Maximizing the mess with Ontario’s electricity assets – by Parker Gallant (National Post – October 21, 2014)

The National Post is Canada’s second largest national paper.

Hydro One paid $93-million for Norfolk Power, about 28.5 times profits. That’s pure insanity

Ontario’s electricity sector is in rough shape, burdened with escalating costs and an interfering government. Not much change or improvement is likely if the government takes up the schemes promoted last week in a speech by Ed Clark, the former CEO of TD Bank who now heads the province’s “Advisory Council on Government Assets.” The objective of the council is to look at three current government monopolies so as to “maximize the value to the people of Ontario.”

We’ll leave Mr. Clark’s comments on the liquor business to others. When it comes to the two electricity monopolies – Ontario Power Generation and Hydro One – Mr. Clark and his council’s proposals seem destined to maximize the mess rather than the value of Ontario’s power sector.

On OPG, the $39-billion asset company that owns gas, hydro and nuclear power installations all over the province, Mr. Clark proposed that it be split into two entities: one to manage existing generation sources and another to manage the Darlington nuclear refurbishment. The speech is silent on what happens to the Pickering nuclear plant.

The OPG proposal looks like an effort to simply create another electricity bureaucracy. For that reason it is impossible to see what benefits will be generated that will “maximize value.” Many large European and U.S. generators successfully produce power from a variety of fuels and there is no reason why OPG cannot do the same if properly managed.

In the case of the $22-billion asset Hydro One, the Clark panel has bigger plans. Hydro One has two business units: the provincial electricity transmission monopoly plus ownership of one quarter of the province’s local electricity distribution monopolies. Mr. Clark apparently sees the long-distance transmission monopoly as a sacred provincial trust that should be retained as a government-owned company.

Never mind the fact that the province is successfully served by private sector natural gas distributors that operate under the same regulator, the Ontario Energy Board (OEB). Those natural gas distributors have done a better job at managing the distribution of natural gas than Hydro One has done on the transmission of electricity.

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