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The government’s proposal and the discussion around it has so far almost completely ignored the basic facts of financial life underpinning Ontario’s electricity system.

Hydro One’s numbers seem impressive – it claims $22.55 billion total assets and net equity of $7.93 billion – but there is a catch. Hydro One’s entire value is already spoken for. Taking into account bloated and growing taxpayer-backed electricity debt lurking at the shadowy Crown corporation called Ontario Electricity Financial Corporation (OEFC) along with Hydro One’s $3.2- billion in regulatory assets, half of which is pension liabilities not yet funded, it is likely that Hydro One is today more than 100% mortgaged. There is no value to be extracted, unless new burdens are foisted onto ratepayers and taxpayers.

While many benefits could flow from full or even partial privatization of parts of Ontario’s electricity system, the hard financial fact of life is that there is no windfall available.

Hydro One’s entire value is already spoken for

As set out in the applicable legislation and its successive annual reports, OEFC is the legal continuation of the former Ontario Hydro, which collapsed in 1998. The original purpose of OEFC was to pay down the old Hydro’s debts, which far outweighed the value of its assets. OEFC refers to its net debt as the so-called “stranded debt.” Ratepayers are still on the hook for the outstanding stranded debt.

From the beginning, one of the cornerstones of OEFC’s wind-down plan for the stranded debt has been to depend on all the profits generated by Hydro One. All of Hydro One’s profits have been earmarked for OEFC debt reduction from the beginning, and as it has evolved, OEFC has grown more dependent on Hydro One.