TORONTO, April 29, 2020 /CNW/ - Today, the Ontario Energy Association (OEA) released a policy paper outlining ways the Ontario government can reduce its nearly $6 billion of annual spending on electricity subsidies, while still offering targeted financial relief to those who need it most. In its paper, Help Those Who Need Help, the OEA notes the Ontario government spends roughly $6 billion annually subsidizing electricity rates for households, the majority of which do not need the subsidy. Should the government remain on the same trajectory, it will spend at least $228 billion over the next 25 years subsidizing electricity rates.
"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 explains the current non-targeted system design 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. In addition, to respond to the COVID-19 pandemic, the Ontario government suspended time-of-use (TOU) pricing and lowered rates to the "off peak" rate of 10.1 cents/kWh for 45 days. While this has provided financial relief to households across the province, it does not identify and target those who actually need the support (e.g. the unemployed) and is costing the government $162 million over the 45-day period.
"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."
In its policy paper, the OEA recommends the Ontario government end the emergency off-peak subsidy on May 8, as planned, and turn their attention to phasing out all non-targeted electricity rate subsidies. At this time, the focus should be placed on identifying and allocating scarce resources to those who have been most impacted by COVID-19.
The OEA offers policy options for the government once it ends the current suspension of TOU. One option is to implement a single rate of 12.8 cents/kWh, which represents a 38 per cent rate reduction from the previous "on peak" rate of 20.8 cents/kWh. While doing so, the government could also implement other assistance programs for Ontarians, so those who need it can continue to receive financial support for their electricity bills.
"Ontario will need all the resources it can marshal to help struggling households and businesses during this pandemic and recovery. Phasing out broad-based, non-targeted electricity subsidies will enable the government to direct much-needed funds to assist with our economic recovery," stated Mr. Brescia. "It will also enable the province to create a more equitable system that will better serve Ontarians for generations to come."
The OEA's paper with proposals on how to end massive government subsides, reduce rates by 12 per cent and stabilize electricity bills can be found by visiting www.energyontario.ca.
About the OEA: The Ontario Energy Association (OEA) is the credible and trusted voice of the energy sector. We earn our reputation by being an integral and influential part of energy policy development and decision making in Ontario. We represent Ontario's energy leaders that span the full diversity of the energy industry. Learn more at www.energyontario.ca.
SOURCE Ontario Energy Association (OEA)