Keep Hydro One best bet and unload lotteries
Ontario is still selling Hydro One but not its provincial lotteries.
It’s selling the thing it should keep and keeping the thing it should sell, making two wrong decisions because the government needs the money.
The Hydro One sale is carrying on in stages, one chunk at a time. The lottery disposal was scrapped last Friday when the Ontario Lottery and Gaming Corp. decided it couldn’t make enough off contracting it out.
It got plenty of interest, the agency reported, but “has determined that the selection of a single service provider would not provide increased value for the province.”
“The province and the government looks at its assets and tries to maximize its value in a way that benefits all Ontarians,” Finance Minister Charles Sousa told the legislature Monday morning, answering questions from New Democrat MPP Jagmeet Singh. “The process by which the OLG was proceeding recognized there was more value to the province to have it in-house because of the way it functions.”
Later, Sousa used a slightly different line: “Ontario Lottery and Gaming’s modernization process is about providing service delivery. It’s not about privatizing the OLG.”
In a sense, Sousa’s right: The OLG was never planning to “privatize” the lottery. It just set out to find a private company that would run the lottery’s day-to-day operations, come up with new lotteries and market them, recommend large-scale changes to the lottery business, and make a profit doing so. In exchange, the private company would give the OLG some money. And the whole thing was scuttled because nobody would give the OLG enough money.
Singh was trying to get Sousa to say the Liberal government has realized privatizing public things is a bad idea, which of course the finance minister would not do.
There’s no principled reason for the government to run lotteries. It’s a long and profitable habit, obviously (worth $2.2 billion last year) but there’s no more reason the state should have a monopoly on lotteries than on movies or food.
Lotto 6/49 and its cousins are a different branch of the gambling business from online casinos, but it has the same problem. If it’s easy to play and presented in a fun way, people will participate even though they know it’s statistically a bad deal.
Now compare Hydro One, where there actually is a principled reason for the government to keep ownership and control. Nobody but Hydro One does what Hydro One does. We’re not going to have competing networks of high-voltage wires crossing the province, linking generating stations and local distribution companies such as Hydro Ottawas. Rural customers who get electricity directly from Hydro One aren’t going to get multiple sets of wires to their houses.
Instead, we’re in the middle of selling a majority stake in Hydro One to private investors.
The provincial government will keep some important veto powers and a large minority stake, but this is explicitly about “unlocking” money in Hydro One shares, trading longterm operating profits for a shortterm cash payoff that can be spent now. The bet is the $9-billion windfall, divided between paying off provincial debt and building new infrastructure, will produce more long-term benefits than Hydro One’s perpetual profits. Ontario’s budget watchdog has pegged the lost income at $500 million a year by 2025, so that’s a lot of revenue to be made up, but it could work out.
Regardless, in the end we’ll end up with (1) a government-owned gambling business battling forever against a lot of competitors and (2) a largely privatized utility with none.