Electricity Act, 1998: The Residual Stranded Debt and the Debt Retirement Charge
Ontario Regulation 89/12
Regulation - LGIC
Bill or Act:
Electricity Act, 1998
Summary of Decision:
On May 15, 2012, the government filed a regulation under the Electricity Act, 1998, to provide transparency and reporting requirements on the determination of residual stranded debt each fiscal year.
December 23, 2011
Summary of Proposal:
As part of the restructuring of Ontario's electricity sector on April 1, 1999, Ontario Hydro was restructured into five successor companies. One of those companies, the Ontario Electricity Financial Corporation (OEFC), is the legal continuation of Ontario Hydro. OEFC's mandate includes the servicing and retiring of its debts and liabilities.
OEFC inherited $38.1 billion in total debt and other liabilities of the former Ontario Hydro on April 1, 1999. A portion of the $38.1 billion was supported by the value of the assets of the other Ontario Hydro successor companies, leaving $20.9 billion of stranded debt not supported by these assets.
The Electricity Act, 1998, provides that dedicated revenues from the electricity sector such as payments in lieu of taxes from Ontario Hydro successor companies and municipal electric utilities, as designated in the Act, shall be directed to OEFC towards fulfilling its mandate.
The Electricity Act, 1998 provides that the residual stranded debt means the amount of the stranded debt, reduced by amounts that, in the opinion of the Minister of Finance, will be paid from specified revenues to OEFC as set out in the Act and other amounts prescribed by regulation.
The Electricity Act, 1998 provides that a debt retirement charge shall be paid by consumers of electricity based on electricity consumption until, in the opinion of the Minister of Finance, the residual stranded debt has been retired.
The Electricity Act, 1998, provides that the Minister of Finance shall determine the stranded debt and shall from time-to-time determine the residual stranded debt in accordance with regulations to be made by the Lieutenant Governor in Council. The proposed regulations would outline how the Minister of Finance would determine from time-to-time and report on the residual stranded debt.
Electricity Finance Branch
Corporate and Electricity Finance Division
Ontario Financing Authority
1 Dundas Street West
May 15, 2012