Robert Benzie and Paul Vieira – with files from Tony Seskus
National Post
May 3, 2002

TORONTO – The largest privatization in Canadian history is in jeopardy after Ernie Eves, the Ontario Premier, said yesterday the $5.5-billion sale of Hydro One is "off the table for [the] immediate time being."

Signalling a major policy shift from his predecessor, Mike Harris, who announced the selloff of the transmission grid in December, Mr. Eves said he will await the outcome of public and legislative hearings before determining how to proceed, emphasizing that privatizing the utility is now just one of several options.

"I’m not doing this so some guy on Bay Street can get a bonus before he goes on summer vacation. I’m doing this to protect future generations of Ontarians for many, many decades to come. It’s an important matter and we will take time and we will do it right," said Mr. Eves, who during his sojourn from politics worked as a Bay Street executive.

Asked whether the initial public offering, by far Canada’s biggest ever, is dead, he replied: "I wouldn’t say it’s dead. It’s one of the … options [for Hydro One]. Is it dead for going out the door on May 6? Absolutely. We’re going to take the necessary time to make the appropriate decision."

He said that if privatization "is the vehicle we should be choosing, then that will be that. I wouldn’t say it [the IPO] is off the table. It’s off the table for this immediate time being."

The goal, Mr. Eves said, is to provide a "private-sector-disciplined" power grid that will protect consumers from high prices, be competitive internationally and not amass a huge debt like the old Ontario Hydro did.

The comments sent shock waves through the financial community, with one analyst calling the Tories’ turnabouts "bizarre."

Mr. Eves’s latest remarks came one day after Chris Stockwell, the Minister of Environment and Energy, proposed turning Hydro One into an income-trust and six days after the Premier expressed support for privatization.

"This is just getting more and more bizarre," said one analyst, who did not want to be named.

"Why create more uncertainty? Why would anyone come into Ontario and buy distributors or build power stations when they see all this political interference and waffling? Business doesn’t like uncertainty, and if the Ontario government keeps changing the rules, investors are not going to stick their neck out," he said.

The uncertainty surrounding Hydro One has prompted one leading utility executive to back off from investing in Ontario.

Steve Snyder, chief executive of Alberta’s TransAlta Corp., said at the company’s annual meeting that it has no plans to expand its presence in Ontario’s deregulated electricity market until the Hydro One issue is resolved.

"Right now, we are more wait and see," said Mr. Snyder, whose company has three plants in Ontario and a $500-million station under construction near Sarnia. "We want to see how … this Hydro One plays out, not so much who owns it, but how much impact it will have on transmission rates and transmission rules. Then, I think we’ll reassess."

Mr. Eves’s announcement on Hydro One came on the same day the province’s $10-billion electricity market officially opened its borders to competition. Under the new regime, homeowners and businesses can purchase their power from whomever they choose and the price of electricity will be set in the open market.

Confusion over the status of the Hydro One sale overshadowed the market opening.

Tom Adams, executive director of Energy Probe and a proponent of privatization and deregulation, said Mr. Eves’s fledgling administration is doing little to allay fears about the changes to the electricity sector.

"The downside is that the public and investors don’t know what’s going on. The government doesn’t know what’s going on. People don’t know how to plan or what to do. It just creates a high degree of confusion and lack of confidence in the government," Mr. Adams said.

Dalton McGuinty, the Ontario Liberal leader, said he was astonished by Mr. Eves’s "bungling" of such an important issue.

"[The Premier has been] flipping and flopping like a freshly landed fish on a hot July day on a Nipissing dock," said Mr. McGuinty, who favours market competition, but not the sale of Hydro One.

"In short order, we’ve gone from a full-fledged commitment to privatization to yesterday a consideration of a long-term lease and today apparently to the point where Ernie is saying everything is on the table," he said.

"To think that this is part of some cunning political strategy would be to flatter Mr. Eves and this government. The fact of the matter is they don’t have a plan, they don’t know what they are doing and they are in panic mode," he said.

Howard Hampton, leader of Ontario’s New Democratic Party, said he was unimpressed by Mr. Stockwell’s musings about an income trust, an idea first presented to the government by a private investor on Tuesday.

"Let’s cut through the charade: This government is going to privatize Hydro One. The Minister was trying to create a bit of diversion yesterday and he got caught promoting a stupid idea," Mr. Hampton said.