FOR IMMEDIATE RELEASE:
[La version française suit le texte anglais.]
ONTARIO TO SPEND $15.2 BILLION TO LOWER ELECTRICITY COSTS
FOR INDUSTRIAL AND LARGE COMMERCIAL RATEPAYERS
TORONTO, March 18, 2021 - Today, the Financial Accountability Office of Ontario (FAO) released its review of the Government of Ontario’s new program to lower electricity costs for industrial and large commercial ratepayers.
Announced in the 2020 Ontario Budget, the Province will reduce electricity prices for industrial and large commercial ratepayers by subsidizing the cost of 33,000 green energy contracts with wind, solar and bioenergy generators. The program, which began January 1, 2021, will shift nearly 85 per cent of the cost of electricity generated under these contracts from ratepayers to the Province until the last contract expires around 2040.
Over the life of the program, from 2020-21 to 2039-40, the total estimated net cost to the Province is $15.2 billion. In just the first three years, the FAO estimates that the program will cost the Province $2.8 billion. The FAO’s three-year cost estimate is significantly higher than the Province’s $1.3 billion cost estimate reported in the 2020 Ontario Budget, as the government’s three-year estimate included additional cost forecast changes for the Ontario Electricity Rebate that were unrelated to the new program.
In 2021-22, the FAO estimates that approximately 1,400 industrial ratepayers (such as auto parts manufacturers and pulp and paper mills) will receive an average 17 per cent reduction in the price of electricity and a 14 per cent reduction in their electricity bills. Large commercial ratepayers (such as hotels and office buildings) will see an average 19 per cent reduction in the price of electricity and a 16 per cent reduction in their electricity bills. After accounting for the impact of the subsidy in 2021-22, the FAO projects that electricity prices for large commercial ratepayers in Ontario will remain among the highest in Canada, while Ontario industrial ratepayers will see electricity prices drop below the Canadian average and below most nearby competing US jurisdictions.
To learn more, read the full report here.
- The new program will reduce the price of electricity for all ratepayers in Ontario. However, the Province will recover the subsidies to residential, farm and small business ratepayers by lowering the discount provided through the Ontario Electricity Rebate (OER). Only large commercial and industrial ratepayers that are not eligible for the OER will see a net reduction in their electricity bills.
- The annual subsidies paid to industrial and large commercial ratepayers, and the cost to the Province, will decline over time as the green energy contracts expire. The decline will be gradual from 2021-22 to 2029-30, with the annual subsidy decreasing by 14 per cent, and will become more rapid starting in 2030-31, as large numbers of the subsidized green energy contracts begin to expire.
About the FAO
Established by the Financial Accountability Officer Act, 2013, the Financial Accountability Office (FAO) provides independent analysis on the state of the Province’s finances, trends in the provincial economy and related matters important to the Legislative Assembly of Ontario. Visit our website at http://www.fao-on.org/en/ and follow us on Twitter at https://twitter.com/InfoFAO.