WATCH: Hydro bills to drop 17% June 1 but you will pay more long term
Premier Kathleen Wynne says it is worth having future ratepayers pay more, so that your hydro bill can go down today.
She announced her government's hydro relief plan Thursday morning.
The average hydro bill will be cut by another 17 per cent in June, but it will mean up to $1.4-billion a year in extra interest costs, plus $1.8-billion a year of extra pressure on the province's budget.
The reduction is on top the 8 per cent drop you saw in January through an HST rebate.
The additional relief on your bill will come from refinancing the electricity system, paying off power generation contracts in 30 years, instead of 20. Just like extending the term of your mortgage, it will mean paying more in interest in the long run. The government is not able to say how much interest payments will add up to in the end, but it will be up to $1.4-billion a year. That cost will be recovered from future ratepayers.
Premier Kathleen Wynne admits that over time it will cost a bit more and will take longer to pay off, but it is fairer because current ratepayers don't have to shoulder the entire burden of huge system costs.
Premier Kathleen Wynne will join Ryan and Jay on NEWSTALK 1010's The Rush after the news at 5:30 p.m. Thursday
The changes will also put more pressure on the province's budget. The HST rebate of 8 per cent that started in January is costing Ontario $1-billion a year. New changes coming to enhance social programs for low-income, rural and northern residents will cost an additional $833-million a year. Those costs will be recovered from the tax base.
When asked where the $1.8-billion will come from within the province's budget, premier Wynne only said that now is the time to make such changes because the economy is growing.
The Wynne government still promises to balance the budget by the 2017-18 fiscal year.
The overall 25 per cent reduction, for the HST rebate and refinancing of the electricity system, is the average for the typical hydro customer. Someone who uses more hydro than average could see a 28 per cent drop, while a condo dweller who uses less hydro could see a 23 per cent reduction.
New social programs for rural and low-income residents mean that some customers could see a reduction of up to 51 per cent in their bill.
After the initial 25 per cent drop this year, the hydro plan promises rate increases at inflation for four years. It is unclear what will happen to rates after that.