Energy Probe

Tom Adams

March 13, 2002

Energy Probe’s complaints against the infomercial, "Ontario’s Electricity: Lighting the way to a brighter future, A special supplement on Ontario’s new electricity market," published in the Globe and Mail on March 11, 2002.

"Ontario’s Electricity" is presented as a journalistic product. However, the authorship of the piece is not disclosed and no opposing views are considered. Regular paid corporate advertising is included but it is not clear whether the advertisers influenced the content. From the tone and content, we can assume that some parts of the supplement were edited by the Ontario government.

The supplement also features some blatantly incorrect statements. For example, a bolded subhead claiming that "Customer protection is paramount." Two instances where actions by the Ontario Energy Board and the Ontario government have been directly contrary to the interests of ordinary consumers are the decisions on distribution rate increases for local distribution utilities and the decision to cross-subsidize the transmission costs of heavy industrial users. 

The decision to break its promise to stop special electricity subsidies to heavy industry, is another instance of the Ontario government acting contrary to the interests of ordinary consumers. In May, 2000, the Ontario government extended direct subsidies to heavy industry at the expense of ordinary consumers and taxpayers.

Another incorrect statement is "taxpayer protection – private capital rather than taxpayer guaranteed debt will build new generation facilities." The restart of the Pickering A nuclear station, a project that is now two years behind schedule and over its original budget by around 90 per cent, is being funded by taxpayer-backed investment. Taxpayer-backed electricity debt is not declining as originally promised but increasing. For more information see: http://www.energyprobe.org/energyprobe/index.cfm?DSP=content&ContentID=1448.

"Ontario’s Electricity" also relies on exaggerated claims. "New investment and jobs – over $3 billion in new generation projects have already been announced be the private sector." There is no acknowledgment in the material that, with only a few exceptions, the projects comprising these announcements have been substantially delayed and some may even be cancelled.

Barbara Carss
Canadian Property Management
April 1, 2002

If May 1 seemed anticlimactic, that’s only what insiders at local utility companies had expected. They’re gearing up for more intensive consumer reaction after the first new-look electricity bills are mailed out later this summer.

"We’re anticipating about a 60% increase in call volume," says Anthony Horton, Director, Customer Relations, with Hydro One Networks Inc., the regulated transmission and distribution subsidiary of the former Ontario Hydro. "It’s safe to say the large players in the marketplace, including us, have put enough investment, energy and time into this that we don’t anticipate any large problems, but we can pretty much guarantee that there will be little blips."

The competitive market is still largely built upon its traditional infrastructure – the generating stations and transmission lines that function in the very same manner as they did prior to market opening. However, software systems that track a range of electricity purchasing options and corresponding variables for calculating rates are the critical new technology that allow multiple players to participate in the market.

The utilities – known as local distribution companies (LDCs) – are responsible for billing both those customers who have signed contracts with a retail supplier and those who have opted to stay with the default electricity supply based on spot market prices, and also for remitting payment to either the electricity retailers or to the Independent Electricity Market Operator (IMO) that oversees the open electricity market. To do so, the utilities rely on an Electronic Business Transaction (EBT) clearinghouse, a financial and administrative hub where retailers and LDCs exchange and process information on customers’ electricity consumption and account status.

"There was extensive testing of that and, really, that’s where a lot of the market readiness efforts were focused," says Blair Peberdy, Vice President, Communications and Corporate Planning, with Toronto Hydro Corporation. "We have also done a tremendous amount of work in our call centres, training the staff in the details of the new market, and the questions they’re going to be getting from customers, but we don’t expect that to happen until around July/August when the first new bills start to hit."

LDCs have invested in equipment, technology and personnel. "IT was the primary area where additional staff would have been brought on in the last year. We’ve had to completely overhaul our billing systems and how these flow through to our accounting systems – and for 1.1 million customers, our systems are obviously fairly large," Horton reports. "We’re beefing up staff in our call centre and our actual billing area." (Nevertheless, Hydro One’s largest expenditure no doubt lies in the acquisition of 80 former municipal electrical utilities.)

The so-called unbundled electricity bill will itemize each element of power provision, breaking down separate costs for energy, distribution, transmission, wholesale market service charges, customer charges for services such as billing and meter reading, and debt retirement charges for the former Ontario Hydro’s stranded debt. Only the energy portion of the bill is an outcome of competition, and will reflect either a contracted rate with an electricity retailer or a variable rate dictated by prices on the spot electricity market.

