Why Doug Ford's government spends more than $6B/year subsidizing hydro rates

When Premier Doug Ford's government tables its new budget on Thursday, expect to see more than $6 billion devoted to subsidizing hydro bills. 

Although previous Liberal governments also spent taxpayer money on lowering electricity prices, Ford's Progressive Conservatives have taken it to such a level that it is now one of the single biggest line items in the Ontario budget.

The 2022-23 provincial budget earmarked $6.3 billion for "electricity cost-relief programs," nearly four times as much as the $1.6 billion Kathleen Wynne's Liberals budgeted for such programs in 2018. 

Ford's PCs blame the size of the spending on green energy contracts signed by Liberal governments that locked the province into paying wind- and solar-power producers above-market prices for generating electricity.

The electricity cost-relief budget is now more than the combined budgets of the ministries of economic development, environment, agriculture, northern development, mining, natural resources, forestry, Indigenous affairs and labour, training and skills development.

The Ford government has spent more taxpayer money subsidizing hydro bills than it has spent on long-term care. In the four budgets since 2019, a cumulative total of $23.6 billion has been devoted to electricity cost relief programs, $2 billion more than budgeted for long-term care in the same time period.   

Ontario's financial accountability officer, Peter Weltman, released a detailed analysis of the electricity subsidies last year, estimating that they will cost taxpayers $118 billion over the next two decades, or roughly $6 billion per year. 

"It's complex program, but it's a lot of money," said Weltman, who serves as the Legislature's independent budget watchdog. 

Weltman says the policy encourages hydro customers to consume more electricity.   

"Because most of the cost of the subsidy is to subsidize consumption, what ends up happening is those folks in the higher income brackets end up getting a bigger subsidy because they tend to consume more electricity," he said in an interview. 

Roughly $600 million worth of electricity price rebates goes to households in the top 20 per cent of earnings, according the Financial Accountability Office's report. 

The report finds that the current subsidies and rebates knock $50 off the average monthly residential hydro bill. Without the subsidies, the typical household would pay $171 a month (inlcuding tax) for electricity. Instead, the average hydro customer's monthly bill is $121. 

It's "politically shrewd" of the Ford government to use tax dollars to keep the price of electricity lower, said Dan Moulton, with the public affairs firm Crestview Strategy.

"The bigger question is: is it wise and is it sustainable?," said Moulton in an interview. "Could this money be better spent on improving other public services?"