Go slow on privatization

The perennial push to privatize Toronto Hydro, the publicly owned power provider, appears to be making unprecedented progress. But as the stars align for the sell-off, or perhaps more accurately, are engineered into alignment, the city should proceed with caution.

The Star revealed earlier this year that some of Mayor John Tory’s senior staff and advisers had long been working toward a partial sale of the utility, which could bring in up to $1.5 billion for the cash-strapped municipality.

Last month, Toronto Hydro hired two former senior Tory advisers to lobby council to consider a sell-off. And last week, Calgarybased energy giant Enbridge Inc. hired another former Tory operative to pitch its purchase of part of the energy provider.

Meanwhile, policy-makers sympathetic to the sale have been chipping away at the traditional arguments against. One was that the province would gobble up much of the money through a long-standing transfer tax meant to discourage the privatization of public assets. Premier Kathleen Wynne, perhaps with a potential hydro sale in mind, lowered the levy significantly in her government’s last budget.

Now, another anti-privatization argument looks ready to crumble. It has never been clear that the benefits of a one-time payoff would outweigh the sacrifice of annual dividends that flow to the city — a revenue source that has pumped almost $210 million into Toronto’s coffers since 2010. But Toronto Hydro’s board of directors is now looking at ending the subsidy on the grounds that it needs the money to update the city’s dilapidated power grid. (It may or may not have the authority to do this.) By withdrawing the payout, the utility would significantly weaken the case against privatization.

The trouble is the appearance that paving the way to privatization is what this is all about, rather than, say, doing what’s best for the city. Toronto Hydro recently received $2.25 billion earmarked for capital spending from the Ontario Energy Board, a boost that has reportedly contributed to a considerable hike in profits. It’s not at all clear that the dividend is needed to cover the costs of a grid update. Needless to say, the timing is rather suspicious.

Public officials should be facilitating, not manipulating, the debate over privatization. Besides the financial considerations, the sell-off of any public utility raises questions of how best to protect the public good.

Toronto Hydro’s 747,000 customers deserve assurance that they won’t suffer undue effect from a sale, especially if it’s to a private sector operator such as Enbridge. Ongoing green initiatives and conservation efforts have to be supported and the city’s say in key decisions at the utility will need protection. The recent history of partial privatization in Ontario — from eHealth to ORNGE — should be read as a cautionary tale.

The allure of a sell-off to those working toward it is clear. Premier Wynne may well hope a sale would provide political cover for her government’s own unpopular privatization of Hydro One, not to mention a big cash infusion in the lead-up to the election. Tory, who has promised not to raise property taxes and has been reluctant to talk about other revenue tools, is surely enticed by what he sees as a more politically palatable, even if one-time, source of funds. Enbridge is no doubt eager to enter a potentially lucrative new market.

But none of that has much to do with whether selling part of this important public asset would, on balance, be in the best interests of Torontonians. The promise of short-term benefits, whether to our cash-strapped city or to particular politicians, must be weighed against the long-term costs. Selling part of Toronto Hydro may be a wise move. But as long as officials continue to manipulate the debate, the utility’s true owners won’t be able to decide.

Officials must refrain from manipulating the debate