Robert Benzie and Paul Vieira
National Post
April 26, 2002

TORONTO – The Ontario government will press ahead with the privatization of Hydro One by amending legislation and appealing a court decision prohibiting the sale of the electricity grid, Ernie Eves, the Premier, said yesterday.

As a concession to critics, travelling legislative hearings on the Electricity Act will begin next month, delaying the largest initial public offering (IPO) in Canadian history – expected to be worth up to $5.5-billion – until at least September.

But regardless of the outcome of the public consultation, Mr. Eves pledged his Conservative government will continue the reform of Ontario’s debt-ridden electricity industry begun by his predecessor, Mike Harris.

"It’s important to send a signal that we are proceeding with the restructuring of the electricity sector and with Hydro One," said the Premier, whom investors have accused of dithering since Mr. Justice Arthur Gans’s landmark decision last Friday concluded the Electricity Act did not permit the sale of the power transmitter.

Mr. Eves agreed many Ontarians are bewildered by his government’s changes in the energy field and do not understand that the opening up of the electricity generation market to competition beginning next week and the sale of Hydro One are separate issues.

"There is some confusion, it’s fair to say, in the public’s mind with respect to the opening of the market on May 1 and the IPO with respect to Hydro One and hopefully this process will allow the Minister of Energy [Chris Stockwell] to explain those differences to the public and to receive input from the public as well," he said.

"It’s important that Hydro One be privatized and I believe if there are changes we can make to our course of action through the consultation process, then we’re quite prepared to consider those.

"We will receive some constructive suggestions that can be incorporated into potential legislation as we go forward, so I think it is a meaningful process. I don’t ever see listening to people as a weakness. I can’t change the past, I can only go forward in the future."

David Young, the Attorney-General, recommended appealing the ruling, made after the Canadian Union of Public Employees and the Communication, Energy and Paperworkers Union petitioned the Ontario Superior Court two weeks ago.

"Any time there is a decision of a Superior Court judge in this province, we have to consider what precedent value it has. We did consider that. That was one of our motivations," he said, noting the decision could have a broad impact on government policy.

"We’re looking for greater certainty. We’re looking for clarification of a number of issues, some of which can be easily addressed through legislative reform and others are better addressed – and arguably exclusively addressed – in the courts. That’s why we’re doing both," he said.

The Minister of Environment and Energy said he anticipates two weeks of hearings in perhaps 10 communities across Ontario, with the amended Electricity Act being passed by the end of June at the conclusion of the upcoming legislative session.

"We have made some good decisions [but] I don’t think the public understands it. The market opening on May 1 and the privatization of [Hydro One] has become so enmeshed that they don’t understand what is going on. It is up to me [to] explain it," he said.

Asked when the IPO could take place, Mr. Stockwell said: "I would suggest likely in the fall."

Dalton McGuinty, the Liberal leader, who opposes the Hydro One sell-off but favours competition in power generation, said the hearings are meaningless since the outcome has already been determined. "Ernie Eves says he is going to consult Main Street, but he is listening to Bay Street. [He] says he will consult, but it is now clear that he is not prepared to listen," he said.

Howard Hampton, the NDP leader, who opposes both the privatization and the opening up of the electricity market, accused the Eves government of mounting a "propaganda campaign" by having Mr. Stockwell criss-cross Ontario promoting the scheme.

"What’s needed here is an election, because this is a fundamental economic [issue], which will touch everyone in this province," Mr. Hampton said.

Even within the Conservative caucus, there are concerns Mr. Harris rammed the Hydro One sale through last December with inadequate notice.

"I’m going out to buy my good friend Justice Gans a bottle of Scotch and thank him for the opportunity, because it’s been a blessing in disguise," said Garry Guzzo, an Ottawa Tory MPP. "My experience is the old administration [of Mr. Harris] railroaded a lot of things through without proper consult with the caucus."

Tom Adams, executive director of Energy Probe, an industry watchdog, said Mr. Stockwell will have a big job trying to persuade the public about Hydro One’s privatization. "This will test his ability to be a leader," said Mr. Adams, a supporter of reforms to the electricity industry.

"The government has put itself in a poor position. It’s let the opposition have free rein over the past several months, and it’s not been effective in replying to the demagoguery" of privatization opponents such as Mr. Hampton and Mr. McGuinty.

On Bay Street, industry analysts and financiers were relieved Mr. Eves’s finally showed a willingness to have Hydro One privatized.

"Unfortunately, this is a painful delay," said one financial analyst. "It’s an embarrassment, because it’s clear the government didn’t do its homework in the first place. But I see this as more of a delay rather than a rethinking of the whole privatization."

"It’s a good development and a good response from the government," said another Bay Street insider familiar with Hydro One.

But the 17 investment banks employed to sell the Hydro One shares are not happy, the insider added. They will not be lining their pockets in June with more than $100-million in commissions as expected and "they’ve put a lot of business on hold so they could market this blockbuster."

The insider said he remains concerned the government could lose the will to privatize once the hearings commence.

"If the polls start to sway, who knows what will happen? It could get nasty before it gets pretty. So you’d better hold on to your hats."