Richard Brennan and John Spears
Toronto Star
December 13, 2001

Energy giant Hydro One is to be sold off in the largest privatization in Canadian history.

And Ontario is to announce next week the date in 2002 that the province’s $10-billion-a-year electricity market will be opened up to competition.

Premier Mike Harris yesterday rejected suggestions the two moves will translate into stiff price increases, but critics warned consumers can expect electricity rates to soar as they did in Alberta and California when electricity markets in those jurisdictions were privatized.

The warning came after Harris ended months of speculation by announcing that Hydro One, the Crown corporation with $10 billion in assets that transmits power in the province, is to be privatized through the public sale of shares.

The privatization of Hydro One will eclipse both the sales of Highway 407 at $3.1 billion in 1999 and CN Rail at $2.3 billion in 1995.

Some critics caution that selling off Hydro One and opening the market could mean soaring prices similar to those in California, where privatization led to a tripling of rates, blackouts and the near-bankruptcy of utilities last winter.

"The announcement today doesn’t steer us clear of shoals with the words California written all over them," said Tom Adams, head of Energy Probe, the province’s energy watchdog.

In Alberta, more than $1 billion in consumer rebates was issued this year alone after rates soared and some businesses were forced to operate at night, when power costs were lower.

The Harris government had initially promised deregulation by November, 2000, but got cold feet after the experiences in Alberta and California.

Opposition critics were quick to raise fears of runaway electricity rates for consumers and condemned the Conservative government for making such an important decision without debating the pros and cons in the Legislature.

"In virtually every jurisdiction in the world, deregulation and privatization of electricity has been a dismal failure. Prices increased dramatically and reliability suffered," New Democratic Party Leader Howard Hampton said in an interview, noting that in some cases rates went up 100 per cent.

"Imagine … if you’re an ordinary consumer and you’ve been paying $1,000 or $1,500 a year for electricity and suddenly you get the bill in the next year, the next two years that says you’re paying $3,000," Hampton said in the Legislature.

Liberal critic MPP Sean Conway (Renfrew-Nipissing-Pembroke) complained the decision was made by cabinet behind closed doors.

"What the Legislature has an obligation to … ensure the consumer’s interest is not sold down the road by Mike Harris as he sold the consumer’s interest down the road with the privatization of Highway 407," Conway said, referring to the privatized highway that recently announced it would raise tolls in the New Year for the fourth time in 27 months.

Harris said the value of the offering remains to be determined by SuperBuild, the government’s Crown corporation that looks at public private partnerships, and its financial advisers.

He said details of the share offering cannot be disclosed until the prospectus has been filed with security regulators.

Hydro One, which transmits electricity through the hydro grid, is part of what remains of the former Ontario Hydro, the largest public utility in Canada before the Conservatives split it into separate entities. Another arm, Ontario Power Generation, produces the province’s electricity, will be opened to competition that will allow generating companies to plug into the electricity grid and offer power for sale.

The Premier said whatever money is raised will be put towards Hydro One’s $21 billion debt.

Major wholesale electricity users such as automakers and steel plants had lobbied for an alternative plan which would have turned Hydro One into a not-for-profit entity.

Harris said he was not worried about skyrocketing rates since the arm’s-length regulator, Ontario Energy Board, will continue to set the transmission rates just as it does now for Hydro One, while the Independent Market Operator (IMO) will oversee the standards of service.

"This move will encourage investment in Ontario, it will help stimulate economic growth while ensuring a continued supply of safe, reliable power," he said.

Hampton said with the privatization of Hydro One, the opening up of the electricity market to competition and other associated costs, consumers can expect at least a 20 per cent increase in rates "just to pay all these new profit takers."

Hampton also raised alarm bells over Hydro One’s plan to be a major player in serving the power-hungry U.S. market.

Ontario residents will then pay the prices that prevail in the U.S.