Hydro Sell-off a Rip-off

Hydro-sell off a Rip-off

Ontario Hydro privatization scheme

by Mel the Muckraker

Christmas issue 1996 HighGrader Magazine

On December 29, 1921, a volley of applause echoed through the cavernous Chippewa power plant, a half mile below Niagara Falls, as the first of ten giant generators turned to a blur before 1,000 dignitaries. Leading the opening ceremonies were Ontario Premier E.C. Drury and Hydro's charismatic champion, Sir Adam Beck.

It was an hour of triumph. Chippewa was then the largest hydro power plant in the world and a masterpiece of engineering. But to the dismay of rival power barons who owned private electric monopolies, Chippewa set a dangerous precedent: it was built entirely with public funds, and it was the rock-solid cornerstone of the first publicly-owned power grid in North America.

It is still running flawlessly.That same month, turbines in the first Hydro-built power plant in Northern Ontario hit 120 rpm at Cameron Falls on the Nipigon River. Most of the power raced 200 miles west to Port Arthur and Fort William (now Thunder Bay). In 1917 the twin cities, then at the mercy of the private Kaministiquia Power Co., had voted overwhelmingly to build their own municipal grid and buy cheaper public power from Cameron Falls.

It is still running flawlessly.

Fifty years later, in 1971, another set of massive new turbines spun into action at Hydro's Lower Notch hydro plant, where the Montreal River meets Lake Temiskaming. Producing 415 million kilowatt hours every year, it is the last water power plant Hydro built.

It is still running flawlessly.

During the five decades in-between, Hydro built or took over 32 hydro plants in Northern Ontario. Together, they produce 10 billion kilowatt hours of power every year - enough to supply about 830,000 homes. They are largely invisible, relentlessly reliable miracles.

Most experts confirm these 32 hydro plants will last another half century with proper dam maintenance and periodic turbine/generator overhauls. Their fuel is inexhaustible and immune to inflation. And, since every one of them has been paid for, power from them is likely to cost an average of less than two cents a kilowatt-hour. For another five decades!

So why would the public sell them - then buy the same power back again from new private owners?

This is not a trick question. But the answer seems to have eluded Mike Harris' hand-picked panel of privatization poobahs, who concluded in June that Mike Harris should sell Hydro's cheapest, cleanest power plants, and keep the dirtiest, most debt-laden ones in public hands.

If you're starting to smell snake oil and another rip-off on the southern breeze, your nose is working just fine.

ACTUALLY, THE SCENT has been drifting north since the 1970s. That's when Hydro stopped building hydro plants in the north and began borrowing nearly $25 billion to build 20 nuclear plants. Borrowing huge amounts of capital was not new to Hydro; for fifty years it debt-financed hydro plants from Niagara to Lake Nipigon. Gradually, the plants were paid off from customer revenues. Then they continued to run. And run. And run.

But, fatally, all 20 reactors were built when Hydro's nuclear learning curve was at zero. Hydro started the $15 billion Darlington plant (original estimate: $3.4 billion), when the first of eight Pickering reactors had been mere months in operation. The eight Bruce reactors were still under construction.

By the early 1990's, these reactors accounted for nearly two-thirds of all energy produced on the provincial grid. And most of the trouble. Darlington power is costing 8.8 cents per kilowatt hour versus the 3.8 cents predicted. The Pickering and Bruce units are suffering chronic breakdowns. Incredibly, nuclear baseload power is being sent to 24-hour operations like pulp plants and mines in Northern Ontario, while low-cost power from hydro plants like Lower Notch is racing south to meet daily peaks in southern power demand.

Northern Ontario is now a power colony. North of the French River, there have been virtually no breakdowns at the 32 hydro plants and no multi-billion cost overruns. None of Hydro's $35 billion debt is attributable to investments made in Northern Ontario. Every year, Hydro's northern operations send net revenues south.

Meanwhile, Hydro spent $25 billion on new power plants in southern Ontario. That's where all the construction, plant operation and maintenance jobs occurred. That's also where the cost overruns occurred. And the breakdowns. And where the money traders live who float more than $2 billion in Hydro debt bonds every year.

Welcome to the politics of geography. Twenty years after Hydro abandoned Northern Ontario as a place to invest, most residents in Northern Ontario now pay more than 9 cents/kwhr for their power - even though local hydro plants produce the juice for less than 2 cents. And, this spring, Hydro announced it was cutting its already thin administration staff in Northern Ontario. In the name of efficiency, northern Hydro bills are to be processed in London and Markham.

Worse, Hydro is citing the nuclear surplus - and using its status as a public monopoly - to stall potential baseload natural gas power plants at northern pulp mills, mines and pipeline compressor stations. Independent renewable hydro, wood-waste and wind projects have also been denied grid access. But guess where Hydro plans to bury the nuclear waste from Darlington, Pickering and Bruce? Not in area code 905.

Ontario Hydro has proven that a public monopoly can make mega-mistakes and abandon the principles of public ownership. So it may be tempting to think a privatized Hydro would be better for Northern Ontario.

Think again. Real hard.

First, the public already owns 32 mortgage-free hydro plants in Northern Ontario, which produce enough power to supply every home, small business and office in the north. At about two cents a kilowatt-hour. Where will northerners get cheaper, cleaner, more reliable power? And how will it get any cheaper by selling the 32 plants to private owners who will then sell it back to the public?

