Will Ontario's Hydro One sale raise your electricity rate?

The proposed privatizationof the Crown corporation that delivers Ontario'selectricity isn't necessarily a bad thing for consumers' pocketbooks, analysts say.

But the province and its taxpayers will still be on the hook forHydro One's massive debt load if much of the quick cash from the sale goes towards new infrastructure, as Premier Kathleen Wynne intends.

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"Whether it's ratepayers or taxpayers, someone is eventually going to have to pay for it," said Energy Probe economist Brady Yauch of the approximately $27 billion thathydro ratepayerscurrentlyowe the Ontario Electricity Financial Corp. after Hydro One's giant parent,Ontario Hydro, was broken up in the late 1990s.

"Basically,the government isdoing whatever itwants with the money" from the proposed sale, says Yauch. "But this idea that because it's private rateswill go up is a straw man."

Still, evenas the Liberal governmentunveiled itsplan last weekto sell off a large chunk ofHydro One in order to funnel money into new projects rather than debt reduction, even Wynne herself couldn't promise the province's electricityrates wouldn't go up.

All that hasbeen promised is that "the government would retain de facto control" of Hydro One, meaning rates won't skyrocket.

The proposedprivatization, however,would appear to contravene the current mandate that all of Hydro One's profits go toOEFCfor debt reduction.

But Wynne said the government will sell up to 60 per cent of Hydro One, while not allowingany one shareholder to buy more than 10 per cent and with the province retaining control of at least40 per cent of the utility.

In effect, that means the Ontario Energy Board will still determine hydrorates, not a privatized Hydro One.

Ed Clark, the former head of the T-D Bank and the current chairman of the premier's advisory council on government assets, says the plan should mean good things for Ontario hydro bills.

The province could generate about $9 billion from the Hydro One sale, he said, with $5 billion going to pay the utility's debt and $4 billion being channelledinto infrastructure projects.

"I think they'll go down," Clark confidently told CBCRadio'sMetro Morning,referring to hydro rates and talking aboutprivate-sector discipline and more capital investment flowing intoHydro One.

Still, while the government's official word is that hydro rates will not go up, Clark admitted "there's no question that not all privatizations have gone well."

No crystal ball

In fact, otherprivatizationschemes across the country have resulted in an increase in rates,Sheila Block, of the Canadian Centre for policy Alternatives, wrote CBC."If you look at Nova Scotia, which privatized its electricity system a generation ago, it has the highest electricity prices in Canada," she says.

Energy analyst Tom Adams agrees that customers will pay more for hydro bymoving proceeds of the sale of Hydro One assets outside of the power system.

Hydro One's profits today, over $700 million a year, goes to service that debt, Adams says."As the stream of profits at Hydro Onegoes to fund subways, that leaves a hole over at OEFC. The governmenthasn't explained one syllable how they are going to fill that hole. I think there is a new electricity tax that is coming that they haven't announced."

The long-term trend is that rateswill go up, regardless, addsYauch.

But rates have gone up when Crown corporations are public, as well, he says. "They'll still have to go to OEB, still have to go through the same rigmarole whether it's public or private. If it's private, people might even push against rate hikes more."

Hydro One recently applied to the OEB for distribution rates to increase, on average, sixper cent annually over the next five years, according to Yauch. "So, collectively, ratepayers could see double digit increases in the next couple of years regardless of who owns Hydro One."