Canada: Ontario Government Moves To Dismiss Challenge To Hydro One Privatization

Last Updated: February 21 2017
Article by Nickolas Grunow-Harsta

Last Tuesday, Ontario's Liberal government moved to strike a lawsuit challenging the further privatization of Hydro One. If successful, they'll have removed a major obstacle to the controversial scheme they claim will fund major infrastructure investments.

Energy prices in Ontario have been occupying headlines for years. Regardless of where you stand politically, it's difficult to deny there's a problem. The impact of hefty hydro bills has been felt by Ontarians across the board. Individuals and families have been forced to allocate more of their scarce income to keeping the heat and lights on – so much so that some Ontario families have even been pushed into poverty (as reported here). Businesses, perhaps especially manufacturers, struggle to stay competitive against rivals with much slimmer electricity bills. Just throw the term "delivery charges" around at the dinner table, and watch the sparks fly.

"But others pay even more," you might say. That may be true, but the problem lies not only in the rates themselves, but in the pace of their escalation (see, e.g., here). As the Consumer Policy Institute observes, Ontario's rates are indeed the highest in Canada, but not in North America. Cities like San Francisco, Detroit and New York actually pay more per kilowatt/hour. Crucially, however, these market have had time to adjust to these costs, meaning the burden is felt more sharply in Ontario, where prices have risen sharply in recent years.

Any way you slice it, the average Ontario resident is probably none too pleased with their hydro bill. To the extent that Ontarians blame their government for it, our elected representatives may also stand to lose. They've certainly not ignored the issue.

The Ontario Liberal Government under Kathleen Wynne has been active on this issue since the latter was sworn in in February, 2013. What began as a pledge not to privatize Hydro One, morphed into a 'partial privatization' whereby 60% of Ontario's flagship energy company was to be sold into private hands. Half that amount has already been sold, with the remaining 30% slated for the same fate. The goal, says the government, is to raise approximately $9 billion to fund much-needed investment in infrastructure and public transit.

Predictably, this (semi)privatization scheme garnered a lot of attention, not least from organized labour. This is a familiar story. Fans of history will remember that this debate over the value of privatization has persisted at least since the UK's Margaret Thatcher 'took on the unions" in the 1980's. It might seem fitting then, that this scheme has prompted a legal battle between the country's largest provincial government, the Ontario Liberals, and the country's largest union, CUPE (the Canadian Union of Public Employees).

For all its continuity, today's dynamics are a strange take on history. That we have Canada's traditionally centre-left mainstay party pushing for privatization while the conservative opposition decries their approach might leave some people scratching their heads – but that's another blog. Suffice it to say here that the economic and distributive impact of privatization is debated, and it is not obvious that the provincial treasury will benefit from it, even in the medium-term (see, e.g., this article). In short, this issue doesn't fit neatly into traditional party divisions.

Last fall, CUPE's president Fred Hahn (on behalf of the union) brought the suit against the Ontario government, alleging that the sale of Hydro One shares, and, in particular certain fundraisers, constituted "misfeasance in public office". While the focus of the suit, technically, is on a December 7, 2015 fundraiser in which party fundraising and government business are alleged to have inappropriately overlapped, Mr. Hahn's lawyer, Darrell Brown, has candidly acknowledged that "the ultimate objective is to convince the government to stop any further sale" (as reported here). Whether you agree or not, it's no secret that CUPE, like other labour unions, is ideologically opposed to privatization.

Yet the government, for it's part, certainly doesn't seem to be looking for an ideological debate. Last Tuesday the government notified CUPE it would be bringing a motion to strike – i.e. dismiss – the suit. If successful, the case will be dead in the water. The government claims the suit amounts to an "abuse of process" in that Integrity Commissioner J. David Wake already addressed the matter and found no illegal activity. CUPE, on the other hand, views this strategy as a means of delaying, and ultimately avoiding, a public trial.

The motion will likely be heard in the spring. Even if CUPE can successfully stave off dismissal at this early stage, they will still need to make their case at trial. It may prove an uphill battle. The Liberal government has little to gain from a public mudslinging match, and a motion to strike is a legally legitimate means of avoiding one. Whether it's a wise political calculation remains to be seen.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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