Current HST hydro rebate benefits rich more, report suggests

Ontario's eight per cent HST hydro rebate is benefiting the rich disproportionately, says a new study by the Canadian Centre for Policy Alternatives.

Canadian Centre for Policy Alternatives suggests 'fairer' way of distributing relief

A new study argues that hydro savings should be based on annual household income. (Yvon Theriault/Radio-Canada)

Ontario's eight per cent HST hydro rebate is benefiting the rich disproportionately, says a new study by the Canadian Centre for Policy Alternatives. 

The study looked at the discount that came into effect this January and found that the richest 10 per cent of Ontario households were enjoying two-and-a-half times more in savings than the poorest 10 per cent.

The report follows a Statistics Canada model to estimate the cost of the residential portion of the rebate, as well as to determine how it is distributed across the population. According to the analysis, the 8 per cent portion of HST paid on residential electricity in 2017 is estimated to be $521 million.

Electricity use rises with income, the report goes on, and then so does the rebate.

The model shows that "a disproportionate share of the $521 million cost of the rebate to households goes to the well-off: the richest 10 per cent of households, who make over $176,000, will take home 19 per cent of the benefit under this current rebate," the report says.

Those making less than $42,000 save on average $84 a year, while those who earn $176,000 or more save about $181.

"Since rich people use more hydro than those who are poor, there was a lot more benefit for high income households than low income households," said Sheila Block, senior economist at the Canadian Centre for Policy Alternatives and one of the study's authors.

"We think that if the residential part of this rebate is going to cost the government $520 million a year, there's a better way to apply it."

Instead of having a uniform deduction of eight per cent, Block said that creating a savings scheme based on income would be a lot more effective.

Under the scheme, those earning less than $35,000 would save 25 per cent on their hydro bills and that percentage would decrease as earnings go up. Those earning more than $176,000 a year would get no rebate.

Chart shows annual savings on hydro based on someone's income and the current eight per cent rebate. (Canadian Centre for Policy Alternatives)
Chart shows what savings could look like annually if study's percentages were applied. (Canadian Centre for Policy Alternatives)

Hydro bills are 'astronomical,' customer says

For Toronto resident Kenza Dine, the proposed system makes more sense than the current provincial HST rebate.

"I don't even notice it on my bill," said Dine, who makes about $52,000 a year.

Since 2015, Dine's average electricity bill has been about $170 per month.

She calls that astronomical for someone who lives alone in a 600 square foot apartment at St Clair Avenue and Avenue Road.

"I turn off my lamps when I'm not using them, I turn off my heat when I'm not home. I make sure not to waste any electricity but it's made zero difference."

Under the government's current plan, she saves about $13 a month. If the study's proposed rates were applied instead, Dine's income would qualify her for 21 per cent in savings, which would knock about $36 a month off her bill.

"It's better, but it's still not enough. The rates are just too high," said Dine.

A shot of Kenza Dine's Toronto Hydro bill for the month of January 2017. (Kenza Dine)

More rebates coming

Premier Kathleen Wynne's Liberal government will make an announcement about more hydro cuts Thursday, which could be as high as an additional 17 per cent.

Block, the economist who helped write the study, says the plan the Canadian Centre for Policy Alternatives is proposing could work within the current HST rebate structure and would make a great addition to any new cuts.

"It's a fairer way of distributing the savings," said Block.