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Hydro sell-off hot campaign issue

NDP, Tories bickering over privatization

Hey there, time traveller!
This article was published 25/6/2011 (2249 days ago), so information in it may no longer be current.

BETWEEN the TV ads, the duelling websites and the endless political chatter, you’d be forgiven for thinking Manitoba Hydro will be the only issue in this fall’s election.

So far, it’s trumped the typical bedrock issues of crime and health care thanks to bickering about Bipole III and the NDP’s attempts to whip up fears the Conservatives have a secret plan to sell Manitoba Hydro.


In recent weeks, the NDP has launched radio ads touting Manitoba Hydro as the province’s publicly owned ticket to prosperity and a new batch of television commercials, known as "the stroke of a pen" ads, that accuse Conservative Leader Hugh McFadyen of harbouring plans to privatize Hydro, among other sins.

Last week, when McFadyen and Premier Greg Selinger met for a radio debate on CJOB, talk of Bipole III wound down with the now-familiar accusation that the Tories would sell Hydro just as they sold MTS.

Next week, there’ll be another round.

On Monday, a group of union leaders, led by Canadian Union of Public Employees president Paul Moist, will host a press conference encouraging Manitobans to make Hydro an election issue. The unions, traditional allies of the NDP, have already launched a billboard campaign asking voters to quiz politicians on the topic. At the same time, the unions will release a report by the left-leaning Canadian Centre for Policy Alternatives on the value of a publicly owned power company.

"Privatization would likely follow a similar path as MTS," writes the CCPA in its report. That path consists of "...denial, at the same time as the corporation is carved into discrete entities...
contracts with private corporations to manage administrative aspects of the company... followed by increased harmonization with the U.S. electricity market and opening up of generating capacity to private interest."

Buttressing the union’s campaign is a new Probe Research poll CUPE commissioned that found 86 per cent of Manitobans want Hydro to stay public.

Most of the rest of respondents said they didn’t know or didn’t care.

That makes the notion of privatizing Hydro a political dog, but one that won’t stop barking.

There is nothing on the public record to suggest McFadyen has any plans to sell Hydro. In fact, he has repeatedly said the power company ought to remain a public asset. During the last election, he proposed legislation requiring the consent of all 57 MLAs to alter Hydro’s ownership, bolstering an NDP law requiring a public referendum to privatize any Crown.

The NDP’s attacks are largely based on guilt by political association.

McFadyen was a senior policy staffer in then-premier Gary Filmon’s office when the Tories privatized MTS after promising they wouldn’t. After the Tories were defeated, McFadyen worked for the high-powered Ontario political consulting firm Navigator, which Tory then-premier Mike Harris hired to help manage the tumultuous deregulation of Ontario’s power market.

(Gord Steeves, the St. Vital city councillor and newly minted star Tory candidate in Seine River added to the NDP’s evidence when he mused earlier this month about privatizing Manitoba Public Insurance.) All that, says Selinger, adds up to an established political philosophy and track record that make it clear the Tories favour privatization.

But McFadyen is emphatic when asked if he would privatize Manitoba Hydro, deregulate the province’s power market or explore more privately owned generation.

"No," he said. "No and no."

McFadyen has also reconsidered previous musings dating back to 2006 about private financing of Hydro projects, such as a public-private partnership model.

"It’s off the table," he said. "It’s clear you get better rates borrowing as a Crown corporation. We are committed to public ownership and control of a reliable Manitoba Hydro."

UNLIKE other provinces with Crown power companies, including Quebec and British Columbia, almost no one in Manitoba has made a cogent case for privatization.

Selling the company outright would eliminate Manitoba’s debt. And it would ensure billions in new debt Hydro is about to take on never appears on the province’s balance sheet. It could also mean more ongoing revenue for the province, beyond what the government takes out of Hydro now in the form of water rental fees. The Crown owns the water and can charge private firms whatever it wants to use water, in addition to corporate taxes.

But even conservative finance expert John McCallum, the Tory-appointed chairman of Manitoba Hydro’s board for a decade under Filmon, says privatizing Hydro is terrible public policy.

Despite NDP claims, no government "in its right mind," even one with an ideological bent favouring the free market and limited government, would sell Manitoba Hydro because the business case to do so just doesn’t exist, he said.

"I don’t think there is any chance Manitoba Hydro will be private any time in the foreseeable future by any government," said McCallum, a finance professor at the University of Manitoba’s Asper School of Business.

Hydro is already a fairly efficient, well-managed company, and its building boom and export contracts mean it’s only likely to make more money in the future. Its value to Manitoba as a tool of job creation, economic development and energy policy is huge and would be dramatically diminished without Crown control. On a continent where energy is among the most complicated industries — look at California’s mess of rate spikes, brownouts or the mess that was Enron — there’s market value in a company backed by one of the most ploddingly stable regional governments in North America.

Then there’s the impact on relations with aboriginal people, only now improving after generations of northern flooding critical to getting dams built. The management of complex investment and compensation deals with northern First Nations, training programs and construction set-asides, could all be undermined, as could a batch of energy-conservation initiatives the province downloads onto Manitoba Hydro.

Rates, particularly for rural and residential customers, would likely go up. Indeed, rates have nowhere else to go. Manitobans have the lowest power rates in North America (though that did not stop a third of the respondents in the CUPE/Probe poll from saying rates are still too high.) McCallum said even at the height of the debate over MTS when the NDP frequently warned Hydro was next to be privatized, he never got a whiff that Filmon was considering selling Hydro. Others familiar with the file agreed.

In fact, says McCallum, it was the Filmon Tories who allowed Manitoba Hydro to buy Centra Gas, essentially nationalizing a private company by bringing it under the Crown’s control.

SO if there’s no public will to sell Hydro, no obvious business case for it and no credible suggestion the Tories would actually do it, why is the NDP hammering so hard?

Even some NDPers agree it’s not likely a vote-changer, but painting the Tories as secret privatizers helps galvanize the party’s base in the lead-up to the election and define McFadyen as an ideologue, countering his attempts to look more moderate and urbane for Winnipeg voters.

And, many New Democrats simply don’t buy McFadyen’s pledge of support for public power. The sell-off of MTS in 1996 is still a bitter pill — Filmon’s about-face, the fire-sale price on shares, the fact many senior Tories benefited financially from the privatization, the finagling of house rules to limit debate on the bill. The year-long MTS controversy was among the seminal battles that established the NDP as a legendarily effective opposition party, setting them up to form government.]

In Hydro, the NDP sees MTS redux.

They say the Tories are doing to Hydro what they did to MTS in the mid-1990s — running the company down, damaging its reputation and miring it in controversy, all in a bid to weaken it and set it up for sale, "The best predictor of future behaviour is past behaviour," former premier Gary Doer intoned endlessly during the 2007 election.

It’s a phrase Selinger has already co-opted.


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