Liberals costing us extra $4 billion in interest costs
By Antonella Artuso, Toronto Sun
First posted: Tuesday, October 17, 2017 07:38 AM EDT | Updated: Tuesday, October 17, 2017 08:20 PM EDT
TORONTO - The Kathleen Wynne’s Liberal government is flouting accounting rules and taking on an unnecessary $4 billion in extra borrowing costs — to be applied to future electricity bills — to keep the true cost of its Fair Hydro Plan buried, Ontario Auditor General Bonnie Lysyk says.
A battle between accountants is not usually the stuff of Hollywood blockbusters, but Queen’s Park was enthralled Tuesday as Lysyk and her experts faced off against the government and its counter experts.
While the Liberals tried to minimize the conflict as a mere accounting dispute, Lysyk said what was at stake was far more important as the financing manoeuvre allows the government to write its own budget bottom line.
“This is wrong,” she said.
Under public pressure to respond to soaring hydro costs across Ontario, Wynne earlier this year released a plan that reduced bills by 25% on average, and promised to keep increases to the rate of inflation for four years — in part by eliminating the provincial portion of the HST from bills.
The government also announced that it would open contracts it had signed with private power suppliers, such as Bruce Nuclear and wind and solar providers, and refinance those usually 20-year deals over a longer period to lower bills in the short-term.
However, instead of borrowing that money itself — the provincial government gets a really good rate — the Wynne team decided to ask Ontario Power Generation to borrow it at higher rates.
The difference adds up to an extra $4 billion in borrowing interest costs — for a total cost of $39.1 billion for the hydro plan — but means that extra red ink doesn’t show up on the province’s books, Lysyk said.
Internal government correspondence shows that was the goal of the financing plan, she said.
Energy Minister Glenn Thibeault said the government made a policy decision that the cost of refinancing electricity assets would be borne by the hydro ratepayer, not taxpayers, as has been the historic practice.
The government’s accounting method has been reviewed and approved by senior staff from several ministries, the cabinet office, Ontario Power Generation, the Independent Electricity Operator, and third-party consultants, including KPMG and Deloitte, he said.
Treasury Board President Liz Sandals noted that they also took hydro relief programs off of the electricity bill, and placed them on the government books, because that was a more appropriate way to record the expense.
“There was no fast ones being pulled at all,” Thibeault insisted.
The government is now estimating the cost of the Ontario Fair Hydro Plan (OFHP) at less than $20 billion.
Lysyk said she consulted with auditor generals from across Canada, and attending in support at her media conference was Tim Beauchamp, the recently retired director of the Canadian Public Sector Accounting Standards Board.
The provincial government’s method of accounting, a first in Canada for any government, is not yet carved in stone and the $4 billion can be saved, Lysyk said.
“There’s still time to fix it,” she said.
What the opposition parties had to say
The Ontario Liberal government “cooks the books” — spending up to $4 billion more than necessary to hide the true cost of its latest hydro scheme, Progressive Conservative Leader Patrick Brown says.
By structuring the cost of the Ontario Fair Hydro Plan (OFHP) in such a way that it was off the government books — adding to borrowing costs but not showing up as more red ink in the provincial budget — the Liberals were essentially forcing taxpayers to fund their re-election campaign, he said.
“This is cynical politics at its worst, making up their own rules, charging Ontario families more to serve the partisan interests of the Liberal Party,” Brown said, shortly after a damning auditor’s report was tabled in the Ontario legislature Tuesday.
The Ontario Liberals, who ran a budget deficit for several years after the 2008-09 recession, announced in their spring budget that the books will be balanced for the upcoming fiscal year.
Provincial voters go to the ballot box this June.
NDP MPP Peter Tabuns, who also sided with the auditor general’s view that this type of accounting was wrong, said the government was attempting to book as an “asset” its ability to charge future hydro ratepayers more than their power will be worth.
“This was one of the most shameless displays I’ve ever seen from Liberal cabinet ministers,” Tabuns said, after Energy Minister Glenn Thibeault and Treasury Board President Liz Sandals defended their financing decisions. “They’re trying to make this whole thing to be a fight over accounting. The guts of this is that the government is spending $4 billion more in interest that we’re going have to pay for in our hydro bills, so they can move these numbers off their books so they can make it look like they’re not running a deficit.”