Transmission and distribution rates are fixed, yet do vary somewhat throughout the province because the Ontario Energy Board (OEB) approves distinct rates for each of Ontario’s 94 local utilities. The debt reduction charge is a consistent 0.7 cents per kilowatt-hour for the vast majority of consumers, with the exception of communities and industries that did not historically purchase power from Ontario Hydro and a small number of large industrial users with special rate discounts originally granted by Ontario Hydro.

Tom Adams

April 17, 2002

All across Canada, big business is fighting to bolster the provincial Hydro monopolies, and the subsidized rates big business gets at your expense.

In British Columbia, big business – especially the major polluters – are livid at the new government’s proposal for market pricing. The corporate opponents of a modern power system include many of B.C.’s largest resource companies, including Teck Cominco, Scott Paper, Canadian Forest Products and the corporate lobbies, the Mining Association of British Columbia and the Council of Forest Industries.

In Ontario, the steel giant, Dofasco, is leading the big business push to keep parts of the old Ontario Hydro system in place. Dofasco, which is well-connected politically, wants a power system that continues to subsidize large, politically connected consumers.

In Quebec, Alcan, Alouette and Alcoa, some of the largest electricity consumers in the world, have just won 25-year contracts to buy massive amounts of power at below market value along with interest free loans to build metal smelters where the electricity will be used. These latest handouts to electricity guzzlers will provide the justification to build more hydro dams in Quebec’s fragile North.

The story is similar in other provinces, too. The multinationals know that Energy Probe’s plan to break up the Hydro monopolies and introduce genuine competition threatens their cozy relationship with the Hydro companies. Cheap energy at any price that is what multinationals want. To prevent competition in power, they’re prepared to let the economy suffer, and the environment be devastated.

Since 1989, when the United Kingdom adopted the Energy Probe electricity-restructuring model, the U.K. has built no new coal plants, no new oil plants and no new nuclear plants. Just the opposite. The U.K. shut down dozens of coal, oil and nuclear plants while simultaneously converting to high-efficiency natural gas plants and some renewable forms of energy – precisely what we and other environmentalists have long argued made most economic sense. What happened to rates in the U.K.? They immediately dropped for small businesses and residential customers, and eventually dropped for big business as well. While rates in most of Canada are set to climb under the continuing Hydro system, in England residential customers now pay, on average, 32 per cent less than they did a decade ago!

If you believe the environment must be protected, and that all customers – not just those with political pull – deserve fair rates, please support Energy Probe with a generous donation. We’ll use it to protect the pocketbooks of hardworking Canadians who don’t want to overpay for their Hydro so that corporations can get a free ride at the environment’s expense.

Paul Waldie – with reports from Andrew Willis and Murray Campbell
Globe and Mail
April 20, 2002

TORONTO — An Ontario judge has ruled that the province cannot sell Hydro One, throwing the largest privatization in Canadian history into turmoil.

Mr. Justice Arthur Gans of the Ontario Superior Court ruled yesterday that the 1998 legislation creating the utility did not permit the government to sell it.

Hydro One, created through the breakup of Ontario Hydro, operates the second-largest electrical transmission system in North America, serving 1.2 million people.

The government announced last December that it was privatizing the company, and shares were set to go on sale in June to raise $5-billion.

Judge Gans’s decision, rendered after two unions representing hydro workers challenged the privatization, will delay the sale for weeks and could even kill it.

"We never considered something like this," said an investment banker working on the share sale, which is expected to generate $113-million in brokerage fees. "It was like we shifted the engines to warp drive and found out Scotty had pulled the spark plugs, so everything went dead."

If the government continues the privatization, it must either amend the legislation or appeal the court decision.

Yesterday, Premier Ernie Eves, who is running in a by-election on May 2, said the province’s Attorney-General is reviewing the ruling. But he acknowledged the Hydro One privatization will be delayed.

"Even if you wanted to, you couldn’t change the law tomorrow morning at 9 o’clock," Mr. Eves said.

Investment bankers say the deal has gone too far to be stopped now, but several labour leaders and opposition politicians said the privatization should be stopped.

