Soaring electricity prices throughout the past decade have made hydro one of Ontario’s most persistent hot button issues. But the Ontario government’s plan to sell off 60 per cent of Hydro One, a provincially owned utility currently valued at between $15 billion and $16 billion, isn’t likely to solve the problem of prices. Instead, it’ll cost the province billions of dollars in future revenue and will probably lead to higher rates, since private operators will likely borrow money to pay for the purchase and then pass on the cost to the public.
Plans to privatize Hydro One
Hydro One is a government-owned company responsible for nearly all of Ontario’s electricity transmission, as well as local distribution to 1.4 million customers. In October 2015, Premier Kathleen Wynne announced plans to sell 60 per cent of Hydro One. The plan drew widespread criticism and helped drive the premier’s approval ratings to a record-low.
More than 83 per cent of Ontario residents say they oppose the sale, but the privatization plan is advancing rapidly. So far, 30 per cent of Hydro One has been sold off to private companies. At this pace, the Liberal government is on track to privatize 60 per cent of Hydro One by the time it faces re-election in 2018.
Ontarians will lose out on billions in future revenue
As a publicly owned asset, Hydro One is a huge source of revenue for the province, providing funds for roads, schools, hospitals, and other important public services. Hydro One generates a predictable dividend of about $800 million annually. Ontario’s financial accountability officer, Stephen LeClair, warns that the proposed sale of a majority portion of the utility company could cause a revenue shortfall of approximately $300-500 million a year. By selling off this important public asset for a one-time windfall, which LeClair suggests could be significantly lower than the government expects, Ontario will lose out on billions in future revenue for decades to come.
Privatization costs spiral out of control
When it comes to privatization, Ontario’s track record is poor. The eHealth and Ornge ambulance scandals demonstrated the problems of delivering vital public services through private companies: massive cost overruns, corruption and service disruptions and delays marred both projects and cost the public millions of dollars.
Privatization has already contributed to soaring rates in Ontario. When the Ontario Liberal Party came to power in 2003, it announced plans to upgrade the provinces’ aging electricity infrastructure and commission new natural gas, wind and solar plants to replace environmentally unfriendly coal plants. The government outsourced the work of building and running the new power plants to the private sector, entering into 20-year contracts that guaranteed revenues for the private companies, regardless of whether the electricity the plants produced was needed. The cost of the deals were passed on to ratepayers in the form of higher electricity bills.
Why public is better
Publicly owned assets are secure, accountable and, in the case of Hydro One, revenue generators that pay for vital services. Keeping Hydro One public prioritizes long-term gains over short term windfalls.