Why Politicians Should Never Run Anything–Part 897

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        Do not think about, write about or deal with  human behavior without determining the effects of incentives. It’s not their money, of course they’ll waste it.

    This is exactly what happens when politicians try to be businessmen. They can never run out of money, they just get more tax money. Every failure is followed by another failure. If people don’t experience the effect of failure, it’s just one money loss after another. One bad decision following another. At least they’re green with lots of wind turbines and solar panels cranking out electricity no one want. It’s bought at a loss and sold at a loss or, as they in government, sound business practice.

National Post – (Latest Edition)
Christine Van Geyn Christine Van Geyn is Ontario director of the Canadian Taxpayers Federation. cvangeyn@taxpayer.com

Sell all of Hydro One
Ontario pays the highest prices for electricity in North America

Recent reports indicate that Ontario Premier Kathleen Wynne is contemplating a sale of part of the government-owned corporation, Hydro One.

The details of the sale process have yet to be released but the idea of breaking up a low productivity company with overpaid staff makes a lot of sense.

Hydro One has been plagued by decades of mismanagement and scandal. The company was responsible for half the costs of Ontario’s infamous $1.9-billion (not-so) smart meters, while it purchased and installed only a quarter of the program’s actual meters.

Long-suffering Hydro One consumers have been the victims of what Ontario Ombudsman André Marin called “egregious errors and baffling bills,” and he has criticized the company for using the intimidating practice of sending phoney disconnection letters in the dead of winter to families that cannot pay their hydro bills. The province-owned company has also been plagued by successive abuse by its CEOs. The salaries paid to the Hydro One leadership were so outrageous the scandal is now a Harvard Business School case study.

These are the types of problems that plague government-owned companies. Money can be all too easy to spend when it is taxpayers writing the cheques.

Infusing some private sector common sense into the operations of Hydro One could do much needed good. But a false privatization won’t do anything to solve Ontario’s hydro woes.

A minority interest sale while the government retains operational discretion is not privatization. If Wynne continues to appease the unions by promising not to break up the electricity giant, and if government retains complete control of hydro rates, the sale of a minority interest in the company will have no impact on operations or costs.

A minority sale with the government retaining operational discretion is, in effect, a substitution of some Hydro One debt with private equity, at a higher cost than government guaranteed debt. Selling the equity of the family jewels (or in the case of Hydro One, more like a lump of coal) and spending the money from the sale to continue the current low-productivity operations, is merely borrowing by another name. It is essentially a bond, bookkeeping sleight-of-hand so that Wynne can continue to spend more than this government can afford without calling it debt.

Ontario pays the highest prices for electricity in North America. Prices have soared 325% since 2002. This is the result of cumulative bad policy decisions by Wynne and her predecessor.

The ill-advised feed-in tariff program sees taxpayers locked into 20-year contracts for wind and solar power at a cost many times the market rate (as Auditor General Bonnie Lysyk pointed on in her latest report, the contracts pay an exorbitant $0.115 per kWh for wind power, and between $0.288 and $0.396 per kWh for solar, while the average electricity market price is $0.03 per kWh).

This has been a part of what has led to the 1,200 per cent increase in the Global Adjustment since 2006. The Global Adjustment is the difference between the wholesale market price and the rates power generators have contracted with the province. When the market price falls and the government has locked ratepayers into expensive contracts, the Global Adjustment rises. It now represents 70 per cent of time-of-use rates, but this is not reflected as a separate line on most bills.

Government policies have also led to an over-supply of power (which in fact, should undercut the necessity of the $1.9-billion smart meters used for time-of-use pricing, but need never stand in the way of a government program). The over-supply is so great, and the cost of generation in Ontario is so high, that we are selling our power to other jurisdictions at a loss of $2.6-billion per year.

Thankfully, Wynne and Chiarelli have not ruled out a majority sale of the company. A true privatization of Hydro One could benefit taxpayers by giving private investors a role in improving the distribution and transmission system. But only if those investors get an actual say in operations.

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    If this monstrosity is sold, an it will be, it will be at a steep discount. The “corporation” is burdened with costly wind and solar contracts, high wages, unfunded pension liabilities and other stupidities which go along with government “business.” When will people ever learn? Politicians are fueled by altruism, greed and hubris in some combination—usually light on the altruism. None of this makes them good in business.

Government Job or Respect–Which’ll It Be?
Cheerio and ttfn,
Grant Coulson, Ph.D.
Author, “Days of Songs and Mirrors: A Jacobite in the ‘45.”
Cui Bono–Cherchez les Contingencies

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