Nov 10
22
McGuinty’s corrupt energy oligopoly
Financial Post – Nov. 20, 2010
Ontario’s powerful sleight of hand
By Lawrence Solomon
The Ontario government’s clever Ontario Clean Energy Benefit – a 10% rebate on the rapidly escalating power bills of Ontario voters – is a win-win-win proposition. A win for the Liberal government, which needs to blunt a consumer revolt before next year’s election. A win for the power companies it owns, which now have a go-ahead to continue to escalate their rates. And a win for renewable energy suppliers and their environmental group allies, who had feared that the Ontario government would curb the lavish solar and wind contracts that have been clobbering consumers.
The rebate scheme – which is sure to dampen public revulsion at the way the power system is being managed – is especially impressive in how expertly the government has disguised its activities. To read the press reports, the government is deftly rejigging its provincial borrowing and fast-forwarding revenues from a long-term land registry contract to finance the rebate during a five year transition period to a cleaner energy infrastructure. Sweep aside these sleight-of-hand explanations and the reality is much simpler: The provincial government is in reality providing voters with a five-year break on their HST while rapidly escalating the power prices that all consumers face. Because the province and the municipalities overwhelmingly own the power system, they are making off like bandits as power consumers get squeezed.
Under the old Ontario Hydro monopoly, the provincial power system was run on a non-profit basis. While the absence of a profit motive eliminated an incentive to be efficient, the system did have one virtue – the government couldn’t milk it for revenue. Under the new government-run monopoly system, the power system is run on a for-profit basis, with the profit roughly proportionate to its equity. The more expensive the system, the higher the dividends, fees and taxes that accrue to the government. Put another way, the new power system rewards inefficiency – the bigger the boondoggles, the fatter the government coffers. The new system is already quietly filling those coffers with some $2 billion a year that wasn’t available to them under the old Ontario Hydro system.