Columnist learns something about energy transmission he wasn't prepared to pay $9000 to learn.

Rivers 100x100By Ray Rivers

November 13th, 2015


Four trucks and seven Ontario Hydro workmen arrived to replace an old hydro pole and transformer before connecting the grid to my new solar collector. A couple of hours later they packed up, leaving me with a pole that looked a lot like that tower in Pisa, and handing me a bill for almost nine thousand dollars for their efforts in installing their own pole.

Electricity started out as private enterprise. So why the fuss about selling shares in Hydro One? At the turn of the century there were entrepreneurs selling electricity and electrical appliances to replace kerosene and coal-gas lamps. Then a little later in the century politicians like Sir Adam Beck, with a bold vision, pushed for the public capital needed to harness the potential of rivers, like Niagara, and distribute the electrons created to every household and business in Ontario.

Rivers hydro pole BEST

Columnist Ray Rivers holding up a hydro poll that feeds the electricity his solar collectors gather and feed into the hydro grid.

By the mid-1990’s deregulation was all the craze. Governments were busy doing their every bit to get themselves out of the business of business. Newly elected Ontario premier Mike Harris was a believer.

His plan was to deregulate the entire energy sector, break Ontario Hydro into smaller components, privatize it all, and bring in competition wherever possible. This was just common sense to him, after all.

Economics 101 tells us that monopolies can be the most efficient form of industrial organization, particularly where conditions favour a natural monopoly – for example where wires come into everyone’s home. Even the phone and cable guys, who managed to stay private, acted like monopolies.

So to deregulation’s credit, telecommunication costs did fall after Bell was required to compete and give up its monopoly.


Mike Harris – are the mistakes many think the current Liberal government is making an extension of the mistakes Mike Harris made?

But Harris hadn’t done his homework. The energy workers’ unions and the courts fought him on privatization. As his plan stalled and the costs of his deregulation spiked, he got cold feet and turned over the keys for the Pink Palace to Ernie Eves. Eves, then facing an imminent election in 2003 and huge public outcry over high rates, further subsided them and put a halt to privatization.

But there was the debt. Decades of subsidized electricity rates had left Hydro almost $40 billion in the hole and $20 billion more than could be supported by its assets (called stranded debt).

Allocation of all that debt among the new companies would have sunk them before they even started operating. And Harris, the deficit-cutter, knew that transferring $20 billion onto the existing provincial debt would have cost him the 1999 election. So every month we now pay off a little more of our parents electricity bills.

Hydro One had its growing pains, including that disastrous first CEO, Eleanor Clitheroe, who paid herself $2.2 million and otherwise acted like a drunken sailor. Today the CEO still gets close to a million bucks while over half of Hydro employees have made the sunshine list. With that kind of leadership I shouldn’t have been surprised by my bill or the seven linesmen who showed up at my place briefly.

Word is out that Hydro One turns in over $750 million to the province annually. They call it a ‘cash cow’ and I know where the milk comes from. Subsidizing government programs with electricity rates is about as regressive as it gets. That hits the poorest households and small businesses the hardest, and is hardly what we’d expect from a liberal government. And doesn’t it make a mockery of the 10% discount we get on each hydro bill – paying ourselves?


Hydro workers clearing trees weighed down by winter ice.

So how would private investors buying a chunk of the giant public corporation be such a bad thing? Hydro One is a big company and isn’t being broken up – and it isn’t even a monopoly. There are other electrical distribution entities scattered in communities all around the province.

Remember all those other guys, besides the heroes from Hydro One, who help us get through that ice storm two winters ago.

The province will hold the biggest share of Hydro One for those worried about the evils of privatization. And in any case there is still a megawatt or two of oversight and control through the Energy Board, the Independent Electricity System Operator and the Energy Minister.

The money being raised from partial privatization has already been targeted to pay for way overdue and badly need transportation infrastructure. And it looks like the public offering has exceeded expectations by already earning $5 billion.

Market investors have a perfectly safe asset in which to stick their cash. And perhaps a new board of directors can help steer a more efficient pathway for the troubled utility.


Rivers-direct-into-camera1-173x300Ray Rivers writes weekly on both federal and provincial politics, applying his more than 25 years as a federal bureaucrat to his thinking. Rivers was a candidate for provincial office in Burlington where he ran as a Liberal against Cam Jackson in 1995, the year Mike Harris and the Common Sense Revolution swept the province. Rivers is no longer active with any political party.

Background links:

A Bone Headed Plan     A Natural Monopoly

Auditor View      US Restructuring      NDP/Toronto Sun View

Hydro One      More Hydro One      Even More Hydro     Bell Canda

Whether Our Electricity     Local Electrical     Ontario Energy     Stranded Debt     Hydro Sales

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4 comments to Columnist learns something about energy transmission he wasn’t prepared to pay $9000 to learn.

  • Ray Rivers

    Dear JP Public – thanks to you and the others for their thoughtful comments. It is a very complicated file, made even more so by this debt issue. That is why I raised it in the article, at the risk of muddying the waters further. The truth is that Hydro One requires discipline, but in its defence also operates some of the least efficient distribution networks in the province, those in rural and sparsely populated areas.

    Hydro One also controls the province-wide transmission lines. It can be privatized but will always need to be heavily regulated, given its monopoly power over the provincial grid. One day, new technologies, such as distributed generation, may lessen that power, making the grid more of a contingency. Hydro One might evolve to become a provider of last resort, in that case.

    To your point, my understanding is that the stranded debt was incurred in large measure on the generation side of the former Ontario Hydro’s operations, and largely to build and debug the nuclear facilities. It is being paid off as quickly as possible, given that the Province won’t simply assume the debt. I don’t share you concern about shareholders of Hydro One having to be subsidized in the future, but that will largely depend on the decisions of the new board of directors.

  • JQ Public

    A friend is buying some Hydro One shares. Apparently he sees it as a “no lose” proposition. I’m not so sure. I’m thinking ordinary taxpayers may be subsidizing his future dividends and capital gains through their electricity bills in the way this “partial sale” is structured. If this is so, I see it as immoral.

    As a capitalist I suppose I should jump at this opportunity to earn money off the citizens of my province. But I just can’t do it.

  • v.muller

    Finally a logical and well thought out overview of Ontario Hydro, warts and all. I have only seen the letters. comments and editorials on the naysayers regarding the partial sale of this giant money eating maw. Now I can make an informed decision on my stand on Premier Wynne’s intending sale. I am for anything that will shake up this excessively expensive necessary service for most of us.

  • Mike Ettlewood


    Your argument has a nice flow and is almost convincing – almost. However, anyone who has knowledge of or experience with either the Ontario Energy Board or the oversight administered by the Ministry of Energy will never be convinced. Moreover, it is bad fiscal policy, whether public or private, to divest capital assets to fund operating costs and this is largely what is being done with this “privatization”. It is short term gain for long term loss and selling our future for political expediency.