The Toronto Star
May 16, 2012
Martin Regg Cohn

The politics of generating power — and winning it 

Provincial politicians run the energy sector the way thrill-seekers tackle Niagara Falls — by defying the laws of physics and going over the cliff.

At least Nik Wallenda, the daredevil now training to walk over Niagara Falls next month, knows how to harness the peril. His family secret: walk the walk and be sure not to stumble.

The same cannot be said of Tim Hudak, the Tory leader who happens to hail from the Niagara region. If Hudak keeps talking the talk — and lets go of the falls by selling off part of its generating station — he will surely tumble.

The latest Conservative plan to partially privatize Ontario’s electrical utilities looks like a bigger publicity stunt than the Flying Wallendas’ careful balancing act. Wallenda is taking measured steps on a steel cable, but Hudak is taking a leap of faith — back to the future — by reprising privatization schemes dreamed up by the Mike Harris Tories.

Hudak boasted Tuesday that he has big, bold ideas — dressed up as a series of position papers called “Paths to Prosperity” (an echo of a 1999 Harris-era economic plan, “Road Map to Prosperity”). The big ideas are a change from the pocketbook gimmicks in the last campaign — waving off the provincial HST on hydro bills, writing off the annoying debt retirement charge and unplugging smart meters.

Now, instead of pocketbook Ponzi schemes, the Tories are opting for privatization panacea schemes: Hudak wants Ontario’s big pension funds to take a minority stake in publicly-held Ontario Power Generation (OPG) and Hydro One (which owns transmission lines). Later, he’d organize a full public offering.

The theory — ideology, really — is that new owners would bring private sector discipline to an inefficient public utility. The politics — optics, really — is that the big pension funds are smart owners who understand infrastructure and would plow the profits back to Ontario pensioners (erstwhile members of those public service unions whom the Tories blame for running public utilities inefficiently).

But these ideas still don’t add up. That’s why economist Don Drummond rejected the false economies of privatization when he looked at these utilities in his February report on government finances. Remember the 407 toll highway fire sale?

Private pension funds are not charities. They demand profits by buying shares cheap, increasing revenues, reducing costs or selling off assets.

They don’t always have the Midas touch: The Teachers’ fund has hardly improved the performance of the Toronto Maple Leafs all these years, apart from raising ticket prices.

One way to raise the rate of return: raise hydro rates at OPG. But if the pension funds had only minority ownership, would a future premier Hudak go along, after campaigning for lower hydro rates? He’d be electrocuted by the electorate.

Much is wrong with Ontario’s energy policies, and Hudak’s latest critique catalogues much of the madness: an over-reliance on gas-fired power plants to back up expensive wind power, for example.

But wind and solar make up only a tiny fraction of recent rate hikes; most of it is attributable to construction of gas-fired generators — all of them run by the private sector, thanks to muddled Liberal government policy.

Blame the Tories, too, for selling off hydro power before they lost power: four Mississagi Riverstations were snapped up private equity firm Brookfield (then Brascan) in 2002, allowing them to prosper for posterity (at secret rates). The quasi-privatization of the Bruce nuclear station also led to (secret) rates that are higher than what publicly-held OPG gets.

And then the rest of the mess: expensive overruns in refurbishing Ontario’s aging nuclear power plants are a risky business that pension funds won’t want to fund. Hudak glosses over this part, because his party is unequivocally pro-nuke.

In opposition, the Tories are well-placed to point out mistakes in Liberal government energy polices. But Hudak would be wise to learn from the errors of past Tory governments, rather than reliving ideological fantasies. And he would be wiser still to not take the current mess and make matters worse.