Where’s the logic in Ontario’s power play? – by Konrad Yakabuski (Globe and Mail – March 16, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

The mandate Ontario’s Liberal government handed former TD Bank chief Ed Clark was flawed from the outset. Selling off prized electricity assets to pay for transit projects smacked more of a cash grab than a considered approach to maximizing value and making sound energy policy.

In the end, Mr. Clark’s panel recommended last fall that Ontario maintain full ownership of Hydro One’s transmission assets, made up of 30,000 kilometres of high-voltage lines across the province, and privatize the utility’s distribution arm, which serves 1.4 million Ontarians. “There is far less reason to regard distribution as a core strategic asset than transmission,” the panel said.

As The Globe and Mail revealed last week, however, Premier Kathleen Wynne’s government is now thinking of both selling up to 60 per cent of the transmission business to investors and privatizing the distribution arm in order to spur a sector-wide consolidation among the spate of “local distribution companies” that interface with electricity customers across the province.

Both are interesting ideas. But the devil is in the details. And when it comes to Ontario governments meddling in the electricity sector, the details always seem to ruin everything.

On what grounds can the provincial government justify using proceeds from selling electricity assets to fund transit? Ontario consumers have borne above-average, escalating electricity rates for years because Hydro One and Ontario Power Generation have unmanageable cost structures. About 11,500 employees at the two Crown-owned companies, 75 per cent of their work forces, earned more than $100,000 in 2013. Name another business with such lopsided labour costs.

About 90 per cent of the workers at both companies are unionized. The Clark panel tiptoed around this issue, no doubt on instructions from the government not to antagonize a critical political constituency. The panel’s review of labour costs, it said, was “not intended as a criticism of the collective bargaining process.” Nevertheless, it found that Hydro One’s distribution business has a labour cost structure “well above” that of other public utilities.

“Because these costs are passed on to ratepayers, the rates paid by those customers served by Hydro One are higher than rates charged by other [publicly owned distribution] utilities,” the Clark report concluded.

For the rest of this column, click here: http://www.theglobeandmail.com/globe-debate/wheres-the-logic-in-ontarios-power-play/article23453424/

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