In an odd twist, Ontario’s governing Liberal party has advanced Ontario Power Generation (OPG) and Hydro One’s unions a $111 million loan to buy stock for their members in the Initial Public Offering (IPO) which semi-privatized Hydro One. The two unions involved are the Power Workers’ Union and the Society of Energy Professionals.
The once publicly-owned utility is being partially hived off to raise much needed cash for the heavily indebted province. But the way the stocks were being sold, and how the money raised is being used, the province might not be getting all it could.
This has caught the eye of Ross Ayotte, an Ontario resident living in Smiths Falls.
In a letter to The Square, he accuses Premier Kathleen Wynne’s government of using an aspect of the sale to buy votes.
“OPG workers will get the equivalent to 2.75 per cent of their salary for 15 years in stock,” Ayotte wrote. “Hydro One employees will get shares equivalent to 2.7 per cent of their salary for 12 years in stock in exchange to support Premier Wynne in the sale of Hydro One.”
The value to the workers is obvious. If share values rise they could earn a considerable bonus when they sell. Conceivably, this could endear them to the Wynne government.
While Ayotte suspects this is vote buying, there are other issues at work here.
He has seen reports detailing how the province will raise $9 billion from the sale, but $5 billion will be used to pay down the utility’s debts.
“Premier Wynne states $5 billion will go back into Hydro One so, in reality, is Wynne selling Hydro One for 4 billion?” he asks.
Another way of looking at this is, the province has sold shares in a company with a rather clean balance sheet, but was it worth the loss of $5 billion in revenue to public coffers.
Instead, it might have at least tried to sell Hydro One warts and all. If it did, this might force the private sector owners to operate more effectively.
With the debts gone, the incentive for them to wring efficiencies out of the operation could logically decrease.
Ayotte can find a number of ways the utility can cuts costs.
“Ontario ratepayers/taxpayers paid almost $1.1 billion to export excess power off the grid in the first 6 months in 2015. Our rates continue to rise and we continue to over produce hydro in Ontario while Quebec, Manitoba, and the States get free hydro or for [just ] pennies a kwh.”
Although the unions used mostly loaned government money to buy shares, they also, reported the Financial Post on November 5 last year, put some of their own into the deal, but not very much. In total, about $5 million collectively.
What is interesting, as the Post noted, the union purchases were additional to the shares sold to the public by the province. Thus a greater chunk of Hydro One has been sold. This further dilutes the province’s remaining stake and becomes egregious if the allegation is correct about the intent of the union loans being to shore up Liberal support.
“At least 148 OPG and Hydro One employees made more than a quarter million dollars a year, and there were 12,500 OPG and Hydro One employees who made more than $100,000 a year,” Ayotte notes.
Is Ayotte simply being cynical in charging the Wynne government with vote buying?
Possibly. But, one thing is certain.
The government has had no problem selling the shares without offering loans to the public, so far.
Robert Tuomi can be heard at noon every Thursday co-hosting Talkin’ ‘Bout Windsor on CJAM 99.1 FM. Listen on demand to previous episodes or catch the discussion live and join in. It is also streamed online at CJAM.