The Debt Retirement Charge (DRC) is provided for under the Electricity Act, 1998, and is payable to the Ontario Electricity Financial Corporation (OEFC) on electricity consumed in Ontario. An overview of the DRC is available in our Guide 101 - General Information.
When the former Ontario Hydro was restructured on April 1, 1999, OEFC was established with the mandate to manage and retire the former Ontario Hydro’s debt and certain other liabilities, totalling $38.1 billion. The $38.1 billion was accumulated to build Ontario’s electricity generation and transmission infrastructure that consumers are and have been using.
A portion of the $38.1 billion could be supported by the value of the assets of Ontario Hydro successor companies and other assets; however, OEFC was left with $19.4 billion in unfunded liabilities (often referred to as stranded debt). OEFC receives dedicated revenues to service and retire the stranded debt from a number of sources, including the DRC paid by electricity users. All OEFC revenues are used by OEFC towards its mandate, which includes servicing and retiring OEFC’s debt and other liabilities. This includes payment of principal amounts as well as interest costs.
The Electricity Act, 1998 allows for the DRC to be charged until the residual stranded debt is retired. As required by a regulation under the Electricity Act, 1998, the Minister of Finance annually determines the remaining amount of residual stranded debt. You can find information on the status of the residual stranded debt online in the Ontario Economic Outlook and Fiscal Review.
The residual stranded debt is the difference between the remaining stranded debt and the estimated value of certain future dedicated revenues to OEFC. The residual stranded debt is, therefore, not a fixed, one-time determination, and the estimated timing for residual stranded debt retirement is subject to uncertainty, as the calculation is dependent on OEFC results and the forecast of future dedicated revenues to OEFC.
On April 23, 2014, the government announced that it is proposing to remove the DRC cost from residential users’ electricity bills after December 31, 2015. This would save a typical residential ratepayer about $70 per year. The DRC is to remain on all other electricity users’ bills until the residual stranded debt is retired — this has been estimated to occur by the end of 2018.