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                       Privatizing Hydro: 

      A Massive Scandal Just Waiting To Happen

 

By Susanna Kelley

It seemed like a great idea at the time.

Privatizing a big chunk of Ontario's public energy system, that is.

Cooked up by some of Mike Harris' closest cronies, back in the day it was going to be their dream come true and a great boon to the Ontario economy.

But it all turned into a scandal-plagued mess where those same cronies - those Common Sense Revolutionaries who came to "fix" government instead but ended up putting the fix in government - raided the public purse they'd pledged to protect, personally enriching themselves with great abandon.  Mike Harris' closest political aides, lobbyists and communications hacks plundered the richest crown corporation in the land — Ontario Hydro — as it was formerly called.

Today, partially privatizing Hydro One is seen as the Holy Grail by some in another government: Kathleen Wynne's Liberals.

The scenarios are eerily familiar, although the reasons being given for such a major and risky policy move are different. This time the Liberals need money to balance the budget after making what anyone with any historical knowledge of Ontario politics knew at the time was an ill-advised 2014 election promise — to bring the deficit to balance by 2017-18.

It is a cautionary tale to which Kathleen Wynne should listen if she wants to avoid the same fate for her party: four election losses in a row, more than a decade out in the political cold after this and other great betrayals were visited upon the people of the province. Voters have never trusted the Tories since.  

The party has become a "toxic brand," as even PC leadership candidate Christine Elliott called it this weekend.

First, a bit of history about the old Ontario Hydro to understand why public power has become so vital to the province.

The crown corporation was started by a Conservative government back in 1909 when private power was tremendously expensive.

Ontario's public hydro system was set up by Adam Beck, who had previously been a Conservative MLA, under Conservative Premier James Whitney.

Originally called the Hydro Electric Power Commission of Ontario, its very purpose originally was to provide cheap, subsidized electrical power from Niagara Falls to the province's businesses in order to help create jobs and prosperity.

And cheap power it did provide: when it went into operation, prices were cut by 87% here and kept as much as 30 percent lower than electricity in the U.S.

Based on "inexpensive" (because it was subsidized) public power, Ontario's manufacturing sector flourished, and thus, the province became the economic engine of Canada. Residential customers were hooked up even in rural areas, and the province was humming.

That went on for decades.

Fast forward to the Mike Harris era.

It was the late 1990s and the electricity system was going haywire.

The economy itself was going gangbusters, having recovered from a brutal early 1990s recession (unemployment hit 16 per cent in this province at one point) thanks to our usual saviour: the US economy - our biggest trading partner. South of the border things were in full recovery mode and pulling Ontario up with it as Americans bought our manufacturing goods.

But for decades, all three parties in Ontario had refused to build more electrical capacity due to political cowardice - fear of massive cost overruns such as the Bill Davis government had allowed to occur while constructing the Darlington nuclear generating station in the 1970s.

Ontario needed more capacity. But the Harris Tories, purporting to be economic Thatcherites, didn't want to raise taxes at all, nor hydro rates, if they could avoid it.

Then came the idea that seemed like the ultimate Mike Harris Common Sense Revolutionary's dream: take one of Canada's largest (and most successful) crown corporations and privatize it. Controlling the electricity distribution grid and much of the generation, this particular crown corporation - Ontario Hydro - was also the crown jewel of the province's assets.

Ontario Hydro just needed some "market discipline" - that was the phrase the Harrisites used at the time - to straighten it all out.

To begin with, they broke it up into four entities, including Hydro One - which operates the distribution grid - and Ontario Power Generation, which generates electricity along with that produced by private companies.  

But it turned out the only winners were Harris' closest aides, who, having initiated and then twice ridden the Harris "cut government to the bone" election campaigns to victory — which landed them lucrative jobs in the Premier's Office — they then left those jobs, riding out of Dodge ... sort of.

Because getting out of Dodge was really landing literally just across the street, where they hitched their wagons to Hydro in anticipation of the privatization ... and where so much taxpayers' money became their low-hanging fruit.

