Union investing $500,000 in public awareness campaign
The Canadian Union of Public Employees (CUPE) is fighting to prevent the partial privatization of Hydro One in Ontario.
Premier Kathleen Wynne recently announced 60 per cent of the electricity utility will be sold in part to fund the government’s transit infrastructure plan. The plan — outlined in the provincial budget — will be a $130-billion push, spanning 10 years.
CUPE, however, said the privatization runs afoul of the Electricity Act. Labour law firm Sack Goldblatt Mitchell prepared a legal opinion report for the union and found "substantial grounds for challenging, as unlawful, a decision to privatize Hydro One for the purpose of 'freeing-up' funds to invest in transit and transportation infrastructure."
"You can’t sell one piece of infrastructure to build another in the way the law is currently written," said CUPE Ontario president Fred Hahn.
The union has retained Sack Goldblatt Mitchell as counsel as it moves forward and Hahn said there are several legal avenues CUPE is prepared to pursue.
"But we also understand," he said, "that this is not just a battle that must be waged in the courts. It must be waged in the court of public opinion."
The union has so far invested $500,000 in a campaign to educate the public about the potential problems with privatization. There are plans for an extensive ad campaign and for the mobilization of supporters in community meetings across the province.
"When you sell the very wires that bring electricity to a community — the infrastructure we’ve already built — rates will absolutely go up. And we will lose control over this resource," Hahn said.
CUPE is concerned about the effect higher prices and declining services will have on union members and their communities.
"We will see real changes to the service itself and to the future of its expansion and delivery in our province because the whole governing principle will be profit, not what’s good for people," he said.
Government makes its case
Ontario Energy Minister Bob Chiarelli said an incredible amount of work has been done to ensure the people of Ontario are protected.
Hydro One is currently subject to requirements of the Business Corporations Act and the Securities Act. This regime will continue to apply following the initial public offering (IPO).
Additionally, the government plans to introduce legislation that will enhance the Ontario Energy Board’s powers to protect economic regulation.
While 60 per cent of Hydro One will be sold off, the government intends to remain the largest shareholder by preventing any other shareholder or group of shareholders to own more than 10 per cent of the utility.
"There are a number of other factors to protect the people of Ontario moving forward," Chiarelli said. "The intention was to continue to have significant control over Hydro One, while repurposing that asset by taking the proceeds from an IPO, going public, and investing that."
Those proceeds, Chiarelli said, are essential for the province to meet its infrastructure commitments.
"We’re falling behind in building infrastructure to keep our economy strong and to assist in quality of life," he said. "The reality is to invest in infrastructure, the money has to come from somewhere. We could raise taxes, hypothetically. We could borrow, hypothetically. Or we could cut other services and put that money into infrastructure. We’re not prepared to do those things, at this particular point in time, given the fiscal situation. That is the underpinning rationale behind looking at existing assets and seeing if they can be used better."
Chiarelli pointed out that the IPO will be open to everyone and unions concerned about Hydro One are more than welcome to invest in its future.
The move would not be unprecedented. After Bruce Power was privatized in 2002, the Power Workers’ Union and the Society of Energy Professionals acquired stakes in the company.
Hahn, however, said the only way to maintain the integrity of the utility is to prevent its privatization altogether.
"Hydro One is a public asset that we all own, in common. Our great-grandparents and grandparents bought and paid for it with their taxes. Even in the depth of the Great Depression, in the infrastructure that we had to build after World War II, in all of those times, no government ever saw it necessary to sell this… incredibly important feature of our provincial government," Hahn said. "There’s only a small number of people who will benefit from this."
Tony Dean, professor at the University of Toronto’s School of Public Policy and Governance, said it will be difficult to actually measure the benefit and value of an investment in transit and infrastructure.
"The proposition is that, done carefully, you can transfer the value of one public asset to another," he said. "The biggest drawback, of course, is there’s a risk of potential value loss. It would be difficult at the end to have a grand accounting of that value transfer."
Dean acknowledged the expectation of reasonable rates of return for investors could over time put pressure on prices and translate into higher energy costs. The government’s plan to remain the biggest single shareholder will be crucial in combatting this effect, he said.
The broader concern, Dean said, is the process of privatization itself. The transfer of any public asset to any private entity is a controversial concept.
"Is this a legitimate public policy choice and a political choice? Yes it is," Dean said. "Is it controversial? It appears so, but not as controversial as it was 10 years ago."