Hydro One sell-off risky

By Admin Wednesday May 06 2015 in Editorial
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The Ontario Liberals say they are committed to responding to the demand for adequate transportation infrastructure but their decision to fund this plan to the tune of $4 billion by selling off some 60 per cent of Hydro One at $9 billion is not being greeted with much enthusiasm, as at least one poll shows.

 

These ideas are never popular and with ratepayers now facing recently increased electricity rates, finance minister Charles Sousa’s budget announcement of the Hydro One sell-off faces an uphill challenge in convincing the public that this is a good idea. This sequence of events might explain why a poll shows some 77 per cent of Ontarians who were asked are against the sale of Hydro One.

 

Ratepayers will now pay twice as much at 16.1 cents per kilowatt-hour during peak hours, 11 a.m. to 5 p.m. on weekdays, compared with 8 cents for off-peak hours, 7 p.m. to 7 a.m., and all day on weekends and holidays.

 

It would not be hard to make a connection between the two events. The fear is that with privatization even greater rate increases will arise.

 

Yet much of the energy industry in this province is already privatized. Furthermore, the provincial government through the Ontario Energy Board (OEB) regulates electricity rates, so any notion that private companies will set the rate for profit or to appease shareholders is incorrect, for now anyway.

 

Nevertheless, we in this province pay higher rates for electricity than anywhere else in Canada. Ratepayers are still burdened by a debt retirement fee on their monthly bills from the previous Conservative government’s decision to carve up Ontario Hydro, dividing it into Ontario Power Generation, the Independent Electricity System Operator and Hydro One. That decision left ratepayers holding the bag for a $21 billion debt, left over from the building of nuclear plants from the 1970s to the 1980s. There is still over $2.5 billion of that debt remaining.

 

Furthermore, there are still hard feelings over the gas plant debacle that has left utility users on the hook for cancellation penalty payments of more than $650 million against the Mississauga plant and more than a billion dollars when the Oakville plant cancellation is included.

 

The provincial government is already on an end run to balance the budget by 2017 and is also averse to raising taxes, since lowering corporate taxes or any other that can be shaved is the mantra of the day. So, rather than raise corporate taxes or create some other revenue generating mechanism such as a vehicle purchase tax to pay for transportation construction, the Liberal government’s best answer is the very unpopular idea of selling of an asset. This is cowardice.

 

At a time when their stated intent is to pay down debt and bring in a balanced budget, it seems contradictory to sell off an asset that generates $800 million in annual revenue in exchange for taking in a large one time sell-off payment.

 

To be clear, as much as half of the province’s energy industry is already privatized so the sale of Hydro One would not be precedent setting, but it would be foolhardy to believe that further engaging with the private sector will not come with consequences. For now, the OEB has the say in energy rates, but as more and more of these energy assets end up in the hands of private interests, the pressure from their lobby groups will come to bear on the government to capitulate to their demands.

 

That is what ratepayers are wary of and that is why the great majority of those polled are against this plan.

 

It seems a clever ploy to explain to the public that the money will go to the urgent need of transportation infrastructure, but it smacks of desperation. We want to see our roads, subways and public transit systems move into the 21st century. We are desperate for them. But, are we at the point of selling valuable and reliable revenue generating assets that will bear on our future in exchange?

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