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Lessons From The Real History Of People's Power In Ontario

 

By Randall White

The “electricity debate” in Ontario “is often driven as much by ‘theology’ as it is by rational analysis."  Thus observed Sean Conway several years ago, former Liberal MPP and well known to be a leading expert in the province's power system.

Some students of the debate today, observing the current controversy over selling 60% of Hydro One to private investors, may nod in resigned agreement. 

A particular public power theology has grown up around the Hydro-Electric Power Commission established by the Whitney government in 1906, under the chairmanship of Adam Beck. 

This theology may have received its fullest expression in a 1960 book called The People's Power: The History of Ontario Hydro. It was written by Merrill Denison, a Canadian radio dramatist of the 1930s who later took up business history.

Denison’s book tells how HEPC (it only officially became “Ontario Hydro” in 1974) used publicly developed electric power to help competitive free markets industrialize, modernize, and rural-electrify Canada’s most populous province, at an attractive low cost.   

When The People’s Power first appeared in 1960 Denison’s story was probably more or less true.

But the rising public enterprise that had evolved over the 54 years from 1906 to 1960 was different from the declining corporate conglomerate that would haunt the 54 years from 1960 to 2014. 

At first, the people’s power company was just exploiting the province’s natural water resources — at such places as Niagara Falls, the Abitibi Canyon and the St. Lawrence Seaway. 

But during the long boom after the Second World War electricity demand proved greater than accessible Ontario water resources could accommodate.

This led to the first coal-fired power stations in the early 1950s. 

Similar demand pressures prompted the beginnings of Ontario’s eventually very important nuclear power system in the early 1960s. The Douglas Point Nuclear Generating Station came into service in 1968, followed by Pickering in 1971, Bruce in 1977, and Darlington in 1989.

Thus in the later 20th century, nuclear energy in Ontario expanded to meet a rising share of the province's electricity needs (more than half the total today).

But the costly infrastructure here created a ballooning debt, increasingly difficult to service through electricity revenues alone.

The change from HEPC to the crown corporation officially known as Ontario Hydro in 1974 had also turned the new corporation into more of a publicly owned business organization.

By the 1980s electricity prices were rising in an effort to meet growing financial challenges. By the early 1990s the ballooning debt had induced a major retrenchment. Electricity rates increased dramatically. But the publicly owned business organization was still losing money.

According to one critical school of thought, “As a monopoly, the corporation lacked the competitive pressures necessary to reform itself.”

This was the situation the Harris revolutionaries thought they inherited in 1995. The problem with Ontario Hydro was its rising electricity rates. The solution was to break up the monopoly and establish a competitive market, to bring prices down. 

The Harris government finally set out the beginnings of what we have today with the Energy Competition Act, 1998. This divided Ontario Hydro into five new organizations — the two largest of which are Ontario Power Generation and what is now called Hydro One. 

The original concept was for both OPG and Hydro One to evolve into private companies. And Harris' successor, Ernie Eves, experimented with following through on the full-blown competitive market reform principles of the 1998 Act in the spring and summer of 2002. 

Alas, the experiment failed.

As a Mowat Centre report later explained, during “a prolonged period of very hot weather that summer, the retail market price of electricity shot up, more than doubling ... within a matter of weeks. Consumers screamed and Premier Eves quickly decided to freeze the price of electricity ...  effectively shutting down the competitive electricity system that his government had envisioned. It was never resurrected.”

The subsequent McGuinty and Wynne governments have carried this largely aborted market reform framework forward, without altogether following through on (or denying) its underlying principles either. 

Yet whatever the current virtues of selling off 60% of Hydro One to enhance public revenues may or may not be, it remains a stretch to see either Hydro One or Ontario Power Generation today as torchbearers for the historic ideals of Adam Beck and the people’s power. 

The theology nonetheless romantically lingers on. A recent Mainstreet Technologies poll “has found the majority of Ontarians disapprove of the sale of Hydro One.” 

This support for public ownership in general is a good thing. There could be various new constructive roles for public ownership strategies in the Ontario economic development policy of the next several decades. 

But these strategies also ought to be taking some sober account of what really happened to the people’s power in the province after 1960.

They need to proceed from what Sean Conway calls “rational analysis,” and not even from some wonderfully romantic theology, rooted in a world we have lost.

 

 

 

 

 

 

 

 

 

 

 

About Randall White

Randall White is a former senior policy advisor with the Ontario Ministry of Finance, and a former economist with the Ontario Ministry of Municipal Affairs and Housing. He is the author of Ontario 1610-1985: A Political and Economic History and Ontario Since 1985. He writes frequently about Ontario politics.
Posted date : May 06, 2015

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