Fred Vallance-Jones
Hamilton Spectator
May 11, 2002

The head of the body that runs Ontario’s new competitive electricity market has waded into the politically charged debate over the future of Hydro One.

And the NDP opposition at Queen’s Park says that’s not something James Baillie should be doing.

The chairman of the Independent Electricity Market Operator, or IMO, says in a letter to Premier Ernie Eves that Hydro One must be "well capitalized." He says that’s important so it can make substantial investments in Ontario’s electricity grid, which it owns.

Baillie doesn’t say exactly what the government should do, and he wasn’t available yesterday to explain further.

But his letter is predicated on the government choosing some form of privatization. And Baillie speaks of the need for Hydro One to have an "entrepreneurial motivation."

His missive to Eves came to light the same day an association representing major electricity industry players, including Hydro One, published a full page newspaper ad. It appeals for the privatization of Hydro One to go ahead as originally planned.

Some members of the Ontario Energy Association, including its chairman Peter Budd, have been donors to the Ontario Progressive Conservative Party.

Budd, a prominent Toronto energy lawyer, says the group bought the advertisement to appeal both to the public and to Ernie Eves and his cabinet.

Of note, Budd sits on the IMO board representing consumers, but he says he hasn’t read Baillie’s letter to the premier nor has he spoken with him about it.

That said, Budd argues the best way to achieve what Baillie wants is to go ahead with the planned privatization.

"When someone says a utility should be well capitalized, to me what they’re saying is they have to have enough money and they have to be able to have the profile in the capital markets to raise new money and replace revolving and old debt," Budd said. "That means you have to have a really good relationship and a trusted one . . . with the capital markets."

The NDP interprets Baillie’s words as an oblique call on the government to indeed go ahead with the planned public sale of shares in Hydro One.

NDP Leader Howard Hampton believes that, reading between the lines, Baillie is really arguing against ideas such as leasing out Hydro One’s transmission network.

"What he’s saying is they want a full privatization," Hampton suggested.

As well as heading the IMO, Baillie is a corporate lawyer with the well-heeled Bay Street firm Torys.

Whatever the precise interpretation of the letter, Hampton argues it is inappropriate for Baillie to comment at all because of his independent role in the electricity system. The IMO both oversees the wholesale market in electricity and operates the transmission grid.

"He’s supposed to be neutral in all this," Hampton said. "So clearly he has stepped outside of his boundaries."

Baillie said his main concern is the reliability of the electricity supply.

The planned sale of Hydro One shares was derailed by a court decision last month that said the government had no authority to sell the company.

The new Eves government has said it will introduce legislation this spring to allow the privatization to proceed, but has at the same time launched a full-scale review of the plan.

In yesterday’s speech from the throne, the government promised to bring market discipline to Hydro One and to "ensure the necessary capital is provided to rebuild and modernize the transmission and distribution of power in Ontario."

Beyond that, the speech gave away nothing about the government’s plans.