Today’s economic statement from Ontario Finance Minister Sousa should be the last time we get data to demonstrate his theft of residual stranded debt charge revenue. I’ve written on this many times, so in this post I just want to cover the latest farcical accounting, but I’ll provide one more overview of what the “residual stranded debt” was meant to be, and how a charge of $7/MWh (0.7 cents/kilowatt-hour) ended up on electricity bills to address it.
Ontario Hydro was broken up with the electricity act of 1998, and the successor company left with the financial burdens was the Ontario Electricity Finance Corporation (OEFC). It’s a shell company that held about $20 billion more in liabilities than it had in assets (this is known as the OEFC Unfunded Liability). In order to pay the liabilities the OEFC was provided revenue tools; specifically payments in lieu of taxes (PIL) from sector businesses, and profits (above a certain number) from Hydro One and OPG – two successor companies of Ontario Hydro.
The Unfunded Liability that was not capable of being retired through PIL and sector revenues was called the “Residual Stranded Debt”, and to address that debt the residual stranded debt charge was added to our bills.
I was anticipating today’s lie, and here’s how it was pictured:
Let me explain how this is a lie.
The “OEFC Unfunded Liability” reduces simply in accordance with the OEFC balance sheet. 10 years ago the government accounted for a Unfunded Liability of $20.3 billion and a finance minister at some point decided to claim $9.9 billion of that was “residual stranded debt.”
The “Debt Retirement Charge” (DRC) has been about $950 million in recent years, so you can see that for the past 8 years the OEFC would have been retiring “unfunded liability” even without the debt retirement charge.
In 2014-2015, the reduction would have been $640 million if there were NO revenue from the debt retirement charge. Sousa’s phony accounting reducing the residual stranded debt by only $400 million doesn’t even reflect the reduction in the unfunded liability that occurred without the DRC.
There’s nothing new in a finance minister of Ontario seizing funds from Ontario ratepayers under the false premise debt will be retired. Note in the chart above the highest net revenue years are 9-10, 10-11, 13-14 and 14-15. 3 of those 4 years are when Ontario’s finance minister claims the least “residual stranded debt” was eliminated.
Sousa’s phony accounting in today’s financial reporting of Ontario’s fall has a horrible precedent in Dwight Duncan’s abuse of the residual stranded debt charge. From March 31, 2005, when the residual stranded debt is claimed to have been $9.9 billion, to March 31, 2015, $10.6 billion was collected from Ontario’s ratepayers through the debt retirement charge and OEFC revenues exceeded expenses by a further $1.6 billion.
The numbers make no sense, except as evidence of intentional deception.
I’ll add emphasis to words quoted in the government’s statement, reminding that lies were expected and the requirement was that for any debt to be paid, the OEFC could not have reduced unfunded liability (because the whole point is to steal the debt retirement charge and raid the value of electricity sector assets):
Hydro One Initial Public Offering: Ontario Electricity Financial Corporation Debt Paydown
As part of the government’s commitment to using the proceeds from broadening Hydro One ownership for infrastructure investments and paying down debt, proceeds related to the book value of the shares sold and the pre-IPO special dividend payment of $800 million paid by Hydro One to the Province will be used to pay down the Province’s electricity sector debt and other payables. This will allow the Ontario Electricity Financial Corporation (OEFC) to reduce its overall debt, and contribute towards the Province’s targeted $5 billion debt paydown. This debt paydown does not affect OEFC’s stranded debt, as OEFC’s receivables from the Province will be reduced by an equivalent amount.
The OEFC has also received $2.6 billion in departure tax from Hydro One, as Hydro One exited the payments in lieu of tax (PILs) regime with the IPO, and will no longer pay corporate tax PILs to OEFC. The OEFC is also expected to receive an additional $200 million in PILs from Hydro One. The cash PILs payments will allow OEFC to reduce its debt outstanding; however, they will not have a net impact on OEFC’s stranded debt, as the departure tax and incremental PILs amount, as expenses to Hydro One, reduce Hydro One net income, and in consequence, reduce the Province’s Electricity Sector Dedicated Income transfer to OEFC in respect of Hydro One net income.
I don’t think I can describe this without swearing.
The OEFC has an asset of $4.9 billion described as “owed from the province of Ontario.” In the first paragraph the asshole currently faking managing the province’s finances claims the OEFC can pay down debt but he’ll just reduce what is owed to them by the same amount.
I have no idea what wine bar that nonsense would be considered credible.
The second paragraph says what special payments should flow to the OEFC from the tax penalties as Hydro One moves from entirely publicly owned to only publicly scorned will simply come at the expense of future Hydro One’s profits so whatever the IESO gets now it simply reduces anticipated future revenue from sector profits. Idiots who believe Sousa’s phony explanations are to accept that as justification for ripping off businesses for another 27 months of debt retirement charges.