Sale of Toronto Hydro is up to mayor and council, Kathleen Wynne says

Premier Kathleen Wynne’s Liberals will not stand in the way of any push by Mayor John Tory to privatize Toronto Hydro.

TheStar.com
Sept. 28, 2016
By Robert Benzie and David Rider

Premier Kathleen Wynne’s Liberals will not stand in the way of any push by Mayor John Tory to privatize Toronto Hydro.

Under fire from the New Democrats, who also oppose her sell-off of Hydro One, Wynne said Wednesday it’s up to Toronto city council to determine the fate of the municipal utility.

“If the member opposite wants to speak about Toronto Hydro, he will have to speak to the mayor of Toronto and the councillors on the city of Toronto council,” the premier told NDP MPP Jagmeet Singh during question period.

Energy Minister Glenn Thibeault agreed, emphasizing that any sale “is totally a decision for Toronto city council.”

Behind the scenes, senior Liberals say they are frequently urged by downtown businesses to do something about Toronto Hydro’s aging infrastructure.

“They come to us all the time because they’re worried,” said a high-ranking official, speaking on condition of anonymity.

The insider confided that many of the concerns heard at Queen’s Park about the province’s electricity system relate specifically to Toronto Hydro and big business’s fear of outages as demands skyrocket due to increased density.

 

To allay those, the city-owned utility has a five-year, $2.25-billion plan to upgrade its infrastructure.

Last week, the mayor said “we have an obligation to look at all the options including unlocking the value that already exists in Toronto Hydro, while keeping it in public hands.”

“We must … identify a way to pay for large-scale projects that are urgently needed,” Tory said.

That suggests he may want to mirror what Wynne’s government is doing with the sale of a 60 per cent stake in Hydro One, the province’s electricity transmission grid.

While a majority is being sold, the provincial government will remain the largest single shareholder and electricity rates will continue to be set by the Ontario Energy Board (OEB), an arm’s-length regulator.

The Liberals are using the proceeds to bankroll billions in new public transit, bridge and road construction.

Of the more than $9 billion expected to be raised from the shares, $4 billion is earmarked for transportation and $5 billion to pay off Hydro One’s debt.

“Every dollar realized from our current assets will be reinvested in Ontario’s infrastructure. This sale will support the single largest infrastructure investment in Ontario’s history,” Thibeault said of the share offering.

Although Toronto Hydro pays the city an annual dividend - $56 million last year - it would lose its provincial tax exemption status if more than 10 per cent of it is sold.

A sell-off would mean a 22 per cent transfer tax hit, so if it sold for $1 billion, the city would owe the province $220 million.

The NDP’s Singh (Bramalea-Gore-Malton) said Toronto ratepayers should be alarmed.

“Two years ago, the premier denied that she was privatizing Hydro One. Today, the premier isn’t denying that she’s planning to help the municipalities sell local hydro utilities,” he said.

“Ontarians are worried. They’ve been let down by the Liberals before and they’re worried that they’re going to be let down yet again.”

Ontario energy insiders, meanwhile, are scratching their heads at Tory’s use of the aging energy grid as justification for selling part of Toronto Hydro to the private sector.

Industry sources - who talked to the Star on background because they are not authorized to speak on the issue publicly - noted Toronto Hydro funds infrastructure maintenance and upgrades through rate increases approved by the OEB.

Last March, the OEB authorized hikes to give the company the $2.25 billion for capital spending over five years, after a request for $2.5 billion.

“It is the OEB’s expectation that one of the outcomes of the capital plan will be better system-wide reliability,” the independent board said in its decision.

The city could invest proceeds from a partial sale into the grid, but Tory has suggested new funding is needed for transit and social housing capital spending.

A private investor could seek to upgrade the grid through an OEB application but they would almost certainly expect a return on their investment and the obvious way is through further rate increases for Toronto Hydro’s 730,000 customers, the experts said.