Why Wynne’s Hydro One sell-off is a sellout
Selling Hydro One is no ordinary sales job for Kathleen Wynne.
For a premier who places a premium on conversations, consultations and consensus, the proposed sale is a done deal. Wynne is pushing her privatization plan through the Legislature with minimal discussion, leaving key questions unanswered.
Amid the Hydro One hyperbole and hypocrisy — the Liberals and Progressive Conservatives keep reversing stances — here’s the good, the bad, the ugly, and the reality on electricity.
The Liberals are using their majority to rush the sale without providing the fine print on secret deals with the unions, or protection of the public interest.
A government-appointed panel on privatization, headed by ex-TD Bank chief executive Ed Clark, concluded last November that “Hydro One transmission should remain in public ownership as a core asset.” Last month, Clark’s panel executed a spectacular backflip, recommending the sale of 60 per cent of Hydro One because, when it came to “public ownership, we did not find the case compelling.”
Clark and Wynne insist they have learned lessons from the 1999 fire sale of Hwy. 407, when a PC government undervalued the asset, overpaid for transaction fees and allowed the private owners to jack up tolls at will. The government promises to retain substantial control of Hydro One, keep transaction costs low and act transparently.
Transparently? As my Star colleague Robert Benzie first reported last month, the government is quietly buying off the influential Power Workers’ Union with a sweetheart deal to win their support by giving its members shares in the new entity. The Liberals have refused to provide details on their secret undertakings to the powerful union, which has since dropped its opposition to any privatization.
Even with minority ownership of 40 per cent, the government stresses it would be the largest single shareholder of Hydro One, with other owners limited to 10-per-cent stakes; key decisions will require a two-thirds vote by the board, giving the province an effective veto; and the government retains the right to fire the entire board (more of a nuclear option than actual control).
That’s fine as far as it goes. It just doesn’t go far enough.
Oh, and don’t be misled by opposition politicians and major unions that have lapsed into scaremongering about price gouging. By obsessing over price points, these critics are missing the larger point that electricity costs are strictly controlled under law — the Ontario Energy Board sets rates, not Hydro One, and it has a record of refusing increases.
The false spectre of high electricity rates generates more heat than light. The more vexing question is how private profit will prevail over public purpose.
As sole owner today, the government operates Hydro One in the public interest — and pockets roughly $800 million a year in profit. By contrast, the board of the partially privatized entity will have a fiduciary obligation to seek the highest profits for its new shareholders.
What difference does that make? In recent years, the Liberals have ordered Hydro One to install expensive smart meters in all Ontario homes, and asked the utility to speed up transmission links to wind turbines or solar panels.
Both were examples of elected governments imposing legitimate public policy obligations on Hydro One. Both decisions resulted in higher rates, which is why critics of privatization downplay the issue of public policy (or contradict themselves by pretending that it’s all about price).
Would a privatized Hydro One make future investments in transmission links to Hydro Quebec should it be in the public interest? The government insists it will find a way, it just won’t tell us precisely how.
In a speech last week, Energy Minister Bob Chiarelli talked about future legislation that would “enshrine the government’s right to prioritize critical transmission infrastructure.” Cabinet could “designate key transmission corridors” for First Nations, the Ring of Fire or electricity trade with Quebec.
Details to come. Yet the privatization proceeds apace.
Wynne and Clark argue they need the money from privatization to invest in other public assets, notably transit and transportation infrastructure. Facing stiff public opposition to road tolls and other tax hikes, the government opted for an asset swap — with the result that Hydro One is being cannibalized to put flesh on the bare bones of transit infrastructure.
The early criticism of Wynne was that she couldn’t make tough decisions. Politics is the art of the possible — and choosing the least-bad option. Now, she has gone against her own ideological instincts to privatize a public asset.
What are we giving up in control of transmission lines to gain new transit lines? The potential risk would be worth taking only if Wynne had exhausted all other options. But she hasn’t.
To govern is to choose, and privatizing is nothing if not a bold choice. Just not bold enough.
Rather than an asset swap that shortchanges the public interest, Wynne should have fought harder to bolster transit revenues to meet her cash shortfall. True, the PCs and NDP teamed up during the minority government years to oppose taxes and tolls, but she now has a majority.
She is using that majority to impose privatization of Hydro One on us rather than introduce new revenue measures, because our electricity utility offers the path of least resistance. While privatization is unpopular, taxation is even more unpopular.
Clark and Wynne argue that failing to make critical infrastructure investments in transit would be a missed economic opportunity. They are right about the opportunity costs, but wrong about the political opportunism that underlies their calculations. Martin Regg Cohn’s Ontario politics column appears Tuesday, Thursday and Sunday. mcohn@thestar.ca, Twitter: @reggcohn