Toronto: A policy paper released April 29 by the Ontario Energy Association (OEA) says the Ontario government can reduce its annual spending on electricity subsidies, while still providing targeted financial relief to those who need it most. The OEA warns that if the government continues on its current course of generalized non-targeted rate relief, it will spend at least $228 billion over the next 25 years subsidizing electricity rates. This kind of spending pattern could put other government priorities at risk.
“Ontarians who need help with their electricity bills should receive financial relief,” says OEA CEO Vince Brescia. “Current electricity subsidies are not targeted to those who most need the help. Those who are low-income earners, for example, or those who have had incomes reduced or lost jobs due to COVID-19 – these are the people the government should focus on.”
The OEA is concerned that the current non-targeted system results in higher-income households, and those with larger homes, receiving larger subsidies, while those living in smaller units with lower incomes receive substantially less assistance. The OEA also pointed out that the roughly $6 billion being spent annually on electricity subsidies is displacing other government priorities.
“We’re recommending the government make the system more equitable by maintaining and enhancing subsidy programs for low income, rural and remote customers – focusing our subsidies on those who need help.” Mr. Brescia explained, “By ending the practice of providing non-targeted electricity subsidies, the government could free up close to $5 billion annually, which would be tremendously valuable as the government struggles with scarce resources.”
The OEA presentation includes a proposal that would allow the government to meet its 12% bill reduction commitment while also phasing out subsidies. They describe it as “Option 3: Gradually phase out subsidies: write-off electricity cost refinancing on tax base to achieve 12%”. The OEA says that Option 3 “allows the government to meet its commitment to reduce electricity bills by 12%.” See chart of Option 3.
In its policy paper Help Those Who Need Help, the OEA recommends the Ontario government turn its attention to phasing out all non-targeted electricity rate subsidies. “The provincial government should move as quickly as possible to phase out broad-based non-targeted electricity subsidies and use those funds to help our impacted households and businesses, and to assist in accelerating our economic recovery from this devastating pandemic.”
A webinar summarizing key findings of the report is available online at this location.
The OEA paper is available online at this location.