The Ontario government's rate-mitigation programs designed to lower electric bills immediately could cost taxpayers as much as C$4 billion in hidden interest costs over the next 30 years, the province's auditor general said.
The province plans to account for the cost of the programs under processes that do not conform to established policies for preparing financial statements, Auditor General Bonnie Lysyk said in an Oct. 17 statement. The auditor is a government-appointed watchdog over provincial programs. The government's system of accounting would hide the real financial impact of the rate-mitigation programs by understating provincial annual deficits and net debt.
According to the Financial Accountability Office of Ontario, the total cost of the electricity rate reduction from the program, called the Fair Hydro Plan, is estimated to be C$39.4 billion over 30 years, including about C$4 billion in additional interest charges. These charges are extra because the province does not plan to borrow all the money directly, Lysyk said. Instead, the financial structure the government designed has other government entities, including Ontario Power Generation Inc., borrowing at higher interest rates.
"The accounting proposed by the government is wrong and if used would make the province's budgets and future consolidated financial statements unreliable," Lysyk said in the statement. "We're not questioning the government's policy decision to give Ontarians a discount on their electricity rates. What we are questioning is how the government is going to report the effects of that decision to the people of Ontario. There's still time to fix it, and we're encouraging the government to do so."
The province unveiled its Fair Hydro Plan in May, proposing to cut consumer electricity rates by an average of 25% by moving some of the costs of its renewable energy programs to government expenses and spreading the cost of those investments over a longer period. The program went into effect this summer.
Lysyk, who has previously questioned the financial impacts of the provincial government's renewable energy policies, issued a report that examines what her office calls the "needlessly complex" financing structure the government used to achieve the desired accounting results. The report was compiled with advice from other current and former provincial auditors general as well as accounting standards professionals.