"Like other privatization schemes, Hydro One privatization will mean we lose control over the service, even though we’re still getting the bill."— James Clancy, NUPGE National President
Ottawa (07 Dec. 2015) — While the Ontario government was forced to abandon its plans to sell off all of Ontario’s electricity system in 2002, parts of the system were privatized.
A nuclear power station, some hydro-electric facilities and all renewable energy generation were transferred to the private sector. Parts of the electricity system remaining in public hands were expected to act like private companies.
The recently released 2015 Ontario Auditor General’s report shows the consequences of that partial privatization.
Contracts guarantee high prices for private sector profits
The Ontario Auditor General Bonnie Lysyk found that guaranteed prices for electricity generators were a major reason for the 70 per cent increase in the electricity portion of hydro bills between 2006 and 2014. Whether it’s nuclear power, renewable energy, or gas plants, contracts with private sector providers guarantee them a price that is far above the average market price.
Instead of responding to the concern raised by the Auditor General, the provincial government appears set on making things worse. The day after the Auditor General’s report was released, the provincial government signed a contract with an operator of an already privatized nuclear power plant operator that commits the province to paying more than double the market price for electricity.
“Before the system was partially privatized, what Ontario consumers paid was what it cost to produce electricity,” said James Clancy, National President of the National Union of Public and General Employees (NUGPE). “Now with partial privatization, we’re having to pay for investor profits as well as the actual cost.”
Running public services like private businesses harms service
The Auditor General’s report also highlighted problems with maintenance at Hydro One that are contributing to reliability issues and are likely to make the situation worse. These issues suggest that the decision to run Hydro One as a private business is causing increasing revenues to be put ahead of serving the public.
Delays in replacing equipment have led to $4.5 billion worth of Hydro One assets being kept in service beyond their normal replacement dates. Lower standards for tree trimming compared to other electrical utilities mean more problems with damaged power lines.
With privatization this is likely to get worse. Private investors in Hydro One were promised at least $500 million a year in dividends. Payments of that size will affect how much is available for maintenance and electricity rates.
Privatization will mean loss of accountability and transparency
Because of privatization, the Ontario Auditor General will no longer be permitted to look into what is happening at Hydro One. This means that even though it will be continuing to provide an essential service and even though it will continue to be funded by the electricity rates paid by Ontarians, the public will lose the right to know whether key issues are being addressed. As the Auditor General pointed out, she will not be able to do a follow-up report on whether the problems she identified are being fixed.
"Like other privatization schemes, Hydro One privatization will mean we lose control over the service, even though we’re still getting the bill,” said Clancy.
The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 360,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE