Ontario’s Auditor General, Bonnie Lysyk, is warning Ontarians to brace themselves for increasing hydro rates as a result of Premier Kathleen Wynne’s Fair Hydro Plan.
According to a special report released Tuesday, the price of the Liberal’s “needlessly complex” solution to rising energy costs in Ontario could be as much as $39.4 billion – more than twice the government’s estimate.
“The substance of the issue is straightforward,” said Lysyk in the report. “Ratepayers’ hydro bills will be lower than the cost of the electricity used … However, power generators will still be owed the full cost of the electricity they supply.”
According to the report, the government will have to borrow $18.4 billion to cover the discounts promised to electricity customers over the next decade. The government will then need to pay out an additional $21 billion in interest over the next 30 years for borrowing this money.
The report also said the structure of the plan – which Lysyk claims violates the government’s own accounting rules – creates the need to pay $4 billion in additional interest charges.
WATCH: Ontario government defends cost and accounting of fair hydro plan
According to Lysyk, this is because OPG Trust – the provincially owned company created to manage the hydro plan – will pay a higher interest rate than if the government had simply borrowed the money itself.
“It’s going to cost us more in the long run in order to save in the short-term,” said Brady Yauch, an economist and the executive director of the Consumer Policy Institute. “It’s not even a band-aid solution because band-aid solutions help something heal, and this is just going to make things worse.”
The government says Lysyk’s assertions are inaccurate and do not reflect the most up-to-date information. It also disagrees with the findings of the report and says all Ontarians will benefit from short-term relief from rising electricity costs.
“While total borrowing costs will not be known until the program is complete, accumulated interest is projected to be considerably less than the estimates in the report,” said the government response to Lysyk’s report. “Current government estimates forecast the peak debt over the thirty-year life of the will be $20 billion.”
This is roughly half of what Lysyk has predicted. She says while Ontarians will benefit from lower electricity costs over the next decade, bills will quickly skyrocket once it’s time to pay back all that borrowed money.
WATCH: Ontario AG says Liberals hiding true impact of hydro bill reduction
Meanwhile, Yauch says he has opposed the plan from the beginning because it does nothing to reduce the cost of electricity in Ontario. (This is true. The plan only subsidizes electricity rates without actually addressing any of the factors that led to increased costs in energy production.)
He also says the era of second, sober thought with respect to energy policy in the province is gone, and that this plan has essentially ended independent oversight of the province’s electricity sector.
“People will get what they have been clamouring for, but in the long run, you’re not actually lowering costs,” he said.
Instead of subsidizing electricity with borrowed money, Yauch says the government should start looking at the possibility of cancelling some of the long-term energy contracts it has with electricity producers.
If that fails, he says the government should just admit the errors it’s made and tell Ontarians.
“Look, we made a mistake and you have to pay for it,” said Yauch.
Ontario’s opposition parties were quick to respond to the auditor’s report, focussing on the $4 billion in extra interest charges Lysyk says will be needlessly incurred.
“The Auditor General in the report is scathing,” said PC Leader Patrick Brown. “The government is making up their own rules for accounting … This is well beyond the size of the gas plant scandal. This is an astonishing number — $4 billion Ontario families are going to have to struggle to pay.”
WATCH: Ontario energy minister says government didn’t pull “fast one” on fair hydro plan
The NDP, meanwhile, accuses the Liberals of misleading Ontarians in the lead up to an election.
“After the election, bills are going to shoot up like a rocket because they’re just spending this extra money to make the bills look good now,” said Peter Tabuns, the NDP energy critic. “They don’t care what happens after the election.”
Glenn Thibeault, Ontario’s energy minister, denies all of these accusations. He says the government has been honest about its plan from the beginning and never once mislead anyone.
“We’ve always said that we were using this like we were remortgaging a house,” said Thibeault. “We always said it’s going to take longer to pay off and it’s going to cost more.”
Yauch, meanwhile, says it’s time for the government to own up to its mistake and start making some tough decisions.
“There’s no other way around it,” he said. “All this does is say ‘Well, for the next 10 years your bill is going to be lower than it was previously, but don’t worry, for the next 20 years it will be higher than we thought. That’s not a very promising proposition if you ask me.”
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