"Politically this is a major setback for the government," said Judy Darcy, head of the Canadian Union of Public Employees, one of the unions that challenged the Hydro One privatization in court. CUPE represents more than 13,000 workers at provincial hydro corporations.

"They tried to do privatization by stealth. They ought to go to the people for a mandate before they proceed with something like this."

Marilyn Churley, the deputy NDP leader, said her party will fight any attempt to amend the legislation.

"I think this is a signal to Ernie Eves and his new government that they should drop the plans for privatizing Hydro entirely," Ms. Churley said yesterday.

Liberal Leader Dalton McGuinty said Mr. Eves must have public consultations before any privatization.

Mr. Eves "could say no to Mike Harris, no to Bay Street brokers and yes to Ontario families and Ontario businesses, which have never, ever handed him a mandate to sell off Hydro One," Mr. McGuinty said.

Tom Adams, executive director of Energy Probe, a Toronto-based consumer and environmental research organization, said, "I think this is something of a turning point in the electricity restructuring."

Mr. Adams said the government should refer the Hydro One privatization to the Ontario Energy Board and let it decide if it should go forward. That would remove the political rhetoric from the process, he said.

The court challenge began on April 9 when CUPE and the Communications, Energy and Paperworkers Union filed a lawsuit arguing that the 1998 Electricity Act permitted the government only to hold and acquire shares in Hydro One. The legislation made no reference to selling the shares, the unions argued.

They also argued that Jim Wilson, the energy minister at the time, said the government had no plans to privatize Hydro One.

The government has not amended the legislation since, the unions argued, and it announced the privatization only in December.

Judge Gans "stressed that this is an asset that has been in public hands since 1906," said Steven Shrybman, an Ottawa lawyer who represents the unions. "If the government intended to sell something this important, that’s been in public hands for this long, it should have made its intentions very clear to people, and it didn’t."

The Hydro One deal is not related to the open market for electricity, which begins next month. That involves deregulating the price of electric power to reflect market conditions. However, the price for Hydro One’s transmission services will remain regulated.

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.

Ronald Zajac
Brockville Recorder Times
April 23, 2002

ONTARIO — It’s a lot more complicated than throwing a switch.

As of May 1, Ontario residents will face the confusing and even frightening reality of a free electricity market.

Utility customers used to getting power from one company, be it convenient or irritating, will now have to choose between sticking with that company or signing with a licensed retailer promising deals that may or may not save them money depending on where the market goes.

Perhaps even more confusing will be the new, "unbundled" hydro bill, which will break down people’s electricity costs into different categories, only one of which is even affected by a retail contract.

It’s enough to make one throw up one’s hands and put off any major decisions.

Which is exactly what people should do, at least for the moment, says Tom Adams, executive director of Energy Probe, an environmental watchdog group that has been keeping a critical eye on the many changes to Ontario’s electricity market.

The way things are now, he thinks, Ontarians would probably save money by sticking with their current electricity provider, who will be required by law to sell them power at market prices.

"Eventually, it might make sense to sign with a marketer," said Adams.

"Right now, you should sit back, procrastinate and wait for things to settle down."

In fact, the commodity portion of the hydro bill – the part affected by deals with marketers – should be the least of people’s worries right now, said Adams.

The real worry, he believes, is in the transmission and distribution systems, or the poles and wires that bring the electricity to local communities and, ultimately, to people’s doorsteps.

Adams says that’s something customers across Ontario will be paying off for years to come in the form of higher electricity bills.

Perhaps so, says a provincial official, but things would have been a whole lot worse had Queen’s Park done nothing.

"Ontarians are going to pay lower electricity prices than they would have had we kept the old monopoly system in place," said Shane Pospisil, communications director for the Ontario Ministry of Environment and Energy.

"That doesn’t mean prices are going to be less; it means prices are going to be lower than they would have been."

Pospisil points to an often-cited study by the government and York University economics professor Fred Lazar, which claims introducing competition could save Ontario electricity customers up to $6 billion.

Both sides agree something had to change.

Under the old system, in which Ontario Hydro held a monopoly of the province’s electricity market, the provincially owned corporation racked up a massive debt of more than $38 billion.

The old system operated under a "power at cost" system, essentially user-pay, Pospisil noted.

That worked fine for decades, but things went awry in the 1980s and early 1990s, when Hydro’s expansion into nuclear power generation created huge cost overruns that ultimately trickled down to the users.