What the Auditor General of Ontario Bonnie Lysyk says:
•Kathleen Wynne government’s complex financing for Ontario Fair Hydro Plan (OFHP) needlessly dumps up to $4 billion more in borrowing interest costs on Ontarians.
•Only reason to spend extra $4 billion is to ensure that the expense doesn’t impact government’s surplus and deficit figures.
•No government in Canada has ever used this method of accounting before, like booking credit card debt as an asset. The government books should reflect the costs of its policy decision — about $2.5 billion a year until 2027.
•Ministry of Energy gave law firm $500,000 retainer to go through its OFHP e-mails, requested by the auditor, and still haven’t turned over everything even though other energy agencies have. Government spent at least $2 million on outside advisors to design this financing structure.
•Total bill for OFHP — $39.4 billion over 30 years.
What the Ontario government and energy agencies say:
•Total bill for OFHP will be under $20 billion, down from an estimate of $27 billion in March.
•Auditor’s e-mail request pulled over 100,000 e-mails, so lawyers needed to go through them to ensure they were on topic. About 7,000 have been turned over already.
•Financing decision was based on government policy to make sure hydro ratepayers, and not taxpayers, covered the cost.
•Similar accounting methods are used by many energy agencies, here and in the United States.
•Government enlisted advice of many experts, including KPMG, on the structure of the accounting.
Liberals costing us extra $4 billion in interest costs | Ontario | News | Toront
at least the fiberals are being consistent.
High hydro rates killed Ontario jobs: Study
By Antonella Artuso, Toronto Sun
First posted: Tuesday, October 17, 2017 08:00 AM EDT | Updated: Tuesday, October 17, 2017 08:03 AM EDT
TORONTO - Soaring electricity prices resulted in 75,000 fewer manufacturing jobs for Ontarians since the recession, a new report says.
Rising Electricity Costs and Declining Employment in Ontario’s Manufacturing Sector — a report prepared by Ross McKitrick and Elmira Aliakbari of the Fraser Institute — says the provincial government’s hydro policies are to blame for the disproportionately high prices and lost jobs.
Competing jurisdictions, including neighbouring U.S. states, took a hit in the manufacturing sector following the 2008-09 recession, said McKitrick, a University of Guelph economics professor.
Global factors impacting employment in the manufacturing sector included the severe market downturn and technological advancements.
“But other regions bounced back, both in output and employment,” added McKitrick. “Ontario just stayed stuck and in some ways continued to decline after 2008. So that means Ontario stands out in some way.”
The report says that Ontario had some of the fastest rising hydro rates for small industrial consumers between 2010-16 — 50% in Ottawa and 48% in Toronto — compared to an average increase across Canada of 15%.
Rates for large industrial consumers of electricity also outpaced those in other provinces, even some of those Ontario firms that are partially sheltered from the full cost, McKitrick said.
The Fraser Institute noted the provincial Liberal government’s Green Energy Act, and its guaranteed above-market prices for renewable energy such as wind-powered turbines, as a key driver for the rising prices.
The report says that since 2008, Ontario saw manufacturing employment decline by 116,435 jobs, and calculates that electricity prices and their negative impact on competitiveness were responsible for about two-thirds of the loss.
Manufacturing jobs tend to come with higher wages, and help boost people into the middle class, he said.
“The Ontario manufacturing sector accounts for 40% of the country’s exports, and so that means it affects everybody because of the way it helps sustain our exchange rate and keep cost of living low,” McKitrick said.
Ontario Economic Development Minister Brad Duguid said the province has created 800,000 net new jobs since the global recession and is experiencing the lowest unemployment rate in 17 years.
Meanwhile, auditor general Bonnie Lysyk will release a special report Tuesday on the Kathleen Wynne government’s Fair Hydro Plan, which seeks to lower bills for Ontarians by 25%.
HYDRO HIKES BETWEEN 2010-16
Medium Power Users
Montreal 11.4%
Ottawa 50.5%
Toronto 48.2%
Winnipeg 19%
Calgary -1.2%
Vancouver 37.3%
Boston 35%
Miami 18.5%
Seattle 66.1%
Large Power Users
Montreal 9.8%
Ottawa 53.1%
Toronto 45.5%
Winnipeg 19.1%
Calgary -4.5%
Vancouver 37.6%
Boston 30.9%
Miami 13.7%
Seattle 62.1%
High hydro rates killed Ontario jobs: Study | Ontario | News | Toronto Sun
By Antonella Artuso, Toronto Sun
First posted: Tuesday, October 17, 2017 07:38 AM EDT | Updated: Tuesday, October 17, 2017 08:20 PM EDT
TORONTO - The Kathleen Wynne’s Liberal government is flouting accounting rules and taking on an unnecessary $4 billion in extra borrowing costs — to be applied to future electricity bills — to keep the true cost of its Fair Hydro Plan buried, Ontario Auditor General Bonnie Lysyk says.
