Ontario’s Outlaw Premier Plots to plunder Hydro One

The Globe and Mail reported early March 10th that Premier Wynne’s Ontario government is looking carefully at selling off a portion of Hydro One.

The government has not yet decided exactly how much of the company to sell off beyond the initial IPO proposal, or whether the private sector would ultimately own a majority of the company’s equity, sources said. Much of that would depend on how the initial sale goes.

…The developing proposal is said to have the blessing of Ms. Wynne’s powerful lieutenants: Deputy Premier Deb Matthews, Finance Minister Charles Sousa, Energy Minister Bob Chiarelli and Infrastructure Minister Brad Duguid.

By the afternoon of the 10th the Globe was adding to the tale:

The Premier said Tuesday that word of the IPO plan “has gotten into the public realm prematurely” and she has not made a “final decision” on whether to pursue it.

“Whatever we do, we are going to control prices. We are going to make sure that the regulatory regimes that will protect people in this province stay in place,”

CTV reported the Premier “said no final decision has yet been made.”

The Premier is shown saying,

“We are going to be able to track the projects that we are building. People are going to be able to look at how much money is coming in and where that money is going to be sent.”

If that doesn’t get a “bullshit” from you, you’ve been asleep for years.

The current Minister of Energy, a former Minister of Energy, the Finance Minister, The President of the Treasury Board and the Premier are all in support of a plan that ignores the law.

Here’s a(nother) law Ontario’s government isn’t interested in; The Electricity Act, 1998.

Proceeds of disposition

 50.3  (1)  All proceeds payable to Her Majesty in right of Ontario in respect of the disposition of any securities or debt obligations of, or any other interest in, Hydro One Inc., a corporation established under section 50, a corporation or other entity established under section 50.1 or an arrangement made under section 50.1 shall be paid to the Financial Corporation,

(a) less any amount that the Minister of Finance considers advisable in connection with the acquisition of such securities, debt obligations or interest, including the amount of the purchase price, any obligations assumed and any other costs incurred by Her Majesty in right of Ontario; and

(b) less the amount of any costs incurred by Her Majesty in right of Ontario in disposing of the securities, debt obligations or other interest. 2002, c. 1, Sched. A, s. 10.

I don’t think this covers spending the proceeds of sales on new brooms for transportation – or any other infrastructure project.

The Financial Corporation referred to in the act is the Ontario Electricity Financial Corporation (OEFC) – which is technically the successor to the old Ontario Hydro before it was carved up in preparation for the flailing attempt at a market introduced in 2002. It used to post annual reports within about 6 months of the end of its fiscal year. They’re 2 years behind posting annual reports to their website already,with their next fiscal year-end less than 3 weeks away.

Numbers for the OEFC can be found, however, in the Public Accounts of Ontario published by Ontario’s Ministry of Finance. For the year ended March 31, 2014 the OEFC showed assets of $17.61 billion and liabilities of $27.391 billion.

The nine billion, seven-hundred and eighty-one million dollar difference is known as the unfunded liability.

It’s why the law exists demanding if an asset is disposed of the proceeds pay down the debt of the OEFC. The debt of the OEFC is something Wynne and her predecessor have been totally oblivious to. Since inception, the OEFC has deemed as paid to the Province of Ontario the first $520 million of revenues from Hydro One and Ontario Power Generation (OPG) to be servicing a note paying Province of Ontario for $8.885 billion at 5.85%. Any proceed above that should reduce the unfunded liability.

And it has.

But only by booking an IOU from the Province of Ontario to the electricity sector.

The last time the province paid the OEFC from the profits of OPG and Hydro One was 2003, prior to the election of a Liberal government.

Since that election the “Due from Province of Ontario” asset has been growing – to $3.865 billion as of March 31, 2014 and due to a record combined income year in 2014, likely to around $4.75 billion by now. While collecting 5.85% interest from OEFC (far above their own financing costs since 2006), Ontario ignores interest on the money they ignore owing the OEFC.

Anybody think a government that ignores the province’s laws in planning is good for the money they owe the OEFC?

We’ve moved from the “stranded debt” under the Progressive Conservatives to “stranded assets” under the Liberals.