December 1, 1993
If I were Bob Rae, on assuming power I would have immediately understood that Ontario Hydro was more than a monster out of control, I would have seen Hydro as the biggest impediment to the sound finances required for a progressive social agenda. And I would see as the roadblocks to changing Hydro all the vested interests in public power. Those vested interests being, in different ways, big business and the unions, environmentalists and the captive NUG community. These vested interests have one thing and one thing alone in common: a fear that their special interests would be gored in a competitive environment.
So I would have searched high and low for the right individual to turn things around, someone with a cast-iron stomach capable of imposing wrenching change on the organization, someone with a social pedigree unassailable by my labour and environmental constituents, and at the same time a wizard able to keep enough people off balance and at bay until the curtain on the final act was drawn. I would have searched the four corners of this earth and found my man in Maurice Strong.
I would then support my man Strong in the unavoidable restructuring to come, a restructuring so obvious that only an idealogue would be blinded to its need. When my man Strong concluded, as I would have expected him to, that Hydro’s staff was oversized, I would stand by my man. And I would stand by him when he decided to spin off the core electricity business from the mushy sustainable development businesses, and when he talked about the need to have equity infusions, and all that jazz.
As a socialist I would want to tax and spend as much as possible. An organization the size of Ontario Hydro could ordinarily be expected to pay several billion dollars in taxes into the provincial coffers, but Ontario Hydro pays virtually none. As a social democrat, I would want to do what’s best for the little guy, but Hydro has been hitting the little guy with one rate hike after another.
So I would look to the UK, which is bringing in new tax dollars by the bucketful following a raft of privatizations, and which is doing a capital job of lowering rates for the little guy.
Negotiation completed in the UK this summer involving the 12 distributors, National Power, PowerGen, and British Coal have resulted in a deal to lower rates by 5 per cent over the next five years.
Under the deal, the cost of power sold to the distributors will fall by 17 per cent over the next 5 years – that means a 25 per cent drop over the eight years following privatization. The retail rate decreases which result apply to all the distributors’ customers, not just to the residential customer. In fact, most businesses, especially small businesses, have benefitted even more than the residential customer, and they benefitted instantly.
In the first year of privatization, over 75% of businesses achieved savings of 10% or more, and nearly one-third saved 33% or more.
If anyone has not benefitted from privatization, it is the very largest industrial consumers of power, who lost the great subsidies they had been receiving. But the loss suffered by the very largest customers was temporary – these very large customers are paying the same amount now, in real terms, as in 1989, prior to privatization, only now they’re not subsidized. For other large companies, electricity rates average about 14 per cent less, in real terms, than in 1989.
The biggest winner of all from the UK privatization, however, was the environment. Nuclear and coal expansion both disappeared, and clean NUGs took over. Little wonder the champagne was flowing in Greenpeace’s London office the day the privatization legislation passed.
As a pragmatic politician, I would follow the UK model and structure a sale of Hydro’s valuable assets – everything except those nuclear plants – to protect the environment and the consumer. I would value my coal plants, and my hydraulic plants, and my transmission lines, and prepare to sell them off. Because I want to get the highest possible value for the sale of my assets, I would prevent new capacity – especially NUG capacity – from diluting my own assets’ value. And when I did sell the companies, I would do so in a series of public offerings that was open to everyone, in order to get the highest price for the public purse.
As for the nuclear plants, I’d keep them in public hands and watch their value grow – that’s exactly what happened in the UK, where nuclear power’s costs came down and production went up under competition. Nuclear is no longer the laughing stock – and enormous public drain – it once was. I may never be able to sell the reactors, or to build new ones because they’re still not competitive, but I may be able to recoup much of my loss.
If I were Bob Rae, I’d be pragmatic and not ideological. I’d notice that the UK privatizations generally occurred BEFORE elections, because privatizations are popular. And having gone as far as I have in this province, and suffered all the abuse and P.R. pain that I knew I must, I would accelerate the inevitable privatization in time for the next election, so that I could reap some of the gain.