Apr. 30, 2002. 01:00 AM Documents give no hint of Hydro sale
Thomas Walkom
MORE PUZZLING questions have emerged about the Ontario government's sudden reasons for selling Hydro One. Confidential government documents obtained by The Star indicate that as late as last June, Queen's Park had no intention of privatizing the publicly owned transmission monopoly.
The documents, apparently prepared for cabinet, paint a picture of a government nervously defensive about its plans to radically reform the way electricity is produced and sold in the province. These so-called market-opening plans, set to begin tomorrow, will eventually see consumers paying electricity rates based upon whatever the market will bear rather than, as now, the actual cost of producing power.
It will be the culmination of an ambitious program embarked upon by the government four years ago to dismantle the old Ontario Hydro and sell off, or lease, most of its generating plants. As part of this scheme, the government agreed to tie Ontario electricity prices directly to rates paid by consumers in the northeastern United States and to build new transmission lines to export power to the U.S.
And it carved two new public companies out of the old Hydro. One, Ontario Power Generation, was to work as quickly as possible to sell its generating plants to private firms. The other, Hydro One, was to remain a regulated, government-owned monopoly devoted largely to transmitting power from generators to municipal utilities.
The confidential documents show that right up until at least last summer, the Tory cabinet appeared to have no intention of selling this Hydro One monopoly.
One document, entitled "Competitive Electricity Markets: Delivering The Government's Vision," outlines a detailed list of actions the government expected to take between the fall of 2001 and this spring. The list includes items that involve Hydro One, such as proposed Ontario Energy Board hearings into the monopoly's transmission rates.
It includes a comprehensive list of measures designed to show that all of the government's electricity reforms were in line with the stated policies of the opposition Liberals — who also support the idea of breaking up and selling off the province's generating plants.
And it contains detailed advertising plans to sell market opening to a skeptical public.
"There remains a strong sense among many consumers that the old Ontario Hydro monopoly was `not broke, so why fix it?'" one document notes. "It will therefore be important that the rationale for change is clearly communicated." To that end, the document recommends a high-powered ad campaign to convince consumers that under market opening they will pay "the lowest possible cost."
Elsewhere, however, the confidential documents note that "price risk" — the possibility that electricity rates will skyrocket under market opening — remains "most critical."
The documents note that the government is developing "a more comprehensive plan" for increased subsidies to consumers in the event of massive rate hikes.
Yet nowhere in these internal documents is there even a hint that Hydro One would be put on the block. Indeed, when then premier Mike Harris made that surprise announcement on Dec. 12, as the Legislature was getting ready to break for Christmas, his announcement took even some Conservatives by surprise.
As Tory backbencher Gary Guzzo noted last week, the idea of selling the electricity grid had been studied and rejected by Harris' government six years ago. Even now, the government continues to flounder when asked for a rationale behind the sale. When Energy Minister Chris Stockwell was asked last week why his government wanted to sell Hydro One, he couldn't think of an answer.
(Memo to Stockwell: The answer you are supposed to give is that the $5 billion the government hopes to net from the sale can be used to pay down the debt of old Hydro. Just hope no one notices that Ontarians will end up paying this $5 billion themselves because Hydro One's new private monopoly owners will recoup their costs by raising the rates users pay.)
I sympathize with Stockwell, who has the unenviable task of selling this dog. And I still don't understand why Ernie Eves, Ontario's new premier, is pushing ahead with Mike Harris' hare-brained electricity schemes.
My colleague, Ian Urquhart, points out the Hydro One privatization allows former Swiss banker Eves to reward his new Bay Street pals — including Credit Suisse First Boston, the firm that paid his handsome seven-figure salary until he won the Tory leadership this year.
But I'm positive there must be some explanation other than venal self-enrichment for this seemingly inexplicable — and certainly unheralded — act.
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Thomas Walkom's column appears on Tuesday. He can be reached at twalkom@thestar.ca
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