A battle between accountants is not usually the stuff of Hollywood blockbusters, but Queen’s Park was enthralled Tuesday as Lysyk and her experts faced off against the government and its counter experts.
While the Liberals tried to minimize the conflict as a mere accounting dispute, Lysyk said what was at stake was far more important as the financing manoeuvre allows the government to write its own budget bottom line.
“This is wrong,” she said.
Under public pressure to respond to soaring hydro costs across Ontario, Wynne earlier this year released a plan that reduced bills by 25% on average, and promised to keep increases to the rate of inflation for four years — in part by eliminating the provincial portion of the HST from bills.
The government also announced that it would open contracts it had signed with private power suppliers, such as Bruce Nuclear and wind and solar providers, and refinance those usually 20-year deals over a longer period to lower bills in the short-term.
However, instead of borrowing that money itself — the provincial government gets a really good rate — the Wynne team decided to ask Ontario Power Generation to borrow it at higher rates.
The difference adds up to an extra $4 billion in borrowing interest costs — for a total cost of $39.1 billion for the hydro plan — but means that extra red ink doesn’t show up on the province’s books, Lysyk said.
Internal government correspondence shows that was the goal of the financing plan, she said.
Energy Minister Glenn Thibeault said the government made a policy decision that the cost of refinancing electricity assets would be borne by the hydro ratepayer, not taxpayers, as has been the historic practice.
The government’s accounting method has been reviewed and approved by senior staff from several ministries, the cabinet office, Ontario Power Generation, the Independent Electricity Operator, and third-party consultants, including KPMG and Deloitte, he said.
Treasury Board President Liz Sandals noted that they also took hydro relief programs off of the electricity bill, and placed them on the government books, because that was a more appropriate way to record the expense.
“There was no fast ones being pulled at all,” Thibeault insisted.
The government is now estimating the cost of the Ontario Fair Hydro Plan (OFHP) at less than $20 billion.
Lysyk said she consulted with auditor generals from across Canada, and attending in support at her media conference was Tim Beauchamp, the recently retired director of the Canadian Public Sector Accounting Standards Board.
The provincial government’s method of accounting, a first in Canada for any government, is not yet carved in stone and the $4 billion can be saved, Lysyk said.
“There’s still time to fix it,” she said.
What the opposition parties had to say
The Ontario Liberal government “cooks the books” — spending up to $4 billion more than necessary to hide the true cost of its latest hydro scheme, Progressive Conservative Leader Patrick Brown says.
By structuring the cost of the Ontario Fair Hydro Plan (OFHP) in such a way that it was off the government books — adding to borrowing costs but not showing up as more red ink in the provincial budget — the Liberals were essentially forcing taxpayers to fund their re-election campaign, he said.
“This is cynical politics at its worst, making up their own rules, charging Ontario families more to serve the partisan interests of the Liberal Party,” Brown said, shortly after a damning auditor’s report was tabled in the Ontario legislature Tuesday.
The Ontario Liberals, who ran a budget deficit for several years after the 2008-09 recession, announced in their spring budget that the books will be balanced for the upcoming fiscal year.
Provincial voters go to the ballot box this June.
NDP MPP Peter Tabuns, who also sided with the auditor general’s view that this type of accounting was wrong, said the government was attempting to book as an “asset” its ability to charge future hydro ratepayers more than their power will be worth.
“This was one of the most shameless displays I’ve ever seen from Liberal cabinet ministers,” Tabuns said, after Energy Minister Glenn Thibeault and Treasury Board President Liz Sandals defended their financing decisions. “They’re trying to make this whole thing to be a fight over accounting. The guts of this is that the government is spending $4 billion more in interest that we’re going have to pay for in our hydro bills, so they can move these numbers off their books so they can make it look like they’re not running a deficit.”