Ontarians were subjected to the highest electricity price hikes in the province’s history. Between 1983 and 1993, wholesale electricity prices in Ontario rose by 94 per cent. Distribution costs made that even more expensive for the average user.

Things started to change under the old NDP government of Bob Rae, which froze electricity prices in 1993. In 1995, the incoming government of Mike Harris froze them for another five years and set about fixing the system.

The result was Bill 35, the Energy Competition Act, the controversial legislation that would eventually lead to the sale of Brockville’s electricity utility.

In April 1999, it broke Ontario Hydro into five successor companies, including Hydro One, the firm that eventually bought the city’s electricity utility, which was once a part of the Public Utilities Commission (PUC).

The government sought to restructure the entire electricity market to make it more competitive. That’s a worthy project, but it has so far been poorly executed, according to Adams.

"At the outset, the project that was proposed made a lot of sense," he said. "[But] this thing has turned from a project that we could have been proud of into a nightmare."

That nightmare will take the form of higher electricity bills and a huge, taxpayer-backed debt left over from the old Ontario Hydro, he said.

"The reason," says Adams, "is disastrous leadership around the transition process."

For starters, the government decided to take the old electricity utilities, quasi-municipal bodies whose accountability structure was ill-defined, and turn them into more competitive private entities known as local distribution companies (LDCs).

Good idea, Adams believes, but for one crucial decision.

After figuring out what the utilities, built up by ratepayer dollars, were worth, the province turned them over to municipalities, in essence giving them a cash windfall that would have been better spent paying off part of Ontario Hydro’s debt.

That left municipalities, at the time, with the option of selling the utilities for a profit or making money running them.

Brockville’s cut of that transfer is the $12 million it made by selling the utility to Hydro One, a sum that remains in the bank until a public debate is held on how best to spend it.

Compounding the problem was Bill 100, further legislation introduced in 2000 that restricted the abilities of LDCs to make a profit. The legislation sent a chill to investors who were ready to snap up LDCs and run them for profit.

In Brockville, that legislation – which never became law – scuttled a lease deal with Enbridge.

That development, as well as a 30 per cent "transfer tax" municipalities would have had to pay to sell their LDCs to anyone other than Hydro One, essentially allowed the successor to the old Ontario Hydro to grow cancerously" by buying up former municipal utilities to the tune of $555 million, said Adams.

"Those acquisitions were all backstopped by taxpayers," he said. "It was a colossal mistake."

Adams believes the provincial government, while it set out to clean up the mess left behind by Ontario Hydro, caved in to pressure from the large firm and thus allowed its successor to grow.

Adams figures that, as a result of transmission and distribution costs and the repayment of the old Ontario Hydro debt, the average Ontarian will see that his or her overall electricity bill has risen by roughly 20 per cent compared to March 1999, the last month before the Ontario Hydro breakup.

"Signing with a marketer doesn’t give you any protection whatsoever from this," he said.

Complicating the situation even further is the more recent news that the province may not have the electricity supplies it had forecast for this year and possibly 2003, a situation that may lead to brownouts.

If Ontario has to buy more power from outside sources, that, too, can increase the overall electricity bill, Adams notes.

"It’s going to increase our prices," he said.

Pospisil denies the province pressured municipal governments to sell their utilities to Hydro One or stacked the deck in the company’s favour.

He notes there are 94 LDCs in the province operating independently from Hydro One. Out of Ontario’s 4.1 million electricity customers, Hydro One serves 1.2 million.

Meanwhile, the $555 million in acquisitions were made not by Ontario Hydro, but the new Hydro One, a firm set up to be a commercial entity that makes purchases on its own credit rating rather than any guarantee of taxpayer dollars, Pospisil said.

While electricity bills may rise, Pospisil believes the new system will protect consumers against unjustifiable increases.

All rate increases for things like transmission or distribution must get the approval of the Ontario Energy Board, an arm’s-length, quasi-judicial provincial panel, he said.

The province has designed the rules so that distribution companies – be they Hydro One or independent – cannot make more than an after-tax return of 9.8 per cent.

Adams concedes there are more safeguards built into the new system.

In fact, he takes issue with the term "deregulation," noting the old Ontario Hydro was subject to much less regulation than its successor firms.

