Ontario Finance Minister Dwight Duncan has hinted an economic statement on Thursday will include relief for Ontarians hit hard by higher electricity prices. (Canadian Press)

Ontario's Liberal government will implement a $1-billion plan to cut electricity bills by 10 per cent, government sources confirmed Wednesday.

The Canadian Press has learned the Ontario Clean Energy Benefit will be introduced Thursday by Finance Minister Dwight Duncan as part of his fall economic update.

The plan, which would take effect Jan. 1, would trim about $125 a year from the average household hydro bill, said the sources.

It's designed to take the sting out of rising bills, which jumped another eight per cent July 1 when the HST was added to hydro.

Premier Dalton McGuinty wouldn't speak to the specifics of the program Wednesday, but said the government knows consumers are feeling the pinch, especially as the province pays to update the electricity system and moves toward more expensive green energy.

"It's essential that we come to the table and find more ways to support families," McGuinty said after an unrelated event.

"And this is just one more way we can demonstrate that we understand what families are going through, and we want to help them out at least a little bit more in a new way."

'Higher principle'

The government is not backing away from the idea of having consumers pay the actual cost of producing electricity, but the slow economic recovery means the government has to make difficult choices, said McGuinty.

"There's a larger, a greater and a higher principle here," he said. "We've got to make sure that families can cope."

The premier also rejected suggestions the cut in electricity bills is more about helping the Liberals get re-elected next October than it is about giving people a break.

"We're doing what families do: you've got to make a judgment call as to how much you're prepared to borrow in order to address the pressures of the day," he said.

"I think it's only right that we help families out at least a little bit when it comes to meeting those new costs."

The premier also rejected suggestions the cut in electricity bills is more about helping the Liberals get re-elected next October than it is about giving people a break.

Opposition unimpressed

The opposition parties weren't buying that and said the move to cut electricity rates was a "desperate" attempt to help the Liberal government's bid for a third term in office.

"Dalton McGuinty has increased hydro rates by 75 per cent for the average family, and now, he says — just before an election — he's going to give 10 per cent back," said Progressive Conservative Leader Tim Hudak.

"I don't think families are going to buy it."

The New Democrats, who have been pushing McGuinty to remove the HST from electricity bills, said a government with an $18.7-billion deficit should not be going further into debt to pay for the program.

"The only reason this government is acting to deal with their bungling on the hydro file is because they've got a reckoning coming up: election day 11 months from now, and they are very, very scared," said NDP energy critic Peter Tabuns. "

"They're borrowing money to give people a break on their hydro bills before the election. I don't think most people see that as very sound policy."

Duncan also declined to speak about the specifics of the plan to cut electricity bills, but he said it was not the same as the rate freeze imposed by former Conservative premier Ernie Eves in 2002

"Rates will continue to go up. What we're doing does not affect the rate base," said Duncan.

"It's coming out of the consolidated revenue fund, the tax base."

Government sources said the Clean Energy Benefit won't be visible on hydro bills for some customers for weeks or months after the Jan. 1 start date, depending on local utilities' billing cycles. However, it will be applied retroactively to the start of the year.

The new energy program is scheduled to last five years, until the debt retirement charge of about $10 to $12 a month from the old Ontario Hydro comes to an end.