Sale of Ontario Power Generating Assets


[Sell Off of Provincial Assets to Fuel Spending Binge]

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There is an all consuming economic circle at the heart of Ontario Lieberal government.  You might even call it a vicious circle. By way of observing the pattern of how decisions are made by this inept bunch, there is little wonder why bond rating agencies such as Standard and Poors bumped up Ontario’s bond costs again. The on-going binge spending is not going unnoticed in international financial markets.  All is certainly not “well”. Ontario’s debt will peak at 267 per cent of annual revenue[1] and interest payments will make up 9 per cent of operating expenditures.

There is not a single indication that the Wynne/McGuinty Lieberals are showing plans to ease up on the binge spending.  When all is added up, the Pan Am fiasco will have dumped another $3.0 BILLION in to debt pile accumulated by this group of politicians comprising the Lieberal caucus.  Wynne is already poised to dump another $1.6 BILLION into a Light Rail Transit (LRT) line aimed at connecting Mississauga and Brampton.

Let’s just say has absolutely nothing to do with Wynne’s lofty environmental musings about grid lock or carbon.  By all appearances that LRT route would seem to have more to do with rewarding campaign donors than anything else.  Anyone who lives and works in Ontario’s Golden Horseshoe   (the Oshawa through Hamilton arc) can tell you one thing about traffic patterns: traffic flow is east/west and not north/south. Except if you are headed to the cottage.

I suppose that by the end of their current term in office, the LIebeals will once again be boasting about all they accomplish. There are some pretty grim consequences as I will explain.

The Lieberals have been covert in their methods of fueling the spending binges.  You need money (lots of it) to continue with the spending binge which turns out to be the only actual accomplishment (?) of the Lieberals in Queen’s Park.  The simplest method to pay for the waste would be tax increases.  They (the Lieberals) do not want to increase taxes directly as the size of tax increases needed to fuel the binge spending would set off riots on the streets and certainly draw attention to the truly wasteful and shameful way that they are binge spending.

Close examination of the Lieberal alternatives to a tax increase are what I have been pointing out. I have already analyzed two alternatives: borrowing and nickel-dime fee charges such as Wynne’s likely attempt to turn part of the major highway system into toll roads. Here is a third in the series of revelations of your LIeberal government’s standard operating plan in Ontario.  I shall refer to this one as “Selling the Farm”.

Sell Off of Ontario Power Generating Assets

 Lost in the swamp of good news PanAM medal stories is a story that too many people have missed.  Wynne and her team are currently preparing to sell off a huge portion of Ontario Power Generation’s (OPG) asset base in Ontario. By carving off the nuclear facilities and the high-voltage, long-distance transmission lines carrying power across the province, the Lieberals have visions of a tidy chunk of cash being available to fuel the Lieberal binge spending engine[2]

The second portion of OPG’s asset base comprised of the lower-voltage lines that distribute power directly to homes, farms and businesses, mostly outside urban centers could then be sold to local and municipal governments bringing in another cash infusion.  The only source of money for the second part of the sell-off would be local business and residential tax grabs. In essence: pay or the lights go out.

Present State of OPG, a Study in Lieberal Mismanagement

Under the Wynne Lieberals, Ontario has been “bleeding jobs”. These jobs vanishing because large and mid scale employers are opting to locate (and relocate) facilities in other jurisdictions that have more favorable hydro costs.  Examples such as Quebec, Manitoba, and several  USA states (Pennsylvania-New Jersey-Marylandas well as most of the New-England region) boast substantially cheaper energy costs than what is happening in Ontario.  To a manufacturer, consuming high amounts of hydro to operate manufacturing machinery, Ontario’s already high hydro charges are all the incentive needed to relocate.

Ontario Class A customers (average hourly peak demand of five megawatts or higher) are paying $76.41 (per megawatt hour).  Manitoba charges $36.49; Quebec: $45.32, New York State: $55.97, Pennsylvania-New Jersey-Maryland: $44.78 and New England: $54.08.  In fact, the Ontario rate escalates to $94.09 Ontario’s Class B customers[3].

Chrysler (Canada) CEO Sergio Marchionne and Windsor Mayor, Drew Dilkens are among the many business and civic leaders who have been cautioning Premier Wynne about the disincentives of high hydro costs[4]. It is ironic that, in Peel we have two former Lieberal (federal and Provincial) gleefully rubbing their hands to encourage the wasteful spending on an LRT as is planned by Wynne. In fact, provincial treasure (Sousa) actually boasts that likely destinations for the hydro $10 BILLION sell-off would be mass transit.

Ian Howcroft, the vice president of the Canadian Manufacturers adds, “said energy could account for as much as 30 per cent of a company’s expense, especially in mining and foundries.” Sarnia Mayor Mike Bradley has stated that, “Chemical plants, in particular, are heavy users of power so there’s a good payback, but we need the province to make sure we’re competitive with our American friends.” Nova Chemicals spokesperson Tracy Tierny says  the company is considering the U.S[5]. Magna International CEO, Don Walker says, “I’m worried about electricity prices in Ontario, where all of our plants are located.” Magna operates 46 manufacturing plants in Ontario.

Here, my friends are the choices that Ontario based manufacturers have in from of them.  The “bottom line” and not jurisdiction is what is discussed at the board room table.  

Take a long look at the competitive disadvantage already faced by your employer in order to maintain that job that you presently have.

