Beer talk steals buzz from hydro sell-off
Think of it as beer and circuses.
Premier Kathleen Wynne’s Ontario government is showcasing plans to change the way in which beer is sold in the province.
It’s talking of letting some supermarkets sell six-packs. It’s changing the way in which the privately owned Beer Store operates. It is even setting up a beer ombudsman to hear complaints from drinkers.
Most media attention is focused on this because — hey, it’s beer. Brewskis. Suds. Two-fours. Meanwhile, as the public digests the bold idea of supermarkets selling six-packs, the Liberal government is quietly forging ahead with the far more serious part of its agenda: privatizing Hydro One.
That’s the Crown corporation that transmits electricity around the province. It’s also the Crown corporation that pays Queen’s Park just under $1 billion year in profits and levies.
More Ontarians use electricity transmitted by Hydro One than drink beer. But the government figures, probably correctly, that beer will receive the lion’s share of attention.
If so, that’s too bad. The beer changes will affect craft brewers, probably for the better. But the most significant effect they’ll have on drinkers is to eventually raise the price of beer, thanks to a new tax that works out to $1 per case of 24.
The most egregious elements of beer-retailing, first revealed by my Star colleague Martin Regg Cohn, will continue.
Beer sales will continue to be dominated by the Beer Store, which, although opened up slightly, will still be controlled by foreign brewers.
Some supermarkets will be able to offer beer. But they won’t be permitted to undercut Beer Store prices. The vast majority of government liquor stores will still be barred from selling beer in anything more than six-packs.
So much for brewski reform.
On Hydro One, however, it seems the privatizers have finally succeeded.
The battle between private and public power in Ontario has been going on since the start of the 20th century. Public power won the first round, when a Conservative government set up Ontario Hydro in 1905.
But the privateers never gave up. They almost privatized Hydro One in 2002, stopping only after a union-instigated lawsuit mobilized public opinion against the sale.
When Wynne first asked a panel led by former banker Ed Clark to look at ways of raising money from provincial assets last year, she specifically told it to stay away from large-scale privatization.
In its first report last fall, the panel obliged. But then the government got greedy. So it went back to Clark’s panel and told it to look at selling off a majority stake in Hydro One.
Again the Clark panel obliged, albeit with the explicit caveat that their recommendations did not take into account any broader policy objectives.
Translation: We’re not advocating that you sell 60 per cent of Hydro One. But if that’s what you want to do, we’ll help you along.
In its final report, released this week, the Clark panel said privatizing Hydro One won’t raise electricity costs for consumers.
I’m not sure how it came to this conclusion. The government hopes to glean $9 billion from the deal. Presumably that money will come from private shareholders who, unless they are blessedly altruistic, will want a handsome rate of return on their investment.
Even Wynne conceded this week that electricity rates might rise.
The government insists that its Ontario Energy Board, which regulates rates, will protect consumers. If so, that would be unusual.
Most regulators begin with the assumption that the businesses they are overseeing must earn a specific profit. Then they calculate how much electricity rates must rise in order to produce that profit.
The ever-malleable Clark panel says that privatizing Hydro One will also make it more efficient. If it were operating in a competitive market, that might be true. But Hydro One, which controls 97 per cent of electricity transmission in the province, is a monopoly that competes with no one.
The only difference now is that it will be a private rather than a public monopoly. Is this really something to drink to? Thomas Walkom’s column appears Wednesday, Thursday and Saturday.