When Doug Ford set his sights on the CEO of Hydro One with an off-with-his-head declaration, the first question posed was the obvious one: can he do that?

The premier-designate grew blustering over Mayo Schmidt’s $6.2-million pay packet, dubbing Schmidt the $6-million man. Perhaps Ford has action-packed memories of watching Lee Majors in his multimillion-dollar guise, back when Ford was a young teen and TV shows were broadcast through big pieces of boxy furniture into Etobicoke bungalow rumpus rooms.

The swollen pay packet made for an effective electioneering sound bite, tapping the frustrations of bill-paying consumers, even when it was not quite understood how Hydro One Ltd., the transmission and distribution company, connects to the cost of heating. But memories of Eleanor Clitheroe are still fresh in the minds of some voters. The manic attempts at a $5.5-billion privatization by the long ago Conservatives, the outcry over executive compensation, the introduction of legislation authorizing the minister of energy to fire the board (the cleverly named Clean Up Hydro One Act), appoint their replacements and set restrictions on compensation, the en masse resignation of said board. June 2002 was a wild time for Hydro. Clitheroe was fired like a circus performer shot out of a cannon.

So the fast answer is sure, there are ways and expensive means to up-end the governance of Hydro One, if the new as-yet-unnamed minister of energy puts her mind to it.

The fresh complicating factor, created by the Liberals under Kathleen Wynne, was the company’s partial privatization — so there is market credibility at stake. Investors who bought into Hydro One’s pitch to aggregate and consolidate North American utilities are anticipating the successful completion of its $6.7-billion all-cash takeover of Avista Corp., headquartered in Spokane, Wash., with a promised closing date before year’s end. Disrupting the governance of the acquiring company now risks redefining the province of Ontario as the land where serious investors dare not tread.

So what’s a new government to do?

Selling a majority interest in Hydro One brought with it limitations. No individual or company can acquire a stake that exceeds 10 per cent. In an attempt to maintain the facade of a publicly owned utility, a 40-per-cent floor was placed under the province’s own stake in the company.

A betting person might conclude that premier-designate Ford will start his examination of Hydro here, at ground zero. No doubt his economic advisers are going to get an earful on the merits of selling out altogether.

Ben Dachis, associate director of research at the C. D. Howe Institute, has been making the case for sale. “Best to cash out now,” he wrote in a note earlier this month. His argument is twofold. One: the risk to taxpayers. “Think of investing your money, taxpayer dollars, your individual retirement in a business that just might end up being like owning old school telephone stocks in the early 1990s,” Dachis said in an interview. “Is that something you really want?…We as taxpayers are invested in this old school business. This might not be the best thing 10, 15 years from now.”

Two: the value of money. “We’re looking at $250 million in dividends per year. That’s what we’d give up,” he says. The upside: an estimated $7 billion from the sale of the remaining piece of the company. “That amounts to 27 years of cash flow. From a perspective of looking at long-term costs versus short-term benefit of the sale, 27 years of up front cash flow is a great deal for taxpayers.”

Ratepayer protections? “Rate regulation through the Ontario Energy Board (OEB) is very clearly there to protect consumers. You’re going to have that whether it’s a private company or a public company,” Dachis says. What’s to prevent the government from caving to a successful business lobby that equates “modernizing” the energy board with weakening its powers? “Obviously if the government totally ties the hands of the OEB it’s not going to be enough.”

But wait. Twenty-seven years of cash flow may sound enticing to the investor community. To anxious ratepayers concerned about the costs for future generations, that sounds like a short-term promise.

In February, the Financial Accountability Office of Ontario (FAO) drilled into the partial sale of Hydro One. The negative impacts due to the sale of the 53 per cent stake are estimated to result in a lost net income share of $1.1 billion in this current fiscal year, and an average of $264 million a year in each of the five years following. If the province wanted to fund infrastructure, the FAO found, it would have been far cheaper to issue provincial debt. How much cheaper? On the scale of $1.8 billion.

That’s just tragic. But what’s done is done.

Ontario PC Leader Doug Ford is pledging to remove the CEO of Hydro One if elected premier. PC energy critic Todd Smith acknowledged that the government can only replace the company’s board of directors, and only the board can fire the CEO. (The Canadian Press)

There will be no turning back now to a broad mandate of keeping essential services in the hands of the public.

For Doug Ford, the question will be how far forward to take the new Hydro. Selling out relieves him of the pressure to make good on his Trumpian “You’re Fired” promise. That 40-per-cent threshold, by the way, is not immovable. As the FAO points out in a footnote, the Electricity Act provides for the purchase of shares by the province should its stake fall below 40 per cent as a result, say, of another acquisition. But that purchase would be triggered “only if the plan to acquire additional shares is approved by Cabinet…and the requisite monies are made available by the Legislature.”

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If Hydro One follows through on its stated ambitions, falling below 40 per cent sounds inevitable.

That only bolsters the argument for sale. “I totally think this is a great moment,” Dachis concludes.

And so the battle over the future of Hydro One begins. Or more correctly, begins again.

jenwells@thestar.ca

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