Becoming either a senior employee or being awarded generous consulting contracts, they made millions of dollars in  "consulting fees" on how to privatize the public utility, and come up with the public relations strategy to convince the public it was a good idea to do that. 

When one of their contracts became public in a Globe and Mail story dug out through a Freedom Of Information (FOI) request, Mr. Harris responded by passing legislation to make Ontario Hydro exempt from FOI legislation - hence, any further contracts were kept hidden until the Tories lost the 2003 election and the Liberals changed the FOI legislation to cover Hydro again. Then the contracts to the Whiz Kids came pouring out.

The privatization itself never worked out, as the Tories - first under Harris, then under Ernie Eves — found out, and it was eventually called off.

But not only did taxpayers have to pay for all the work that had gone into the idea — the consultant fees, the PR campaigns etc. — but energy prices continued to climb as subsequent governments changed directions chaotically several times since.

That lack of stability, according to business, drove manufacturing and jobs out of the province, while customers watched their hydro bills skyrocket.

Which brings us to Kathleen Wynne's Liberals.  

The Grits — the self-declared mortal enemies of that same Mike Harris free market philosophy, and the same party that opposed his privatization plans at the time — are today looking at the possible partial privatization of Hydro One.

This time, however, the real reason is because the Liberals need money.  But they need it for political reasons. They are scrambling to fulfill Kathleen Wynne's election promise to balance the province's budget by 2017-18 — a promise everyone knew was totally unrealistic when she made it while campaigning in the last provincial election.

Premier Wynne should beware.

When talking about Hydro One, we are talking about access to billions and billions of dollars in assets, operating dollars and cash flow.

That kind of money attracts consultants, lawyers and lobbyists like moths to a flame.

To some (not all are this mercenary, but some certainly are) their job is not so much to protect the public interest as to make money for their clients.

The Liberal government must take another look at the notion that selling off the family jewels simply so that Ms. Wynne can balance the budget a year or two earlier.

Privatized Hydro just doesn't make economic sense. The province's prosperity was built on precisely the opposite policy.

Nor does it make sense to shake up the energy sector just as manufacturing continues to struggle to get back on its feet.

There are billions of dollars at stake here, and many individuals and companies are watching and waiting to hop on this latest gravy train and pocket the cash. Just like the last time.

It is unfortunate that Ms. Wynne feels boxed in by the promise to balance the budget by 2017-18.

It's not at all certain that most voters could care less if she doesn't balance the books by then.

Usually, it's the bond market analysts who put the pressure on the finance minister, not the public, when it comes to balanced budgets. Finance ministers often then run scared to find more money to save and rein in spending.

Surely partially privatizing a massive public asset that businesses depend upon, in the midst of a faltering economy, isn't the smartest way to go. It is a great example of being penny-wise and pound-foolish.

There are many, who personally stand to make a lot of money, who will tell Ms. Wynne what a great idea it is.

Just like they did with Mr. Harris.

Ms. Wynne should not listen to them.

For the good of the province.

If not for that, you would think she would avoid it at least for the good of her own party.

Because we've been down this road before, and waiting at the end may very well be another major scandal that takes down her government.

And after the gas plants, eHealth and the Sudbury by-election, surely that's the last thing the Kathleen Wynne needs. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

About Susanna Kelley

Susanna Kelley is Editor-in-Chief and Queen’s Park Bureau Chief for Ontario News Watch. A veteran political and investigative reporter, documentary-maker, host and media commentator, Susanna oversees and has final editorial control over all news production at Ontario News Watch. Susanna has reported for the CBC, the Canadian Press and served as Queen’s Park Bureau Chief for TVOntario for 13 years. She has also hosted a number of documentaries for CBC’s The Current, CBC Radio News and TVOntario’s Studio 2. Passionately dedicated to excellence in political journalism, and having covered both Parliament Hill and Queen’s Park, Susanna believes quality political reporting is essential to a healthy democracy. You can find Susanna here: @susannakelley
Posted date : April 13, 2015

View all of Susanna Kelley's columns
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