What the Auditor General of Ontario Bonnie Lysyk says:
•Kathleen Wynne government’s complex financing for Ontario Fair Hydro Plan (OFHP) needlessly dumps up to $4 billion more in borrowing interest costs on Ontarians.
•Only reason to spend extra $4 billion is to ensure that the expense doesn’t impact government’s surplus and deficit figures.
•No government in Canada has ever used this method of accounting before, like booking credit card debt as an asset. The government books should reflect the costs of its policy decision — about $2.5 billion a year until 2027.
•Ministry of Energy gave law firm $500,000 retainer to go through its OFHP e-mails, requested by the auditor, and still haven’t turned over everything even though other energy agencies have. Government spent at least $2 million on outside advisors to design this financing structure.
•Total bill for OFHP — $39.4 billion over 30 years.
What the Ontario government and energy agencies say:
•Total bill for OFHP will be under $20 billion, down from an estimate of $27 billion in March.
•Auditor’s e-mail request pulled over 100,000 e-mails, so lawyers needed to go through them to ensure they were on topic. About 7,000 have been turned over already.
•Financing decision was based on government policy to make sure hydro ratepayers, and not taxpayers, covered the cost.
•Similar accounting methods are used by many energy agencies, here and in the United States.
•Government enlisted advice of many experts, including KPMG, on the structure of the accounting.
Liberals costing us extra $4 billion in interest costs | Ontario | News | Toront
at least the fiberals are being consistent.
High hydro rates killed Ontario jobs: Study
By Antonella Artuso, Toronto Sun
First posted: Tuesday, October 17, 2017 08:00 AM EDT | Updated: Tuesday, October 17, 2017 08:03 AM EDT
TORONTO - Soaring electricity prices resulted in 75,000 fewer manufacturing jobs for Ontarians since the recession, a new report says.
Rising Electricity Costs and Declining Employment in Ontario’s Manufacturing Sector — a report prepared by Ross McKitrick and Elmira Aliakbari of the Fraser Institute — says the provincial government’s hydro policies are to blame for the disproportionately high prices and lost jobs.
Competing jurisdictions, including neighbouring U.S. states, took a hit in the manufacturing sector following the 2008-09 recession, said McKitrick, a University of Guelph economics professor.
Global factors impacting employment in the manufacturing sector included the severe market downturn and technological advancements.
“But other regions bounced back, both in output and employment,” added McKitrick. “Ontario just stayed stuck and in some ways continued to decline after 2008. So that means Ontario stands out in some way.”
The report says that Ontario had some of the fastest rising hydro rates for small industrial consumers between 2010-16 — 50% in Ottawa and 48% in Toronto — compared to an average increase across Canada of 15%.
Rates for large industrial consumers of electricity also outpaced those in other provinces, even some of those Ontario firms that are partially sheltered from the full cost, McKitrick said.
The Fraser Institute noted the provincial Liberal government’s Green Energy Act, and its guaranteed above-market prices for renewable energy such as wind-powered turbines, as a key driver for the rising prices.
The report says that since 2008, Ontario saw manufacturing employment decline by 116,435 jobs, and calculates that electricity prices and their negative impact on competitiveness were responsible for about two-thirds of the loss.
Manufacturing jobs tend to come with higher wages, and help boost people into the middle class, he said.
“The Ontario manufacturing sector accounts for 40% of the country’s exports, and so that means it affects everybody because of the way it helps sustain our exchange rate and keep cost of living low,” McKitrick said.
Ontario Economic Development Minister Brad Duguid said the province has created 800,000 net new jobs since the global recession and is experiencing the lowest unemployment rate in 17 years.
Meanwhile, auditor general Bonnie Lysyk will release a special report Tuesday on the Kathleen Wynne government’s Fair Hydro Plan, which seeks to lower bills for Ontarians by 25%.
HYDRO HIKES BETWEEN 2010-16
Medium Power Users
Montreal 11.4%
Ottawa 50.5%
Toronto 48.2%
Winnipeg 19%
Calgary -1.2%
Vancouver 37.3%
Boston 35%
Miami 18.5%
Seattle 66.1%
Large Power Users
Montreal 9.8%
Ottawa 53.1%
Toronto 45.5%
Winnipeg 19.1%
Calgary -4.5%
Vancouver 37.6%
Boston 30.9%
Miami 13.7%
Seattle 62.1%
High hydro rates killed Ontario jobs: Study | Ontario | News | Toronto Sun