The long road to privatization of Hydro One
Adrian Morrow,
Jacqueline Nelson and
Sean Silcoff
The Globe and Mail
Published Friday, Mar. 13, 2015 7:21PM EDT
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Privatization of government-owned entities has a mixed history in this country. It has worked for companies such as Potash Corp. of Saskatchewan and Canadian National Railway Co., while the long-term lease of Ontario’s Highway 407 to private interests has led to increased costs for consumers and less money for government. Some private power deals in Ontario – including the cancellations of two gas-fired power plants – have also added to electricity rates.
Ms. Wynne’s plan is certain to meet opposition from the unions representing Hydro One workers as well as the NDP, who characterize the plan as a proposal to enrich big business while depriving the province of a long-term revenue source.
The Premier must also please investors who argue the government should privatize the entire operation, giving stakeholders more control over the business. Hydro One also has enormous pension costs, with employees putting in only a fraction of the money needed to cover their benefits, with hydro ratepayers and the government picking up the rest. Many believe it will take a private owner to negotiate more forcefully with the unions.
Asked whether Ms. Wynne has the resolve to push forward where others have balked, Infrastructure Minister Brad Duguid said Friday: “This Premier has the steel to make these decisions. She’s determined to ensure that we get full value out of those assets, not just for the sake of doing so, but to make sure we have the ability to invest in building a stronger province.”
Staggering toward privatization
The roots of Ontario’s electricity privatization woes date back a generation, when Ontario Hydro was the province’s all-encompassing utility. In the early 1990s, power prices skyrocketed, along with the size of Ontario Hydro’s debt, due to massive cost overruns and delays in the construction of the Darlington nuclear facility east of Toronto. In 1993, the NDP government of Bob Rae froze energy prices and they remained frozen for nearly a decade. By 1999, Ontario Hydro’s $38.1-billion in debt accounted for about a third of total provincial borrowings.
Mike Harris promised sweeping changes to reform the electricity market when his Progressive Conservative Party swept to power in 1995. Under his watch, Ontario Hydro was split in two, with one part holding its generation assets (Ontario Power Generation) and the other owning its transmission business (Hydro One). Eventually, Hydro One became the province’s biggest distributor, buying utilities from many rural municipalities.
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the electricity business in Alberta has been the wheelhouse of public companies and even foreign investors. Last year, Berkshire Hathaway Energy, the power and utility arm of Warren Buffett’s conglomerate, bought AltaLink, the province’s largest electrical transmission company.
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