Ontario tenants rights Ontario landlord and tenant act Ontario Residential Tenancies Act Ontario government Poverty research Apartments for rent Ontario Hydro Search Ontario tenants rights
Toronto apartments for rent

Questionable economics in Hydro sell-off

Toronto Star - April 18, 1999

Although it hasn't yet put a "For Sale" sign on Ontario Hydro, the Harris government has put a price tag on assets that it is likely to sell. In breaking up the utility, the government decided that its generators were worth $8.5 billion, its transmission lines just a fraction more.

Since this valuation of assets falls far short of the $38 billion that Hydro owes, Queen's Park has effectively written off $21 billion from Hydro's books.

But what if the government's numbers are wrong? What if the assets are worth far more than it thinks?

Then consumers and taxpayers stand to lose billions. If Queen's Park were to sell off generators for what it says they are worth, Ontarians could pay big-time for the mistake.

Since the government's plan is to promote competition in electricity by selling as much as two-thirds of Hydro's generating capacity to the private sector, every Ontarian has a huge vested interest in an accurate assessment of what Hydro is worth.

And that's why a calculation by Myron Gordon, professor emeritus in finance at the University of Toronto, should be setting off alarm bells all around the province.

Gordon starts with our hydroelectric generators, including the big one at Niagara Falls. These generators produce more than 36 million kilowatt hours of electricity a year.

The electricity from these plants can be sold for at least 4 cents per kilowatt hour, but costs only a third of a cent to produce. Accordingly, Gordon puts their annual operating income at $1.3 billion.

Assets that will produce that much income for "as long as the water flows," he says, should be worth more than $16 billion, or almost twice the value the government puts on all of Hydro's generators - hydroelectric, nuclear and fossil fuel.

But Gordon's calculation still isn't complete. Making the reasonable assumption that Hydro will succeed in its stated goal of raising the utilization rates for its nuclear stations from 50 to 60 per cent to the industry standard of 80 per cent, he puts the value of all of Hydro's generating assets at $37 billion - a far cry from the government estimate of $8.5 billion.

If Gordon's numbers are anywhere close to the mark, the sale of these assets for the price Queen's Park has put on them would amount to a giveaway that would deliver exorbitant profits for private investors at Ontarians' expense.

When Gordon tried to find out how the Ministry of Finance arrived at its figures, he received a document that listed the "key valuation factors," but said nothing at all about how these factors were brought into play. So Ontarians haven't a clue about how the government decided that Hydro was worth so much less than it cost.

In the face of so many questions, it would be the height of irresponsibility for the government to start selling off generating plants.

Prudence demands that the successor to Hydro in generating power, the Ontario Power Generation Inc., be kept whole and under government control - at least until Ontarians can get a clearer reading on what it is really worth.

Visit the Toronto Star newspaper today

  Toronto apartments
  Ottawa apartments
  Oakville apartments
  Mississauga apartments
  Ontario Hydro
  Toronto Lawyers & Paralegals
  Ottawa Lawyers & Paralegals

Places to visit on the site:
Ontario Tenants homepage         |       Residential Tenancies Act       |     Finding an apartment
Ontario Landlord and Tenant Q&A   |   Housing and poverty reports   |   Elections
Tenant rights and social justice     |     Renters muncipal issues     |     Rent Control
Apartment safety & security  | Tenant health: Toxic mould, cockroaches  | Consumer Information
Tenant association organizing   |    Utility costs: Ontario hydro, natural gas   |    Ontario MPP list