Hydro One pay just a distraction, experts say
TORONTO • Ontario’s Progressive Conservative leader stood in the rain Tuesday and protested at the doorstep of an unlikely Tory villain — a big corporate headquarters.
Surrounded by sign-wielding supporters, Doug Ford condemned Hydro One and the steep salaries paid to bosses and board members of the recently privatized electrical utility.
It was just his latest take on a recurring campaign theme. Almost daily, Ford invokes the “$6-million man” — Hydro One chief executive Mayo Schmidt — and contrasts Schmidt’s annual income to the struggles of ordinary Ontarians and their hefty power bills.
That comparison is certainly stark. But how much do those now-infamous paycheques really have to do with the mismanagement and scandal that have beset the province’s electricity system under Liberal rule?
Well, actually, almost nothing, say energy experts.
Generating electricity in Ontario costs about $21 billion a year, dwarfing the salaries not only of Hydro One — which distributes the power — but of every top executive in the sector combined, notes Tom Adams, a prominent energy consultant,
“The electricity system is a mess — it has to be reconceptualized and restructured from the ground up,” says Adams. “I’m just really concerned about the politicians not thinking carefully about this … The demagoguery has gotten out of hand.”
As a campaign tactic, however, Ford’s Hydro One salary fixation appears a winner, a straightforward symbol of broader controversies that resonates with voters angered by hydro inflation.
Among the TV-news-like videos posted by the Tories on their Facebook page, those highlighting recent raises for Hydro One executives — and this week its board members — far outstrip others in popularity, one of them viewed well over 700,000 times.
The PCs’ polling, and campaign experience, confirms that the salary angle strikes a chord, said a senior campaign official, speaking on condition of anonymity.
The official insisted the issue is not merely symbolic, but symptomatic of a Liberal government out of touch with the aggravation their policies have generated.
“This is definitely the No. 1 issue with voters,” said the PC organizer. “People are just feeling left behind, they’re feeling left behind and that everyone is cashing in at their expense.”
Ontario’s electrical system undeniably is and should be a major issue leading up to the June 7 election.
Hydro rates rose at several times the rate of inflation in the years after the Liberals came to power in 2003, first under Dalton McGuinty, then current Premier Kathleen Wynne.
The province’s auditor general has estimated that Ontarians paid a mind-boggling $37 billion too much for electricity between 2006 and 2014, partly because of overly generous contracts for renewable energy and poor planning.
A plan to reduce hydro bills by 25 per cent last year, funded with borrowed money, will itself cost $21 billion in interest, according to Ontario’s Financial Accountability Office.
Hydro, says Adams, has been a “public policy disaster on an epic scale.”
But both the Conservatives and NDP seem to have missed the point in addressing the issue, analysts say.
Firing Schmidt, as Ford has pledged, “would do next-to-nothing to lower rates, while continuing a more than decade-long trend of growing political interference in the sector,” says Brady Yauch, an economist with the free-marketoriented Consumer Policy Institute.
Ford has also promised he would scrap overly expensive energy contracts wherever possible, and reduce consumer rates by a further 12 per cent, partly by using dividends paid by Hydro One.
But he would keep intact the Liberals’ Fair Hydro Plan — the 25 per cent rate cut that until recently the Tories regularly blasted.
The NDP says it would buy back the 51-per-cent of Hydro One the government sold, also using those Hydro One dividends. Combined with other measures, it says it can achieve a 30 per cent rate cut.
Adams shakes his head at both parties’ policies, saying those dividends now effectively subsidize hydro rates by paying off stranded electrical debt.
“It seems kind of obvious that you can’t spend a dollar twice,” he says.
Adams says the solutions should start with analyzing the state of current energy contracts and getting out of over-priced deals where possible, though he says that will not be as easy as some suggest.