Fred Vallance-Jones
Toronto Star
April 22, 2002

Donations surge as hydro goes private

Almost a million dollars have flowed to the governing Conservatives since 1995 from companies and individuals with interests in the new privatized electricity market.

More than half came in after Jim Wilson, energy minister before a cabinet shuffle last week, announced the government’s electricity revolution in 1997. Industry players even funnelled thousands of dollars to Wilson’s riding association.

The opposition NDP condemns the donations, but Wilson, now northern development minister, says he welcomes them.

"With respect to people in the industry — I assume that’s the energy sector — contributing to my party or my riding, I encourage them to do so, and I wish more companies would," he said during a northern swing to familiarize himself with his new job.

The 70-plus hydro-related donors include generating companies, electricity retailers, large consumers of power, even the publicly owned Hydro One Inc.

It is sometimes difficult in the Canadian system to gauge the effects of large donations on public policy. But Tom Adams, head of the lobby group Energy Probe, says the industry money represents a concentration of political pressure, all pushing the government in one direction: to follow through on its promised open electricity market.

In the 1995 election year, companies that would eventually have licences to operate in the new electricity market donated $70,000-plus to the Harris Tories, according to elections financing records. Donation levels began to escalate as the Tories’ electrical policy became clearer.

Shortly after the 1995 election, Toronto businessman and Harris insider William Farlinger called for the privatization of Ontario Hydro. Soon after, he was made Hydro chairman.

The same year, former federal Liberal finance minister Donald MacDonald was appointed by Harris to study the issue. By 1996, he recommended a competitive market.

In 1997, the government introduced its white paper on hydro restructuring. Later that year it unveiled the policy that would see Ontario Hydro broken into five parts and a competitive market by 2000.

Political donations were hitting a crescendo. With the electricity policy in place but final implementation still in the future and the Tories facing re-election, nearly $300,000 flooded into Tory coffers during 1999 from companies that now have licences to operate in the new electrical market.

Consultants and lawyers working on the energy file added to the total.

The Liberals received only about one-quarter as much, the NDP a comparative trickle of about $3,000.

During non-election years, corporations, individuals or trade unions in Ontario are limited to giving a total of $12,500 to a registered party and its constituency associations. At election time they can donate an additional $7,500 to any provincial party and up to $1,000 to any candidate, to a maximum of $5,000.

NDP leader Howard Hampton, a bitter opponent of the Tory power policy, sees the donations in simple terms: "Some people stand to make billions of dollars on this, and they are the people who are funnelling money into the Conservative party, funnelling money to Jim Wilson, funnelling money … many of them … to the Liberal party as well."

Dick Perdue, a lawyer and consultant with the lobbying firm Enterprise Canada, says there was a real fear the government might get cold feet and abandon the whole plan. "There were times when we thought it was gone, that `This ain’t going to survive.’"

As a result, the long-time Conservative says, industry people did what they could to get close to the government, including opening the purse strings for things such as expensive fundraisers. "Players in the industry attempted to spend as much time with government as possible."

Enterprise Canada has registered to lobby the Ontario government for Direct Energy Marketing, the biggest player in the new retail market, and for National Grid USA, which hopes to buy transmission lines from a privatized Hydro One Inc.

National Grid gave $7,500 to support the Conservative by-election campaign in Parry Sound Muskoka last year, while Direct Energy has given more than $30,000 to the Tories since 1995, as well as nominal amounts to the Liberals.

Perdue himself has contributed, and Enterprise Canada has given more than $12,000 to the Ontario Conservatives and more than $8,000 to the Liberals since 1995, according to elections financing records.

There’s a great deal at stake. A lot of money can be made in the competitive market. Annual retail electricity billings in Ontario are about $10 billion. The wholesale market is said to be worth about half that.

Adams believes some of the largest sums will be earned by retail companies such as Direct Energy, who could make an early killing by signing up customers at prices considerably higher than those expected at market opening.

Generators also stand to make money, although it may be a tougher haul for them because of the competition expected as Ontario Power Generation (OPG) sheds generating capacity and private firms take over.

`We are still owned by the government but we act like any other business, if you will. Essentially, we are at the (party) leaders’ dinners. We buy a ticket and listen to what they say.’

Terry Young, Hydro One

Still, says John Brace, executive vice-president of Northland Power, "Without the competitive marketplace, we don’t have any prospects, because it has been a monopoly (the old Ontario Hydro) who decides whether other entities could build plants or not."

Canadian conglomerate Brascan Ltd. recently agreed to purchase four hydro dams east of Sault Ste. Marie from OPG for $340 million, adding to its existing North American holdings.

"As a generator we are excited about the market; we’re excited about the province," said Harry Goldgut, CEO of Brascan Power.

Brascan has given the Conservatives more than $70,000 since 1995 under the names Brascan, EdperBrascan, and Great Lakes Power.

"Our policy is to donate a modest amount to both political parties in the jurisdictions in which we operate," said Katherine Vyse, Brascan’s vice-president of communications. "Our objective is to support the political process."

Brascan firms have given more than $30,000 to the Ontario Liberals since 1995, and about $1,500 to the NDP.

Northland has given more than $60,000 to the Tories and their candidates since 1995. The firm’s owner and CEO, James Temerty, has personally given thousands more. Northland also gave at least $12,000 to the Liberals.

Along with other electricity industry players, Temerty and his company have donated money to Jim Wilson’s own riding of Simcoe-Grey.

Temerty says he met Harris at Montreal’s Beaver Club a decade ago. "I liked what he had to say, and what he had to say ultimately turned into the Common Sense Revolution."

He dismisses the notion the donations have anything to do with Wilson’s hydro policies. "To try to make a connection between that (the donations) and the restructuring, that’s a bunch of nonsense."

He argues that, if anything, the donations would deter the government from favouring the power companies.

Perdue agrees, saying it would be foolish for a politician to risk a career for a few thousand dollars.

An examination of the over-all numbers shows generating companies now licensed by the Ontario Energy Board have together given well over $400,000 to the Tories since 1995. The firms have donated much less, in the range of $125,000, to the Liberals.

One donor stands out, even though the sums aren’t huge: Hydro One Inc.

Hydro One is another successor company to the old Ontario Hydro. It owns nearly all long-distance transmission lines across Ontario. It also serves as the local electrical utility in many parts of the province, and since hydro restructuring was announced has swallowed up dozens of utilities, including Brampton Hydro.

For now, Hydro One remains in public hands. An Ontario Superior Court judge blocked the planned $5 billion sale of the company Friday, saying the province had no legal right to sell it. Since 2000, the company has donated $12,000 to the Ontario Tories, including $537 to Wilson’s riding association in 2000, apparently to participate in a golf tournament. It has also given $5,000 to the Liberals.

"We are still owned by the government but we act like any other business, if you will," said Terry Young, director of communications for Hydro One. "Essentially, we are at the (party) leaders’ dinners. We buy a ticket and listen to what they say."

NDP leader Hampton argues it is wrong for a publicly owned company to make donations to a political party.

Hydro One did not give to the NDP, according to records on the elections financing Web site, which do not yet include most 2001 contributions.

There are suggestions that donations from electricity companies may be slowing in the wake of controversy over massive political gifts in the U.S. by the bankrupt Enron Corp.

British oil giant BP declared after the Enron debacle it would no longer make political contributions. BP Canada gave $5,000 to the Tory campaign in Parry Sound Muskoka last year.

Dick Perdue says BP’s move has been echoed by many others in the electrical industry. It may be that the mix of politics and electricity is getting too hot to handle.