As an Ontario election approaches, provincial Auditor General Bonnie Lysyk is making it difficult for the Liberal government to wash away its legacy of energy policy gaffs.
Earlier this week, Lysyk released a Special Report looking at the accounting methods of Kathleen Wynne’s provincial government. Quite simply, she says the Liberal government’s approach “creates concerns of transparency, accountability and value for money.”
The report was specifically related to the government’s “Fair Hydro Plan,” a project it pitched as a way to cut electricity rates for residential customers, with a greater cost savings for specific demographics.
The problem is that, as Lysyk put it:
Ontario power producers are guaranteed a certain price for their electricity. If ratepayers get a discount on their hydro bills, someone else will have to pay the difference. Someone has to pay the piper … right now.
Since it was up to the province to foot the bill, it had the option of raising revenue or borrowing money. It chose to borrow, and by hiring outside advisers (for an additional $2 million), it was able to create a complex financing structure that would hide the loss from financial statements, and the province’s net debt.
“The government’s proposal is to treat that loss [from borrowing] as an asset. That’s like you treating your credit card debt as an asset in your own books,” said Lysyk. “In proper accounting, borrowing money and losses should result in net debt increasing and higher deficits. This is Government Accounting 101.”
In order to pay the cost of the Fair Hydro Plan ($39.4 billion, according to the Finanaical Accountability Office of Ontario), the province has other government entities like Ontario Power Generation borrowing money at higher interest rates. This will cost about $4 billion in extra interest charges.
Auditor General Lysyk made it clear in her announcement that the decision to offer discounts to ratepayers is within the government’s jurisdiction, and there is still time to fix the accounting.
“[The Special Report] recommends the government record the true financial impact of its electricity rate reduction plan in the province’s budgets and consolidated financial statements, and use the least costly financing structure to fund the rate reduction.”