Ontario was once the engine of the Canadian economy, a Triple-A-rated powerhouse commanding more than 40 per cent of the country’s GDP. Today this once-proud place is a have-not province whose credit rating is near the bottom of the pack, a loser that collects subsidies from the rest of the country.
Ontario lost its lustrous Triple-A credit rating when Ontario Hydro went out of control, ending the province’s low-price advantage, making industry uncompetitive and sinking the province in a morass of debt.
Ontario’s credit rating then continued to sink, in tandem with continuing boondoggles in the energy sector that now leave Ontario the world’s most indebted sub-national jurisdiction. According to a 2012 MacDonald-Laurier Institute study by Marc Joffe, a former senior director at Moody’s Analytics, the province’s likelihood of defaulting over the next two decades is 43 per cent.
But there is a way to reverse Ontario’s downward spiral, likely the only way that avoids a painful and protracted retrenchment — by righting the province’s power sector, the biggest cause by far of its ruin. And there’s only one way to right the power sector — by rethinking Ontario’s Green Energy Act and rewriting the ruinous contracts that are responsible for most of Ontario’s power woes.
According to Bonnie Lysyk, Ontario’s auditor general, Ontarians paid $37 billion above the market price for electricity over the past eight years, and face an additional $133-billion overpayment by 2032. Industry and wealth-creation as a result are fleeing the province in what could become a death spiral — the more that industry leaves, in the process depriving the provincial treasury of tax revenues and the power system of sales revenues, the more that Ontario must make up the shortfalls by increasing taxes and rates on those who remain, which in turn convinces others to leave.
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