Government cuts hydro rates in bid to offer pocketbook relief

Government cuts hydro rates in bid to offer pocketbook relief

The government will cut hydro rates for seven weeks in a bid to alleviate pressure on the pocketbooks of Ontarians amid a global pandemic.

The relief will be offered by temporarily suspending time-of-use pricing and making rates all day the lowest rate available. That means Ontarians will pay 10.1 cents per kilowatt hour in their hydro rates, a discount from the typical 14.4 cents for mid-peak time and 20.8 cents during peak demand.

The government estimates that the measure will cost over $160 million in lost revenue.

But Premier Doug Ford made the case alongside Energy Minister Greg Rickford that despite the money, the measures were necessary to offer relief during an extraordinary crisis.

"I think it's critical. It's absolutely critical that when people are at home they have that flexibility" to use power when they need to, said Ford, who has long expressed his distaste for time-of-use pricing, a measure brought in under the previous Liberal government to encourage consumers to switch behaviour away from when energy demand is near capacity.

"We just want to take a little burden off their back," he said by way of recognizing the shared sacrifices that Ontarians have made given the extraordinary threat presented by the novel coronavirus, which has killed thousands worldwide, threatens to overwhelm the health care system and has sent stock markets plummeting.

Rickford also acknowledged the unprecedented situation. "There's no playbook here," he said at the press conference at Queen's Park, which was again limited to just a pooled camera in order to guard against the spread of the virus.

Rickford said that the structure of the program represents the government's best estimate of what's needed at the time, and that the 45-day timeline will give them to re-assess. "We knew at 30 days it wouldn't represent enough of the savings for the millions of families who have shifted to their home base in a very real way," he said of the huge influx of people who are working from home. Rickford added that the government would assess what further interventions might be appropriate in early-to-mid-May.

On Monday evening the government outlined a list of essential services saying who could continue operating in a business-as-usual fashion — with social distancing measures in place, of course. Essential industries included grocery stores, first responders and health care workers, among others.

The savings in lower rates will automatically appear on bills and consumers won't have to apply for any program. The policy comes at a convenient time of year for potentially additional demand to be added to the electricity system. As Independent Electricity System Operator vice-president Terry Young explained to QP Briefing last week, demand at this time of year tends to be lower as Ontario households use less heat and haven't turned their air conditioners on; the Easter long weekend is typically one of the lowest-demand periods of the year. That means that there is additional capacity in the electricity system at the moment. Surplus power is also created by high water levels and good wind conditions in these months, pointed out Pollution Probe energy policy director Richard Carlson in an email.

The move had been hinted at by Ford twice last week, as the province has sought ways to alleviate economic pressures amid a health crisis that threatens to upend financial fortunes. Prime Minister Justin Trudeau said in a press conference last week that Canada saw a record half-million employment insurance claims last week, which is an order of magnitude greater than the previous record; Canada shed 425,000 jobs over eight months in the 2008–09 recession. U.S. investment bank Goldman Sachs revised its second-quarter GDP projection downwards to -24 per cent, which would be by far the worst quarter in recorded American history. And on Tuesday Bombardier and WestJet announced thousands of temporary layoffs.

The government won some praise for its decision to offer some energy relief, and for the additional decision to extend the prohibition on energy disconnections to July 31, in light of these overwhelming circumstances.

"Lowering electricity rates is the right thing to do – this will help offset some of the costs related to increased consumption due to Ontarians isolating at home as well as financial pressures resulting from the COVID-19 shutdown," said Rocco Rossi, the CEO of the Ontario Chamber of Commerce.

Ryan Mallough, the director of provincial affairs for the Canadian Federation of Independent Businesses, called on the government to do more. "We urge the government to consider extending the 45-day deadline to avoid businesses that are starting back up after COVID-19 facing peak summer rates when the economy is just getting going again," he stated.

David Butters, the president of the Association of Power Producers of Ontario, added his support. "We agree with the government that Ontarians should not be financially disadvantaged simply because they are following the direction of public health officials and staying home. Protecting citizens financially is a wise measure in these difficult times," he stated.

David Hains

QP Briefing Reporter

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