Margaret Wente
Globe and Mail
June 6, 2002

 Was it low political opportunism, or was management out of control?

Yes.

Ernie Eves is staking his career on convincing us that he’s the anti-Mike.

Eleanor Clitheroe, the CEO of Hydro One, staked hers on playing the business game like a guy.

Ernie may be winning this one with the public. They’re shocked by Ms. Clitheroe’s $6-million pension package. Even the old boys on Bay Street are offended by it. But the biggest loser in this power struggle isn’t her. It’s you, dear ratepayer.

Naturally, you won’t hear this from Mr. Eves. Or from the former board of directors, who claim it’s the government, not them, that’s out of control. Both sides prefer to keep you in the dark.

"The land mines in this enterprise were strewn in so many different places, it was almost bound to blow up," says someone who knows that it took years of folly to make a mess as big as this one.

Ms. Clitheroe, the woman with the $174,000 car, got the top job at Hydro One in 1999. She had been CFO of the big old Hydro, before it was broken up, and deputy minister of finance before that, and a banker before that. One key to her success, she explained recently, was "understanding the relationship between the public and private sectors." Her mandate was to prep up Hydro One, the giant transmission and distribution arm, for the biggest public share offering in Canadian history. Everyone knew about this except the public, because the government didn’t bother to try to sell us on the idea.

The bad old Tory regime, led by Mike Harris and Ernie Eves (not to be confused with the good new Tory regime, led by the anti-Mike) appointed a new high-wattage board for Hydro One and told it to proceed full speed ahead. The bad old energy minister, Jim Wilson, smiled on all the compensation deals and proceeded to meddle unforgivably in the rate structures. Any resemblance between him and the Jim Wilson who said last week that "they should fire the whole lot of them" is purely coincidental.

Although you wouldn’t know it from the anti-Mike’s behaviour, privatization is a really good idea. One person who says so is Tom Adams, the head of Energy Probe. He appears to be the only guy who’s on the customers’ side. He’ll remind you that the old Hydro was a bloated, arrogant behemoth that dug itself $38-billion into debt because of its misadventures in nuclear power. Privatizing its operations will inject large doses of accountability, transparency, market discipline, new capital, and rational decision-making. And rates will still be regulated, just like phone rates.

Ms. Clitheroe has a reputation as an intelligent and aggressive manager. At 47, lean and coiffed and with a power hobby (ocean-boat racing), she is the very model of the modern female CEO. She didn’t want to run a boring local monopoly utility. She wanted to turn Hydro into a gung-ho growth company and a major North American player.

That’s how it was in the late ’90s. Everyone believed in gung-ho growth and synergy back then. She secured a favourable tax ruling from the province and set out on an acquisition spree, snapping up small utilities everywhere. Unfortunately, she overpaid.

"The acquisitions substantially reduced the value of the company," says Mr. Adams. Hydro One also has three big new transmission projects to interconnect with other markets, and all three are behind schedule. Never mind the vision thing. What it needs right now is the operations thing, to get the projects fixed. "I think Hydro One’s performance has been very poor," he says. "It has behaved a lot like the old Hydro."

In his view, Ms. Clitheroe didn’t deserve her big performance bonuses. Nor did she deserve a private-sector paycheque before the company was actually privatized. (Paul Tellier, her hero, only made $351,000 in 1995, the last year he was on the public payroll at CN.) In any case, her $2.2-million compensation package is way off the charts, despite what the former board members claim. Did she hypnotize them? It was also tacky to tack on that $6-million golden parachute after a court ruled the IPO out of order. Don’t they know corporate greed is a sensitive issue these days? Doesn’t the name Enron ring a bell?

Needless to say, the anti-Mike was quick to take advantage of these awful optics. He’d like you to forget that the government that’s so shocked by these excesses is the same one that, as the sole shareholder, benignly said nothing all this time. He hopes you’ll blame Ms. Clitheroe, instead, for the mess that Hydro’s in.

But the truth is that his squeamishness and ambivalence and political cowardice over privatizing Hydro are going to cost you and me a whole lot more than Ms. Clitheroe’s yacht sponsorship. The province’s biggest asset is lost in space.

Oh, by the way, your rates are going way up. Start praying for a cool summer.