He points to the OEB’s role, as well as the new Electrical Safety Authority, an arm’s-length provincial agency designed to keep the power system safe. In the old days, Ontario Hydro essentially performed that role on its own, he said.

But for the Ontario electricity user, the final test will not be on paper, Adams cautions.

"We’re going to have to see how these instruments perform," he said.

Ronald Zajac
Brockville Recorder Times
April 23, 2002

Last week’s court decision blocking the sale of Hydro One will not affect plans to open the electricity market to retail competition May 1, government officials insist.

"It’s full steam ahead," said Shane Pospisil, director of communications at the Ontario Ministry of Environment and Energy.

The sale of Hydro One and the deregulation of the electricity commodity market are related issues, but the one does not directly affect the other, Pospisil said.

But a frequent critic of Ontario’s electricity reforms, Energy Probe executive director Tom Adams, thinks the court decision could throw the entire restructuring process into doubt.

Justice Arthur Gans ruled Friday that the Ontario government does not have the authority to privatize Hydro One.

The decision stemmed from a legal challenge on the sale of the company launched by two unions, the Communications, Energy and Paperworkers Union of Canada and the Canadian Union of Public Employees.

Lawyers for the two unions had argued that Section 48 of the Electricity Act only allows the government to acquire and hold shares – not to sell them.

The sale was expected to raise about $5 billion for the provincial government.

Hydro One is one of five companies created when the Ontario government broke up the former Ontario Hydro in 1999.

The company operates the transmission towers and lines that carry power across the province. It also sells electricity to 1.2 million retail consumers including Brockville and the surrounding area.

The other successor firms to Ontario Hydro are: Ontario Power Generation, which deals with the generating end of the power grid; the Electrical Safety Authority, an arm’s-length provincial agency governing the security of the power system; the Independent Electricity Market Operator, another arm’s-length agency that will oversee the power market; and the Ontario Electricity Financing Corporation, a special entity formed to retire a part of the old Ontario Hydro’s $38-billion debt.

The court decision halting the Hydro One sale could have a "dramatic impact" on the whole restructuring process, as it can serve as a focal point for the larger public discontent over the reforms, Adams believes.

"There is now a lack of consensus" on electricity restructuring, in contrast to the late 1990s, when the province set out to change the system with a plan most people endorsed, he said.

"The public has a lot of legitimate concerns."

Some of these, such as the political left’s claims that electricity bills will double, that the system will be unsafe or that Ontario will lose control of its electricity system because of the North American Free Trade Agreement (NAFTA), are spurious, Adams believes.

But concerns about rising electricity rates remain legitimate, he said.

And Adams estimates as many as 900,000 Ontarians have already signed deals with electricity marketers, often under the mistaken impression their rates will go down.

"We’ve got to go forward with something, but we can’t really move forward effectively unless there’s some level of public consensus around the restructuring," he said.

"Adams’s prescription is to depoliticize" the discussion by sending the issue of electricity privatization to the Ontario Energy Board, a quasi-judicial provincial panel.

Pospisil said Monday the government is continuing to study the situation before deciding on the next step.

Ronald Zajac
Brockville Recorder Times
April 23, 2002

Electricity marketers may offer customers stable prices in an uncertain power market, but for now it makes sense not to sign any long-term contracts, says the head of a Toronto-based energy watchdog group.

While he has nothing against the private retailers who will be selling Ontarians power starting May 1, Tom Adams, executive director of Energy Probe, believes that at the moment the market favours those who sit and wait.

Starting May 1, electricity bills will be "unbundled," a term meaning the total amounts they show will be divided into their constituent parts.

A part of the bill will go to costs over which the consumer has no control, such as transmission, distribution and the retirement of the old Ontario Hydro’s debt.

The rest, known as the commodity price, will vary according to the regulated "spot market," where the actual power that ends up in people’s home is bought and sold.

For instance, a provincial government estimate, based on January 2002 figures, places the average cost of electricity at 9.3 cents per kilowatt hour. The commodity portion accounts for 4.3 cents, while the rest goes to the other costs.

Area residents who are visited by electricity marketers should remember the marketers only have control over the second part of the bill.

People will have a choice between buying electricity from one of the licensed marketers now offering deals, or sticking with the company that currently distributes power into their area. Under the second option, the company is required to provide electricity at the spot market price.

