Hydro: Ontario's Troubled Asset
People are troubled by their hydro bill. With an election looming, the government will spare no expense to make the problem go away.
On Wall Street it was called TARP, the Troubled Asset Relief Program. In Ontario it could well be called HARP, the Hydro Ache Repayment Program.
Like the big bank bailout, Ontario's massive hydro bill relief package is a slick scheme. Its goal is to hide years of reckless behavior. It too will cost billions more than any politician will ever admit.
In the fall of 2008 the global economy was in crisis. The U.S. housing market was in free fall. Investment banks, such as Lehman Brothers, were allowed to go bankrupt. Others were bailed out (Morgan Stanley). Mortgage lenders and mortgage insurers (Fannie May, Freddie Mac, AIG) were nationalized. Fear gripped the market. Unless the crisis was contained, there would be another Great Depression.
TARP was born.
The legislation allowed troubled lenders to trade in bad paper. These became known as toxic assets - mortgage backed securities, credit default swaps. The American taxpayer became a $700-billion back stop. In return, banks agreed to limit executive compensation, cap annual bonuses and the U.S. government received preferred shares, with juicy dividends. TARP was deemed a success. It restored confidence in the capital markets. Banks began lending again. Much of what was borrowed was eventually paid back.
But TARP wasn't the only bailout.
The true size of the Wall Street rescue package came to light in 2011, only because Bloomberg News won a court battle against the big banks. The decision forced them to confess their borrowings topped an incredible $1-trillion, in a single day.
TARP was the result of private sector malfeasance, poor decision making, greed and reckless behavior. In a moment of true desperation, the Bush administration's solution was to spend trillions to make the problem go away.
Ontario is suffering from a decade of wild abandon. The government has been crafting energy policy drunk on ideology, fueled by green greed. There have been cover ups and corruption. The Wynne government's latest fix is a brazen attempt hide its recklessness under a multi-billion dollar TARP.
You can't blame them. They've tried everything else.
The liberals have written down the value of their signature green energy deal, the Samsung contract, by close to $4-billion. A once lauded wind turbine plant in Tillsonburg is closing, throwing nearly 400 people out of work.
Their suite of hydro bill relief programs reads like a bingo card. There's been the Green Energy Benefit (10% off!). Then there was the removal of the debt retirement charge. We've had the Save the PST! - 8% off sale! There's the OESP (Ontario Electricity Support Program). There's LEAP (Low-income Energy Assistance Program). Don't forget the NOEC (Northern Ontario Energy Credit) and the SaveonEnergy Home Assistance Program.
Even after all of this, a hydro bill arrives and people say WTF?
Now it's HARP, or what the government calls The Fair Hydro Plan. 25% off! The Auditor General of Ontario, Bonnie Lysyk calls it "bogus". Today she opined its accounting is so dubious, she has no faith in the province's public accounts.
(For a complete run down of the swindle, see the Globe & Mail's recent in-depth report.)
The Fair Hydro Plan is ten years of borrowing, by three different entities. They're borrowing at three different interest rates. They lend and borrow among each other. This is followed by 18 years of repayment. The total bill, assuming interest rates never go up, is close to $40-billion, over a 28-year period. Magically, none of this ever appears on the ledger as government debt.
Small fixes and token gestures have not worked. For Kathleen Wynne it is go big or go home. Money is no object. If it must be hidden from public view, so be it.
People are troubled. The hydro bill is toxic.
HERE IS TODAY'S PREP: Globe & Mail:
Office of the Auditor General of Ontario: The Auditor General’s Review of the 2018 Pre-Election Report on Ontario’s Finances