You Can't Fix Ontario Hydro

Vincent J. Curtis

24 Dec 2016

My hometown newspaper published an article by Mr. Andrew Frame, P.Eng. in which he outlined a way in which the exorbitant electricity rates charged to Ontario electrical consumers could be substantially reduced.  Mr. Frame is a highly respected consultant in the Electrical business in Ontario.  His proposal seemed to me to be to aim at restoring the status quo ante 1998, when which Ontario Hydro was a government regulated monopoly.  The government of Mike Harris partially deregulated the electrical market in Ontario so that the Ontario government could get out from under the debt load of Ontario Hydro.  That debt exploded under the mismanagement of Ontario Premier David Peterson, who kept starting and stopping the construction of the massive Darlington Nuclear generation facility.  Much water has passed under the bridge since 1998.

Below is a commentary. 

Mr. Andy Frame proposed a means of reducing the cost of electricity in Ontario by between 30 and 50 percent, in his estimation.  He would do so by having the Ontario government pass new legislation that would, in effect, restore the status quo ante 1998 in respect of electrical generation, distribution, and delivery.  The old structure of Ontario Hydro would be restored, such as it can be.

I submit that his proposal is impossible.  In respect of Sir Adam Beck’s ideal of Ontario’s electrical supply at cost, the toothpaste is out of the tube and it is impossible to put it back.

The levels of government in Ontario are addicted to the tax revenues they receive from electrical generation, and Hamilton in particular is looking to sell shares in Horizon Utilities in order to raise capital.  His proposal would have government cease receiving these revenues altogether.  Mr. Frame would also have Ontario buy out existing contracts for wind and solar generation, and it would likely also have to buy out private ownership whose capital investments would become practically worthless as a result of the expropriation of powers Mr. Frame recommends.  The Ontario government hasn’t got the money for the capital purchase that would be involved.

The unraveling of Ontario Hydro began when Premier David Peterson bungled the Darlington file, with his repeated starting and stopping of the project driving the cost of that new facility out of sight.  He followed it up with an anti-Keynesian fiscal policy that doubled Ontario’s fiscal expenditures in five short years, running a deficit and increasing Ontario’s debt during good financial times.  He left a fiscal mess to his successor, Bob Rae of the NDP.  Rae, in turn, pursued a pro-Keynesian policy of running deficits in bad financial times, increasing further Ontario’s debt load.  All this time the province was seen as the guarantor of the debt of Ontario Hydro, as well as of its own.

Fiscal sanity was not restored until the election of Mike Harris.  To get the province out from under the debt of Ontario Hydro, Harris instituted the reforms of 1998.  Then Dalton McGuinty was elected and it was under him that things went all madcap.  Wynne inherited the mess from McGuinty.

For all this, the people of Ontario have no one to blame but themselves.  Those who today are in their seventies and find electricity unaffordable, were the ones who in their forties elected David Peterson and then Bob Rae.  They were in their fifties and sixties when they elected Dalton McGuinty.  They were stronger then, and had sturdier incomes.  Now their indulgencies and inattention have come home to roost.

The iron law of politics is that you get the government you deserve.  The fate of today’s seniors and of Ontario industry in respect of electricity costs should serve as a warning to today’s twenty to forty-somethings.  The decisions they make and fail to make today will have a powerful consequences on their lives after they retire.

Mr. Frame’s solution won’t work.  With all the debt and fiscal demands on municipal and provincial government that have grown since the days of David Peterson, it is impossible to go back.  Debt and mistakes have to be paid and paid for, and that can only come by working our way forward and by stop making stupid and obvious mistakes.

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