TORONTO - Electricity users in Ontario will get a 10 per cent rebate on their bills starting in January to help offset an expected 46 per cent jump in hydro rates over the next five years as the province goes green, Finance Minister Dwight Duncan said Thursday.

In his fall economic update, Duncan said electricity rates will continue to rise as the province shifts from coal-fired generation to much more expensive renewable energy sources, and will only start to ease off after 2015.

"Every kilowatt hour is more expensive than the last," said Duncan.

The rebates will help keep the electricity rate increases down to about 3.6 per cent a year for four million Ontario households and another 400,000 farmers and small businesses, he said.

"Through this benefit at 10 per cent per year, that will bring that (46 per cent) down significantly," said Duncan.

"We wanted to make sure we were crystal clear about the future and why we're making the investments we're making. If you look at the longer term, you'll see prices stabilize."

The so-called Ontario Clean Energy Benefit will be applied after all other items on electricity bills, including taxes, and will kick in Jan. 1. The rebates may not show on statements until next May, but they will be retroactive from the start of the year.

The discount will be in effect for five years, until the debt retirement charge from the old Ontario Hydro is finally removed from bills. The initiative will cost taxpayers $1.1 billion a year.

'Buying votes'

The opposition parties say the electricity rebates are a blatant attempt by the Liberals to buy votes before next fall's provincial election, but they support the idea of giving consumers a break.

"This is not about helping families with their bills," said NDP Leader Andrea Horwath. "What it is about is solving the premier's problems until the next election rolls around in about a year."

The Tories warned the 10 per cent rebates won't go far with hydro bills set to rise so high in coming years.

"Families can expect to see double-digit increases in their hydro bills in 2011 and beyond," said Progressive Conservative Leader Tim Hudak.

"According to this government's own fiscal update, this so-called benefit will be erased in very short order as families' hydro bills skyrocket 46 per cent more in the next five years."

Teranet deal

Duncan also announced a 50-year extension of a contract with Teranet, the company that operates the province's electronic land registry. The $1 billion the province gets upfront from that deal will be applied to Ontario's $220-billion debt, and will also lower interest costs by $50 million a year, said Duncan.

The Teranet contract has built-in consumer protections, freezing its fees for five years and limiting increases after that to one-half of the inflation rate, he said. It also includes new royalties for the province of about $50 million a year, starting in 2017.

"That approach stands in stark contrast to the Progressive Conservative government that sold off Highway 407 without protecting consumers and used the money to pretend there was no deficit," said one senior Liberal government source.

The New Democrats were not impressed with the Teranet deal, but like the Liberals, were reminded of the Highway 407 sale in 1999 by then-premier Mike Harris, just before a provincial election.

"It looks like another fire sale of an opportunity to have long-term revenues for the province being paid off in a short-term amount. It's another 407 type of deal," said Horwath.

"A 50-year deal to a company for a short-term, $1-billion cash grab doesn't make a lot of sense and doesn't ever pay off for Ontarians."

Economic recovery

Duncan reported earlier this week that the projected deficit had fallen to $18.7 billion from the $19.7 billion forecast in the budget.

"There are clear signs that the Ontario economy is recovering," Duncan said in his speech to the legislature.

Revenues were up 0.67 per cent while expenses decreased by 0.2 per cent after the province paid $246 million less in interest than was forecast in the budget last March.

Real GDP is expected to average 3.2 per cent for 2010 and fall to 2.2 per cent next year, while unemployment is expected to average 8.8 per cent from nine per cent in 2009.

Duncan also announced the province would introduce legislation to have the Ontario Securities Commission regulate the $12-trillion derivatives market.