Why the rush to sell Hydro reactors?

Toronto Star - May 3, 1998
Editorial

In his 1995 election platform, the Common Sense Revolution, Mike Harris talked about putting Ontario Hydro up for sale.

After the election, there were more musings from time to time.

But when the government unveiled its plan last year for introducing competition into the electricity market, privatization wasn't mentioned.

Instead, the Tories said the utility would be broken up into three new crown corporations: one to generate electricity, one to transmit it over the power grid, and a third to play the role of auctioneer in matching electricity suppliers with buyers. While the ``wires'' company would remain a regulated monopoly, the generating company would be run like a commercial firm - in competition with private and foreign producers. Its bottom line will be to make a profit for the shareholder, the government of Ontario.

But behind the scenes, talk about privatization seems to have surfaced again. Hydro has had an ongoing dialogue with British Energy, which has openly said that its preferred option would be to buy Hydro's nuclear plants.

Sensing that with all this smoke there must be fire, the Power Workers Union has been putting together its own offer to buy reactors at Hydro's Bruce facility with the surplus from its members' pension plan.

But many of these reactors are considered "stranded assets" - or assets that would not be able to cover the debts incurred to build them in a competitive environment. So naturally, both British Energy and the Power Workers would expect to get these reactors cheap, leaving taxpayers saddled with the debt.

The problem is, no one really knows for sure how stranded these reactors are. As Hydro itself explained two years ago, stranded costs can't be determined without knowledge of what future market prices for electricity will be: "To the extent that competition leads to lower prices, it could also lead to stranding. On this basis, estimating stranded costs therefore requires estimating future market prices. However, there is considerable uncertainty as to the level at which market prices will settle" (emphasis ours).

In other words, no one can say with any certainty how viable Hydro's nuclear plants would be under competition, which is only hypothetical in Ontario right now.

That's why any potential buyer would be looking for a bargain basement price to take the nukes off Hydro's hands. That's the only way they could make a profit in the uncertain world of competition.

It would, therefore, be foolish for the government to even contemplate giving away the nukes but keeping the debt, on the assumption that competition will drive electricity prices down. Harder information is needed.

Having created the smoke, the government should assure Ontarians there won't be any fire sale. It should declare a moratorium on privatization of our nuclear plants until there's evidence of how effectively competition works.

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