It won't. There is no evidence, anywhere, that the northern hydro plants are being badly run by a fat bureaucracy. They're cheap, they're clean, they're trouble-free, most of them are automated and they're bound to stay that way for decades. That's why private investors are lining up around the planet to buy them.

Second, if they are auctioned off to private bidders, the new owners will buy them only if they know they can make back every cent of capital and interest they invest, plus pay for all transaction costs, water rental charges and taxes, plus make a rate of return of 15-20%. Since the 32 hydro plants already run efficiently, the only way to make that profit is to charge consumers more.

Third, don't forget the nuclear albatrosses. Every serious study of reactor performance in developed countries confirms they require increasingly expensive repairs as they age. That's already happening at the Pickering and Bruce reactors. And why no investor will touch them with a 60-foot, creosote-coated hydro pole.

So, since Mike Harris shows no sign of granting northerners a special exemption from paying nuclear repair and debt bills, isn't it a good idea for northerners to minimize those bills by hanging on to the low-cost hydro plants?

Fourth, the plan to auction Hydro's assets will merely transfer ownership to private companies which will sell power at volume discounts to big consumers - and use their formidable market share to freeze out independent generators.

Right now, northern rural residents pay almost twice the price per kilowatt hour that large industries pay. Rate disparities will widen under a privatized system. Private companies will be under no obligation to serve small, dispersed customers. If they do, it will be at robber-baron prices.

Just like at the turn of the century.

Many forget that Northern Ontario was once the preserve of private power barons. Before 1920, the moguls who owned the mines, paper mills, timber limits and smelters often owned the power plants and the local grid systems. Incensed by wretched service and rip-off rates, citizens welcomed a public power system which for 50 years delivered on a promise of sound technology, power at cost and fair rates.

Now, Ontario Hydro's nuclear-dominated grid is delivering lousy performance and higher costs to everyone - but especially northerners.

The lesson here is that monopolies - both private and public - counter the public interest. The bigger the monopoly, the bigger the mistakes. By contrast, diversity of ownership limits monopoly abuse, minimizes the scale of mistakes and fosters technological diversity which often fosters price competitiveness.

To make that happen, and prevent future monopolies, Ontario needs a reformed power system where the transmission grid stays in public hands, while both Hydro and private power generators compete to supply power to it under identical, regulated bidding rules.

Fortunately, self-sufficiency in electricity is a no-brainer for Northern Ontario. To compliment the existing 32 hydro plants, additional water, wind and woodwaste resources can be developed carefully to help meet future needs. In the industrial sector, nearly two dozen pulp and paper mills, wood processing plants, large sawmills, mines, compressor stations and hospitals can double the efficiency of natural gas use by installing high-efficiency turbines in their steam loops.

This will not only displace baseload power now coming from nuclear plants in southern Ontario but, in many cases, provide a low-cost surplus to sell to the grid. Northern industries will have two products to sell and lower energy costs. Jobs in primary northern industries will also be preserved.

If folks in Southern Ontario agree to sell their half of the Hydro grid (including the southern power plants), to private companies which can't even conceal their drool at the prospect of setting up private power monopolies, well, there's no law against taking yourself to the cleaners. Or buying snake oil elixers from guys with black hats, handle-bar moustaches, and eyes that are shiftier than Richard Nixon's.

The terminally gullible can achieve the same effect by swallowing the privatization pitch of Donald MacDonald, chief author of Mike Harris' blue-ribbon report on the future of Hydro.

MacDonald, of course, is the former 1970's Trudeau cabinet minister who promoted the state-driven National Energy Program, the creation of Petro-Canada, a secret Cabinet-sanctioned international uranium cartel and government-subsidized CANDU reactor sales to military dictatorships in Argentina, Romania, South Korea and Pakistan.

The same Donald MacDonald is to be confused with the $800-a-day chief author of Brian Mulroney's blue-ribbon report promoting Free Trade in the 1980s, and the Bay Street sultan of the pro-NAFTA corporate forces. Demanding deregulation and decrying state subsidies for everything from buses to particle board plants to ballet schools, they in turn led most of Canada (including Northern Ontario) into the jobless 90s.

Nobody could accuse Macdonald of consistency. Or of failing to appear for an encore. In 1996, the best friend that Canada's subsidy-soaked CANDU reactor program ever had, reincarnated himself as a foe of state intervention, and allowed Mike Harris to pay him big bucks to advise Ontarians to keep 20 chronically crippled CANDU reactors in public hands, but to sell the mortgage-free hydro plants to private owners who will sell the power back to the public.

Northerners should tell Mike Harris to forget privatizing what they already own up here. North of Highway 17, the transmission grid and the 32 hydro plants should remain in public hands. They are golden assets. They're paid for. They run just fine. They're clean. They were built right the first time.

Northerners don't need to pay for perfection twice.

Vaping has become a popular alternative for those seeking a Stylish and Convenient way to enjoy nicotine without the drawbacks of traditional smoking. the iget moon Offers an exceptional Vaping Experience, combining sleek design with ease of use. Its compact size makes it perfect for on-the-go enjoyment, while its variety of flavors satisfies diverse preferences. Choose the iget moon for a modern and satisfying Vaping solution that fits seamlessly into your lifestyle.