branding signals just how badly the Liberals want to reverse their flagging poll numbers. So eager were the Liberals to highlight some good news that Ms. Wynne called in Lieutenant-Governor Elizabeth Dowdeswell to prorogue the legislature and read a Speech from the Throne on Monday.

"You continue to face electricity-cost increases above the level of inflation," Ms. Dowdeswell said in the noon address, as hundreds of corporate and union leaders packed the public galleries and the floor of the legislature. "Whether in Kenora, Sudbury, Belleville, London or Barrie, your government has listened to and has heard your concerns. It recognizes that the cost of electricity is now stretching family budgets."

The speech also pledged to create 100,000 more child-care spaces over five years, at a cost of up to $3.75-billion; to create new training programs for workers; to improve home care; and to cut waiting times for patients to see specialists. The pledges appear to be a bid to win back disaffected voters by framing the government's agenda in day-to-day terms.

The hydro subsidy will kick in Jan. 1, 2017. It will apply to houses, farms and small businesses. The government estimates the discount would save a typical household $130 a year.

Rural residents will also receive an additional discount of roughly 20 per cent, while industrial businesses will get more incentives to shift their electricity use to off-peak times, such as late at night, to save money. The increased savings for rural residents will be subsidized by other hydro ratepayers, who will have to pay extra to cover an annual cost of $285-million.

A combination of factors – including long-term contracts that guarantee a single rate of return to private power producers, the cost of repairing aging infrastructure such as nuclear reactors and transmission lines, and falling demand – have driven up rates in recent years. Not only is the expensive power an irritant for voters, it also deters businesses when they consider setting up shop in Ontario.

Hydro rates have proven a potent issue for the opposition parties, which hammered the government over prices in the Sept. 1 Scarborough-Rouge River by-election. A Liberal seat since 1999, it fell to the Progressive Conservatives.

"It's clear that the problems of everyday Ontarians are never a problem until it's Premier Wynne's problem," Tory Leader Patrick Brown said. "This is merely a Band-Aid solution."

NDP Leader Andrea Horwath pointed out that the program will not actually remove the provincial portion of HST from bills, but only rebate it, meaning the Liberals could cancel the program at any time.

"That raises a lot of questions about how long this rebate is going to last," she said. "My message is: Just take the HST off hydro already, once and for all."

A government source said taking the provincial portion of the HST off would involve lengthy negotiations with the federal government, so the Liberals decided instead to structure the move as a subsidy so they could roll it out faster.

Energy Minister Glenn Thibeault would not directly address any criticisms of the subsidy. Asked why he thought it was a good idea to have Ontarians effectively subsidize their own hydro rates with their tax dollars, he told reporters: "What we're doing today is we're investing in families, investing in Ontario businesses."