Hydro sparks election debate, but parties’ promises don’t add up
In the competition for political power, the fight over electrical power never fails to energize an election.
Rival parties know how to press people’s buttons, and how to generate powerful myths. Consider the boondoggles of the last few years — true or false:
We have North America’s highest power rates? Untrue, as Hydro Quebec’s annual survey cites higher prices in many U.S. cities. Yet “heat or eat” resonates as a campaign slogan despite a dramatic 25 per cent drop in rates last year.
The Liberals sold off Ontario Hydro, boosting prices for private profit? In fact, Ontario Hydro was dismembered out of existence years ago by a Progressive Conservative government, which split it into Ontario Power Generation and Hydro One. It is only the latter company — a regulated transmission utility — that the Liberals partially privatized, not the power generation assets.
The only certainty is that the polarity of Ontario politics keeps getting reversed.
The Conservatives earnestly claim they oppose privatization, despite laying the groundwork for it when they were last in power, and proposing it again in recent elections. The Liberals, who opposed it in the past, tried it under Premier Kathleen Wynne.
The sale of half of Hydro One was perhaps Wynne’s biggest political blunder.
The big winner was New Democratic Party Leader Andrea Horwath, who keeps profiting from Wynne’s miscalculation.
It didn’t hurt that Horwath shrewdly conflated branding and pricing. The vast majority of Ontarians believed Wynne had sold off the generating assets of the old Ontario Hydro — the jewels of the Crown corporation, as opposed to mere poles and wires. Voters started to blame rising hydro prices on the sale — never mind that most hikes long predate privatization, and that the Ontario Energy Board alone determines rates.
Luckily for Horwath, most voters aren’t paying attention to an implausible NDP promise to buy back all those Hydro One shares for a mere $6.4 billion — by magically repurposing a $250-million-a-year dividend stream over eight years (no money down). As my colleague Rob Ferguson has reported, financial analysts put little stock in the chimera that would leave a future Horwath government several billion dollars short.
But the politics of privatization pale under the weight of populism. When Doug Ford took over as PC leader, he seized on the outsized pay packet of Hydro One’s new CEO, Mayo Schmidt, mocking him as the “Six Million Dollar Man” at every campaign stop and stealing Horwath’s thunder along the way. That Schmidt’s money is dwarfed by the more than $20 billion spent on generating electricity, as Ford’s critics have pointed out, is beside the point, for in the heat (if not light) of an election campaign, politicians know how to harness hydro anger.
The Liberals have long defended increased hydro rates by claiming they had to invest heavily in the electricity system after the Tories let it atrophy, leading to brownouts. Boxed in by rising rates, Wynne tried desperately last year to ease public resentment by announcing a 25 per cent reduction, relying on a refinancing scheme akin to a second mortgage.
Despite the controversy over Wynne’s borrowings, Ford has bought into it (and then some) by promising to retain that 25 per cent reduction and, magically, reduce rates by a further 7 per cent (details to come). Horwath, for her part, has vowed to unwind the entire Liberal refinancing scheme — costs to be determined — and then come up with her own 30 per cent reduction in hydro rates instead, details to come (hint: time-of-use pricing will be undone).
Remarkably, Wynne’s rate reduction scheme moved hydro prices off the political agenda for several months last year — until, unexpectedly, Ford seized on the high salary of Hydro One’s CEO and promised to fire Schmidt. Never mind that it requires firing the entire board, which triggers more than $10 million in severance and penalties. “You’re fired” has a certain resonance these days.
Amid the blunders and blunderbuss, the rival leaders can only offer competing panaceas: Ford will fire the Hydro One brass, Horwath will buy Hydro One back, Wynne will borrow more to shrink our bills.
None of it adds up. But in their zeal to secure power — political and electrical — each is taking take the path of least resistance on the campaign trail.