What the marketers can offer is a fixed commodity price over a set number of years. The customer signs on thinking he or she will get a better deal with the fixed price, in the long term, than on the fluctuating spot market.

But people should know that, according to a provincially mandated rebate program, electricity customers are currently entitled to some money back if the commodity portion rises above 3.8 cents per kilowatt hour, Adams noted.

It’s a cost mitigation program the province has put in place for the next four years, he said.

Even more crucial to know, according to Adams, is that deals with marketers tend to sign away that rebate into the hands of the marketers.

The combination of current market conditions and that provincial rebate makes it more advantageous, at the moment, to stick with the fluctuating market, according to Adams.

"Eventually, it might make sense to sign with a marketer," he said.

People who want more information about the new electricity market can call the Ontario Energy Board at 1-877-632-2727.

Robert Benzie and Paul Vieira
National Post
April 24, 2002

TORONTO – A landmark court ruling that blocks the sale of the Hydro One power utility has left Ernie Eves, the new Ontario Premier, struggling to determine a course of action as his Conservative government fends off criticism it is indecisive.

Observers were puzzled yesterday by the fledgling administration’s apparent inability to decide whether to appeal Friday’s Ontario Superior Court decision preventing the Hydro One privatization or to amend provincial legislation enabling the largest initial public offering (IPO) in Canadian history to move forward.

"It’s been kind of quiet, to tell you the truth" said one Bay Street insider in reference to the lack of information the government is relaying to the group of investment dealers who will participate in the sale of Hydro One shares.

He said most of the dealers involved are waiting for Mr. Eves’ next move – but are not expecting a snap decision.

"I suspect they’ll take their time on this," the insider said, "because this has gotten very political now, with Dalton McGuinty [the Liberal leader] giving speeches and Howard Hampton [the NDP leader] running around with billboards across the province."

Within Mr. Eves’ administration there are concerns about the lack of urgency in dealing with an issue that could make or break the Conservative government’s fiscal planning.

"The longer the decision is put off, the greater effect that it will have on the government. If we put the sale off too long it could potentially hinder our ability to use any proceeds of the sale to balance the budget," said one government official.

Given a projected revenue shortfall of up to $5-billion this year, the Conservatives have been counting on the Hydro One IPO to ease its financial worries. While the proceeds of the sale are earmarked to pay down the "stranded" debt of the old Ontario Hydro monopoly, the infusion of cash from the IPO could help the government stave off a budget deficit this year.

The new Premier has indicated he will not make a hasty move.

"This is a matter of great public importance that requires very careful consideration regarding next steps," said Barry Wilson, a spokesman for Mr. Eves.

"The Premier has asked his Attorney-General [David Young] to review this very recent decision in detail and to provide him and Cabinet with options."

Another government insider said a few days’ delay should not have a significant impact on the sale.

"It will be later this week. Whether they come to a decision today or later this week is not going to make that much of a difference," said the official.

Mr. Hampton, for his part, said Mr. Eves is being cautious because he has inherited a political minefield from Mike Harris, the former premier.

"If they want to proceed, they’ve got to do one of two things: They have to either appeal or they have to bring legislation to the floor of the Legislature," said the NDP leader, noting either option is fraught with dangers for the government.

"The problem with an appeal is it would probably take at least a couple of months to have an appeal heard. There’s no assurance they would win the appeal because they put in very weak evidence at the trial. The problem with bringing in legislation is that it gives this issue the public and political profile that this government has tried to avoid from the very beginning," he said.

Mr. Justice Arthur Gans’s decision, which ruled in favour of an application from the Canadian Union of Public Employees and the Communications Energy and Paperworkers that the provincial Electricity Act did not empower the government to sell its electricity transmission grid, blindsided the Conservatives, Mr. Hampton said.

Mr. McGuinty, meanwhile, has written to the Ontario Securities Commission, asking the regulatory body to stop the Hydro One sale.

Tom Adams, executive director of Energy Probe, urged Conservatives to counter the Opposition leaders’ charges.

"They’re not demonstrating a lot of leadership. They need to respond to Hampton and McGuinty in terms of their claims [of the negative impact of the Hydro One sale]," Mr. Adams said.

With the opening of the market slated for May 1, homeowners and businesses will be able to buy their electricity from whomever they choose.

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."