Maurice Strong
Toronto Star
May 13, 2002

The future of Hydro One, one of Ontario’s largest and arguably most important companies, has become a major topic of debate and discussion. At stake is whether Ontario creates a financially sound backbone for the future of the province’s electricity industry and, by extension, its economy. Or whether Ontario chooses an unworkable or restrictive business model harking back to the intrusive government controls that led to spiralling rates and the $38 billion in debt. The choice is stark and the stakes are high.

As Premier Ernie Eves pointed out last week, a great deal of confusion has engulfed the entire debate about the future of Hydro One. Much is due to the concerns raised over simultaneously opening the competitive energy marketplace and discussing Hydro One’s future. Now that the market is open, without the rate shocks predicted by some and feared by many, some reasoned discussion of the options facing Hydro One is in order.

Hydro One is in the business of transmitting and distributing electricity. That’s it. It builds and maintains the transmission stations, as well as the power lines that criss-cross Ontario. As a natural monopoly, Hydro One’s rates are tightly controlled and can only be changed by a decision of the Ontario Energy Board. And Hydro One needs access to new capital to continue to do its indispensable work for Ontario.

This is why a public share offer for Hydro One makes so much sense. It provides the best business model to achieve the most for the province without affecting what consumers will have to pay. The same can’t be said for other options being looked at. Lease agreements can constrain the regulator, not-for-profit structures undermine accountability, and an income trust bleeds off the revenue needed to invest in the future.

A public share offering will help pay down the $38 billion debt, raise funds to restore aging infrastructure, and reduce the burden on the public coffers. A widely held, publicly owned Hydro One could pursue a growth strategy that transfers risks from ratepayers and taxpayers to where it belongs, shareholders. Government can concentrate on investing in high priority areas like health and education and not have to worry about running a power transmission and distribution business.

Finally, a public offering, more than any other option, gives Ontarians a say in the future of this great company. It is a simple, flexible financing structure that the public and markets can understand. Complex, restrictive, Enron-like financial structures like income trusts may appeal to Bay Street. But they make no sense to Main Street, and they make no sense for Hydro One.

It has been almost a decade since I accepted Premier Bob Rae’s invitation to become chair of Ontario Hydro. To meet the immediate crisis, we undertook radical change to freeze rates and bring the debt down. In addition, I asked Bill Farlinger, now chair of Ontario Power Generation, to lead an examination of longer term options for financially restructuring Ontario’s power sector, including privatization.

I believe today we are at a critical juncture. Decisions made in the coming days will set the course for Hydro One and Ontario for decades to come. But after years of experience, study and debate, there is really only one choice. Only a public share offering delivers the financial benefits, access to capital, and accountability necessary for Hydro One to thrive and succeed in a competitive North American energy marketplace. The stakes are high. But the choice is clear.

Maurice Strong is former chairman of Ontario Hydro and is currently chairman, Earth Council, and special adviser to the United Nations Secretary-General.