Grabbing Cash from Municipalities to Fund Hydro One “Windfall”

Two themes of my public comments on the sale of Hydro One have been that there is no windfall available from the sale to fund government spending initiatives and that creating a Potemkin windfall will hasten Ontario Electricity Financial Corporation’s (OEFC) collapse into insolvency.

Supporters of the Hydro One sale, including the Globe & Mail editorial board and Ed Clark, have claimed that the Hydro One sale will create a windfall to fund government spending. The government has been silent on explaining the impacts of the sale on OEFC until now.

Postings on this site addressing these twin themes have included this series of media interview, this National Post column coauthored with my friend Mike Hilson, this deputation Hilson and I made to the Ontario legislature Standing Committee on Finance, and this column where I argue that the coming removal of the Debt Reduction Charge is a phony stunt and I anticipate a new transit tax on power to replace it.

Here are some of my Tweets on these twin themes:

Tom Adams @tomadamsenergy 27 Mar 2015
Hey @Bob_Chiarelli, what’s your big plan 4 Debt Reduction Charge payable by commercial consumers? Have you noticed OEFC’s solvency problem?

Tom Adams @tomadamsenergy 3 Apr 2015
Hey @Bob_Chiarelli, have you realized yet that even if you repeal s.50.3 of EA, OEFC tanks without H1+Debt Reduction Charge? #nowindfall

Tom Adams ‏@tomadamsenergy Sep 25 Toronto, Ontario
Friday aft, dandy Lib time 2 slide out ON Provincial Accounts. Watch 4 OEFC claiming big net income but actually sliding toward insolvency.

Bill 144, an omnibus budget measures act introduced November 18th, contains the first clues so far disclosed as to how the government intends to fill the hole it has created at OEFC with the sale of Hydro One. One section of Bill 144 repeals section 92 (4) of the Electricity Act. That section of the Electricity Act would have redirected the flow of municipal taxes back to municipalities (and away from OEFC) once a portion of OEFC’s liabilities called the Residual Stranded Debt were paid off. What all of this means is that Wynne’s signature initiative to use the proceeds of the sale of Hydro One to build transit is to be achieved in part through the farcical finance of seizing revenue from another level of government. The amount of money is small in the scheme of things but it illustrates the government’s reliance on astrology and unicorn sightings to guide their electricity and transit plans.

The financial flows underpinning Ontario’s electricity system, particularly OEFC, were designed from back in the days of Mike Harris as shell game. The Libs have taken the shell game to ever greater levels of subterfuge. The government uses this shell game to sustain the provincial Auditor General’s continued confusion about the reality of the situation. The Auditor General has been lost in space on the subject of OEFC’s coming insolvency for at least 10 years. The fact that the Auditor General signed off on OEFC’s phony accounts for Fiscal 2014/15 while the Hydro One bank robbery was in progress illustrates the continued inability of the Auditor General to get the jokes.