The Ontario government’s decision to sell off most of Hydro One was not an easy one as the provincially funded Hydro One is a very powerful government monopoly; but, times have changed, and the Ontario government can no longer afford it. Selling off up to 60% of Hydro One is good for Ontario taxpayers. Let me tell you why.
There will be greater transparency
As a powerful monopoly fully funded by the province, Hydro One never had to provide transparency for the government or the public as long as the province had money to spare. This is no longer the case. It was also too powerful, and too big for any government, until now. Actually, Hydro One’s lack of transparency first showed up with the introduction of renewables (solar and wind) being paid by Hydro One for generated electricity going directly the grid in accordance with the terms of the Feed-in-Tariff.
Generating energy is a complex and expensive endeavour. Our lifestyle depends on energy, and we use excessive amounts of it, but most people, inside and outside of government, have no idea how it really operates, and how much it really costs to provide. This lack of knowledge results in complaints when prices rise. I don’t complain about the rising price of electricity because I’m informed, and I know what the cost is to my lifestyle when there is no electricity in a power outage.
Greater transparency will educate everybody about energy generation. This will spur energy conservation, and reduce the number of complaints. There will be greater efficiencies, and more effective service. For example, when Alberta deregulated its electricity , the new providers found out that electricity theft wasn’t 1% as stated, but 10%! They quickly closed that loophole which existed for who knows how long.
As majority shareholder, the province can require greater transparency, and oversight.
There will be full cost accounting
The Ontario government can now demand the implementation of full cost accounting for new energy projects, and this information will be available to the public. This means the environmental, social, and economic costs, including insurance, will be considered for the lifecycle of the project: from inception to end of life. Up to now, the government has provided the land, water, and air for free, and has cleaned up the abandoned mess for free. The government can no longer afford to do this. With this sale, the Ontario government will be in the position to require full cost accounting for new energy projects.
Ontario should also consider phasing full cost accounting on existing projects, instead of “grandfathering” them to standards that are 50-100 years old.
Full cost accounting will also educate consumers and government officials about the total costs of energy generation, which will spur greater conservation. Companies will transition to operate more efficiently and be more profitable.
The opportunity to replace 100 year old infrastructure with a modern system
Most of the electrification infrastructure in Ontario is more than 100 years old. The increasing demands on this infrastructure means it is only a matter of time it will fail because fixing it no longer solves its problems.
The sale of Hydro One, which owns Ontario’s electrification infrastructure, will open the door to provide the funds to replace this infrastructure, not with a new version of the old stuff, but with modern technology that will meet the needs of Ontario for the next 100 years.
The new system will be likely a decentralized smart energy grid that will be responsive to both providers, and consumers. It will include all forms of energy generation, including renewables, and storage. It will be decentralized to be closer to the consumer, and therefore more cost effective. In addition, it will be more resilient to extreme weather conditions (climate change), and terrorist acts, or theft. These features are needed, and important to have when we are so dependent on energy.
The new system will implement the innovations spear-headed by renewables, and become mainstream. The cost of this new technology will go down with the economies of scale.
Opportunity for pension plans to invest in the new infrastructure
The sale will provide the investment opportunity for pension plans that need long term long reliable returns, and investing in Hydro One is ideal.
With this sale, Ontario will get closer to having its financial books in order, consumers will get a modern responsive energy system, and businesses will get growth.
Energy is worth conserving.
Sharolyn Mathieu Vettese
SMV Energy Solutions