Probably the most controversial action taken since I was elected is the decision to sell off 60 per cent of Hydro One. I have heard from many constituents about the deal, and in this column will make the case for why it is the right thing for Ontario.
We do have a mandate to do this. The budget introduced before the election, and subsequently passed, specifically stated that we would seek ways to repurpose assets such as Hydro One, the LCBO, Ontario Power Generation and others. That review, conducted by Ed Clark with input from former Beaches NDP MPP Frances Lankin and former Conservative MPP Janet Ecker, recommended not selling OPG or the LCBO, but concluded that selling GM shares, the LCBO head office lands and 60 per cent of Hydro One was prudent.
Note that Hydro One does not generate electricity but only transmits and distributes it to customers. In fact over three quarters of Ontarians, including East Yorkers and Beachers, are not Hydro One customers and are well served by municipal and private distribution companies such as Toronto Hydro, which are not owned by the province.
Financing new infrastructure
The sale of Hydro One must be viewed in conjunction with our commitment to spend $130 billion over 10 years to build needed infrastructure. Despite low interest rates, Ontario’s debt load is too great for more borrowing. The sale is expected to bring in about $9 billion, $5 billion of which will go to paying down Hydro One debt.
Without the partial sale of Hydro One, many proposed projects, such as increased GO train service that will see the Main and Danforth area transformed into a transit hub, would not be possible. The same goes for needed roads, bridges, schools and hospitals, including the $300- to $400-million reconstruction of Toronto East General Hospital.
Not the 407
Many view the sale as an example of bad government decision making, along the lines of the sale of Highway 407, the only toll road in Ontario. We have learned from the mistakes made in that sale because the Conservative government of the day did not get good value for the asset and did not maintain control over the rates that drivers must pay.
Conversely, the sale of Hydro One will be done in four stages of 15 per cent each, to ensure we get the best value possible.
Furthermore, the rates that the new entity can charge will continue to be set by the Ontario Energy Board so that consumers will be protected from gouging. Should Hydro One start making too great a profit, the OEB will reduce the rates that are charged, just as they have been doing to privately-held Enbridge on gas bills because of the falling price of natural gas.
Constituents have also expressed concern that by selling 60 per cent, the government is not maintaining a majority stake in Hydro One. Under securities law, a 40 per cent stake is considered a “controlling interest” and the province will maintain control over major decisions that are in the public interest, including dismissing the board of directors.
The deal further restricts any one group from owning more than 10 per cent of shares.
The sale of Hydro One will bring private-sector discipline to its operations.
The province will continue to receive a dividend, and if the new entity is better-run and expands its business in line with new smart grid opportunities, all Ontarians will benefit from owning 40 per cent of a bigger and better company while building Ontario up.
Arthur Potts is the MPP for Beaches-East York