Daniel Leblanc
The Ottawa Citizen
May 10, 1998

Suspicious eyes are cast over every one of Ontario Hydro’s moves.

Be it borrowing money, hiring lobbyists, producing an annual report or fixing its plants, Ontario Hydro is constantly accused of shadowy dealings.

And as competition is set to hit Ontario’s electricity market in 2000, the accusations only get stronger.

Publically owned Ontario Hydro, it seems, cannot act as a normal business. That’s because it isn’t.

If Ontario Hydro were a private-sector company, it would be bankrupt. With $45 billion in debt and liabilities, it owes more money than its assets are worth.

Still, private power producers, who want a piece of Hydro’s $9-billion monopoly on the province’s electricity market, are scared of the utility.

They especially fear its efforts to maintain a grip on the market and beat competition to the punch.

An umbrella group called the Stakeholders’ Alliance for Electricity Competition and Consumer Choice has written to Ontario’s Energy Minister Jim Wilson, mainly to urge him to keep Hydro in check over the upcoming months.

The alliance says the utility is negotiating long-term power supply contracts with industrial customers, in order to keep its business even after new power producers enter the market.

"There is a distinct risk for the government should a perception develop that it is supporting predatory pricing by Ontario Hydro," wrote David McFaddan, chairman of the alliance.

The alliance also expressed concern that Hydro, which lost $6.3 billion in 1997, was trying to get others to pay for its debt.

Because it is said that Hydro cannot support its entire debt in an open market — its costs are too high, its performance too low — the Ontario government will probably be forced to "strand" a portion of its debt.

That would take between $10 billion and $20 billion in debt off Hydro’s books.

The alliance wrote to Mr. Wilson that Ontarians would probably have to pay for it, through increased electricity rates or taxes prior to the introduction of competition in the year 2000.

And that’s not the only correspondence that found its way to the minister’s office.

Three weeks ago, an important player in the process to restructure Ontario’s electricity market, Ronald Daniels, wrote to complain about Hydro’s lobbying efforts.

Mr. Daniels chairs the Market Design Committee, which is making recommendations to the government on the structure of Ontario’s future electricity market.

It had voted 12-2 to dilute Ontario Hydro’s power over the electricity transmission system.

Although Ontario Hydro sits on the committee, it hired a Tory organizer to lobby the government against this decision.

In a strongly worded letter, Mr. Daniels countered that the work undertaken by lobbyist Leslie Noble, who was executive director of the 1995 Tory election campaign, was "inimical to the integrity of the debate and analysis that is taking place within the committee."

There are plenty of other complaints against Ontario Hydro.

Last year it incurred a $6.6-billion charge — or writeoff — in order to restore some efficiency to its badly damaged nuclear plants. It was as if the utility had loaned itself money, since the charge would not be fully spent before 2001.

Ontario Hydro said the move was simply to recover the massive investment already made in nuclear power, instead of letting it go to waste by shutting down plants.

But groups such as the Independent Power Producers’ Society of Ontario, as well as individuals such as former federal minister Don Macdonald saw it as a delusion of grandeur. Ontario Hydro, they say, is willing to bet the bank to become one of North America’s electricity potentates.

Economist David Argue shares in many of the criticisms against Ontario Hydro. This week, he railed against its 1997 annual report, after having spent more than 15 hours trying to make sense of it.

"This has brought creative accounting to new heights," he said, mumbling about incremental spending, refinancing of non-depreciated assets, and borrowed profits.

Ontario Hydro’s critics say it isn’t hard to find reasons to rap the public utility. Nonetheless, the trade carries its risks.

It could be said that Tom Adams, a Ontario Hydro specialist at Energy Probe, has prematurely greying hair.

And the folks at IPPSO: Seems that in these hectic times in the electricity field, they need a Tylenol dispenser in their washroom.