How many of you would trade all the Pan Am hoop-la or whatever joy comes from having a LRT running through your town when those pay cheques stop because that job that you presently have has been moved to another jurisdiction?  If you think it cannot happen to you, I recommend that you get in touch with a few former Northern Telephone (Nortel) employees who watch their jobs migrate first to the Carolinas and finally into Mexico.

Go ahead. Be vane and stubborn and persist in requesting that your Ontario government continues on a path that could easily cost your job and most certainly will leave a legacy of debt for your children and grand children.

Average Prices on April 1, 2014[6]

City US cents/kWh
New York 21.25
Boston 13.98
Toronto 11.03
San Francisco 10.64
Edmonton 7.51
Houston 7.90
Calgary 7.40
Chicago 8.79
Regina 6.32
Portland 6.70
Seattle 6.32
Montreal 4.78
Vancouver 5.51
Winnipeg 3.91

Why Hydro Are Rates so High?

In a word: mismanagement.  But a fish always rots from the head down.  When you voted in this present gang of Lieberal’s to look after things in Queen’s park, consider that complete lack of business acumen that came into office.  As you can see, picking a government based on who has the nicest smile will seldom work out.

Over the past nine years, the Lieberals have literally squandered tens of BILLIONS of hard-earned tax-payers’ money on things that are often scandalous.  Moreover, the “hydro” file has been one of the more unsavory in the Lieberal scheme of doing things.

Initially, it began when (then Lieberal) Premier McGuinty worked out a sweet deal with Samsung involving wind turbines.   The scheme was to phase out existing energy generating sources with tens of thousands of wind turbines across the province.  In exchange, Sansung would be able to regulate hydro billings but would build a wind-turbine manufacturing factory and hire 1,000 workers. We all know how that one worked out. In fact, the downside was class action law suits relating to health risks from RF (radio frequency) and possible cancer.  While the Lieberals were playing with wind turbines, the Europeans were dismantling the exact same devices because of the same worries.  By the way; that 1,000 job factory never did come to fruition.

Then we had Eleanor Clitheroe, the Lieberal appointed CEO of Hydro One Inc. She grossed $2.1 million in her last full year with the utility and was back in the news in 2010 after arguing her pension should rise from $33,644.21 per month from $25,637.08 before the Supreme Court of Canada, a bid she eventually lost later that year[7].  Look closely at your hydro bill. You will find it there in black and white. It is called, Debt Retirement Charge.  Given that the Supreme Court found that incompetence and embezzlement [8] the Hydro CEO saw fit to charge $40,000 worth of renovations which she had Hydro One’s service providers make to her home along with an equally string of other odds and ends before she suddenly departed Hydro One with a very nice pension.  In 2006, Ontario’s Auditor General, Jim McCarter, confirmed that $127 million of that deficit came from “questionable” charges to corporate expense accounts, with few receipts to justify them[9].

Her predecessor (another Lieberal choice) Ron Osborne, the former president and chief executive officer of Ontario Power Generation, was paid $8.2-million between 1999 and 2003[10].  Her successor, chief executive Carmine Marcello received total compensation of $724,917 in 2013, including a base salary of $525,000 that is down 29 per cent from his predecessor[11].

It does not take a rocket scientist to prove that the “hydro” file is little more than a calamity of stupid moves. Each stupid move is the product of government neglect and often brings about another subsequent fiasco.

The failure of the wind turbine fiasco led to an impulse decision to construct gas-generating hydro facilities. In that case, they (the dumb Lieberals) neglected local consultations and thereby had to scuttle partially build facilities near the GTA in order to save erstwhile Lieberal incumbents from facing the wrath of the voters in the election.  Lucky us! One of those seats was that of Charles Sousa who is now Ontario Treasurer and right hand man for Premier Wynne. Karma does not always work out.

The legacy of neglect on the Ontario hydro file deserves its own analysis.  Having looked at five to one matches on employee’s pensions where each dollar contributed by an employee is matched with $5 dollars of your money is leaving me with a nagging suspicion.  Such mismanagement can only be willful neglect or part of some scheme to make the operation sufficiently unprofitable as to render public opinion favorable to a sell-off.

A guide Line for Lieberals to consider When Selling off Assets

“There was once upon a time a poor widow who had an only son named Jack, and a cow named Milky-white. And all they had to live on was the milk the cow gave every morning which they carried to the market and sold. But one morning Milky-white gave no milk and they didn’t know what to do.”

Alas, we too often get exactly the type of government we deserve.  Hats off to the Lieberals for pulling it off and to the NDP for enabling the Lieberals and convincing the public that these things are reasonable as long as there is a bag of beans to show at the end of the day.

cropped-lloyd

Copyright   Thunderbird Rising 2015

 The above article is copyrighted.  You may use, copy or distribute this article conditional on attributing your source (Thunderbird Rising) and the author (Lloyd Fournier)

[1] Huffington Post, Denial Tencer, July 06, 2015

[2] Toronto Star, by John Spears, April 11, 2014

[3] Source, Association of Major Power Consumers in Ontario, 2012, published in London Free Press,  Antonella Artuso,  May 16, 2015

[4] National Post, July 13, 2015

[5] CBC News, Jun 04, 2013

[6] From Official Manitoba Government web site based of survey by Hydro Quebec (http://www.gov.mb.ca/jec/invest/busfacts/utilities/compare.html)

[7] The Cape Breton Post By Elizabeth Patterson, April 26, 2013

[8] Blog by Hal Manator, June 12, 2010

[9] ibid

[10] Globe and Mail, Richard Mackie, Mar. 18, 2009

[11] Toronto Star, Rob Ferguson, December 13, 2013.

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