Ford’s hy­dro med­dling might end up help­ing On­tar­i­ans

The Hamilton Spectator - - Opinion - THOMAS WALKOM

Hy­dro One’s grandiose ex­pan­sion plans have suf­fered a se­vere blow. Good. Maybe now the util­ity can con­cen­trate on its real job, which is to trans­mit cheap and re­li­able elec­tric­ity to On­tar­i­ans.

Wed­nes­day’s de­ci­sion by Wash­ing­ton State reg­u­la­tors to dis­al­low Hy­dro One’s pro­posed takeover of U.S. en­ergy firm Avista Corp. should be no sur­prise. The Amer­i­cans are jeal­ous of their eco­nomic sovereignty and wary of for­eign, state­con­trolled en­ter­prises.

As my col­league Jen­nifer Wells has writ­ten, the pro­posed takeover also faces a rough ride in Idaho, an­other of the five states in which Spokane-based Avista op­er­ates.

Amer­i­can reg­u­la­tors were par­tic­u­larly spooked by On­tario Premier Doug Ford’s de­ci­sion this sum­mer to force out not only Hy­dro One CEO Mayo Schmidt but the util­ity’s en­tire board of di­rec­tors.

When Ford fired Mayo, crit­ics — in­clud­ing me — dis­missed his ac­tion as a po­lit­i­cal stunt. And in some ways it was that. But it was also a sig­nal that On­tario’s gov­ern­ment would con­tinue to take an ac­tive in­ter­est in a com­pany that holds a mo­nop­oly over elec­tric­ity trans­mis­sion in this prov­ince.

Per­haps the gov­ern­ment will use that in­ter­est to rein in the util­ity’s ob­ses­sion with be­com­ing a North Amer­i­can en­ergy be­he­moth. Few asked what the deal would do for On­tario rate pay­ers.

Tak­ing over a com­pany that pro­vides elec­tric­ity and nat­u­ral gas to Ore­gon, Idaho, Wash­ing­ton, Alaska and Mon­tana might work to the ben­e­fit of Hy­dro One share­hold­ers (in­clud­ing the On­tario gov­ern­ment), but it would do noth­ing to im­prove the elec­tric­ity trans­mis­sion and dis­tri­bu­tion sys­tems Hy­dro One owns in On­tario. Nor would it re­duce the steep rates On­tar­i­ans pay.

In fact, ac­qui­si­tions like the Avista deal risk shift­ing Hy­dro One’s fo­cus from On­tario to the much more lu­cra­tive Amer­i­can mar­ket. But that, of course, was al­ways the aim be­hind the ill-fated de­ci­sion to pri­va­tize Hy­dro One — a de­ci­sion that other­wise made no eco­nomic sense.

The short­com­ings of for­mer Liberal premier Kath­leen Wynne’s Hy­dro One pri­va­ti­za­tion fiasco are well known. Af­ter pay­ing down debt, the Lib­er­als net­ted only $4.5 bil­lion from the sale — a rel­a­tive pit­tance for a gov­ern­ment that spends $150 bil­lion an­nu­ally.

Even then, as the prov­ince’s Fi­nan­cial Ac­count­abil­ity Of­fice pointed out, this wasn’t much of a deal. Over time, the gov­ern­ment was set to lose more than $4.5 bil­lion in fore­gone div­i­dends.

What pri­va­ti­za­tion did do, as the util­ity ex­plained in reg­u­la­tory fil­ings at the time, was lay the ground­work for ex­pand­ing ag­gres­sively into the U.S.

The $6.7 bil­lion Avista deal was to be the first foray. Had it suc­ceeded, there would al­most cer­tainly have been more.

Just as the 1990 pri­va­ti­za­tion of Al­berta Gov­ern­ment Tele­phones pro­duced telecom­mu­ni­ca­tions gi­ant Telus, so the pri­va­ti­za­tion of Hy­dro One was sup­posed to pro­duce an en­ergy leviathan.

Iron­i­cally, it was busi­ness cheer­leader Ford who put the ki­bosh to this ex­pec­ta­tion.

Ford is be­ing blamed for the merger’s fail­ure and the at­ten­dant $103 mil­lion kill fee that Hy­dro One must pay Avista. Fair enough. But the Pro­gres­sive Con­ser­va­tive premier also did On­tar­i­ans the ser­vice of clip­ping the util­ity’s wings.

Hy­dro One was set up to ser­vice the elec­tric­ity ratepay­ers of On­tario. It has a mo­nop­oly over trans­mis­sion provincewide and is charged with dis­tribut­ing elec­tric power to most of ru­ral and North­ern On­tario. The Lib­er­als had no busi­ness pri­va­tiz­ing it. The newly pri­va­tized com­pany had no busi­ness en­gag­ing in im­pe­rial over­reach. For all of his faults, Ford seems to get that.

He is has re­minded Hy­dro One that when it comes to elec­tric­ity in On­tario, gov­ern­ment is al­ways more than a pas­sive in­vestor. That is a use­ful les­son. Thomas Walkom is a Toronto-based columnist cover­ing pol­i­tics. Fol­low him on Twit­ter: @tomwalkom

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