Don’t rush to sell Hydro

Consider it the Energizer Bunny of municipal politics. No matter how many times its plug has been pulled, the notion of selling all or part of Toronto Hydro just keeps going, and going, and going . . .

Former mayor Mel Lastman pushed for it back in 1999. Mayoral candidates campaigned on it in at least three elections. (Jane Pitfield, Rocco Rossi and Karen Stintz all failed.) In 2011, city council voted 30-6 against “monetizing” the utility, declaring “it is not in the public interest to sell all or any part of it.”

Former mayor Rob Ford supported that motion and in the 2010 election he campaigned against any sale of Toronto Hydro. But that didn’t keep Ford from flip-flopping later and urging city council to sell a minority stake. In short, this idea has been generating sparks since amalgamation.

Now it’s back. As revealed by the Star’s David Rider, behind-thescenes work is underway for a possible sale of the massive cityowned utility. The motive is the same as ever: harvesting a huge financial windfall desperately needed by a cash-strapped administration.

According to sources cited by Rider, partial sale of Canada’s largest municipal electricity distributor is being explored in order to fund a variety of infrastructure requirements, including transit expansion and building social housing. The extent of Toronto’s need was outlined by city manager Peter Wallace last month when he indicated that $23 billion in planned capital projects lack adequate funding.

But the current push to sell off a piece of Toronto Hydro seems to have begun well before that. While Mayor John Tory hasn’t taken a hands-on role, Rider’s sources indicate some of Tory’s senior staff and advisers were considering a partial sale of the utility even before he took office. If so, they’re part of a grand tradition.

As the Star wrote in 1999, in response to Lastman’s drive to sell this asset, municipal officials are on firm ground in exploring what to do with Toronto Hydro. There’s no harm in evaluating options. But a sale mustn’t happen without evidence of a solid business case in favour of divestment.

A fundamental trade-off is inevitable: Toronto might earn as much as $1.5 billion from a partial sale, but that one-time payoff would require some sacrifice of annual dividends flowing to the city — a revenue source that has pumped almost $210 million into Toronto’s coffers since 2010. Anyone pushing to sell a piece of Toronto Hydro must show convincingly that the deal’s short-term gain will offset long-term losses.

And that’s not all. Toronto Hydro’s 747,000 customers deserve some assurance they won’t suffer undue effect from a sale, especially if it’s to a private sector operator. Ongoing green initiatives and conservation efforts have to be supported, and the city’s say in key decisions at the utility will need protection.

Once all that is established, there may be a case for a sale. One has never surfaced before.

A huge stumbling block has been a provincial rule imposing a 33-per-cent transfer tax on the sale of a utility, such as Toronto Hydro, to the private sector. That, quite understandably, dampened interest in a deal. But Queen’s Park has exhibited some welcome flexibility regarding this provision. In last year’s budget, it lowered the transfer tax to 22 per cent, and it entirely exempted municipal electricity utilities with fewer than 30,000 customers.

With provincial thinking evidently in flux on the subject of this tax it seems a good time to at least explore possibilities in selling part of Toronto Hydro. That doesn’t mean it should be done. But it’s something to consider — yet again.

Plan for partial sale of Toronto Hydro is not without merit, but care must be taken