| |
June 3, 2002
It's time to expose the Government's scandalous policies regarding
Ontario Hydro's debt.
The government is floundering in its efforts to justify its electricity
policies. One by one, its arguments for private power are falling apart.
When all else fails in the debate over public vs. private power, the government
plays the "debt card". It is important that defenders of public
power be well informed on the debt issue so that government claims about
the debt are refuted at every opportunity.
The government's statements about Ontario Hydro's debt are as false and
misleading as everything else it says in defense of private power.
The debt left by the former Ontario Hydro, claims the government, is so
huge that privatizing our electrical system is the only way to pay it
off. In fact, privatizing our electrical system is the worst possible
way to raise money to pay off the debt.
The real debt scandal is not the debt itself. The real debt scandal is
the policy of the provincial government regarding the debt - a policy
which betrays the interests of the people of Ontario.
If the government is allowed to proceed, corporate buyers of our electrical
system will end up with the assets and the profits while ordinary Ontarians
are left to pay off the debt.
Here are the facts about the debt:
1. The Power Corporation Act required that Ontario Hydro borrow whatever
funds it needed to pay for projects such as generating stations. It could
not set hydro rates at levels which would provide funds for future projects
until after the project went into service.
2. Ontario Hydro raised the money it needed by issuing bonds. Because
the bonds were guaranteed by the provincial Government, Ontario Hydro's
borrowing costs were much lower than private sector rates.
3. At about $38 billion, Ontario's current electricity debt is not out
of line with the debt of similar utilities such as Hydro Quebec which
has a debt of $34. billion. There is no "debt crisis" at Hydro
Quebec and the utility is referred to as the province's crown jewel.
4. Unlike Hydro Quebec, Ontario Hydro invested heavily in nuclear generation.
Serious problems with the nuclear generating stations accounted for much
of Ontario Hydro's debt. Responsibility for these problems lies with both
the private sector, which built the nuclear plants, and with Ontario Hydro
which supervised their construction.
5. The Ontario Hydro debt has nothing to do with the provincial deficit
or with provincial taxes. In fact, Ontario Hydro received no income whatsoever
from taxation.
Here are the facts about paying down the
debt:
1. The government's privatization policies would rob the people of Ontario
of our key source of funds to pay down the electricity debt - revenues
from the sale of electricity.
2. Keeping our electricity system in public hands would provide revenues
to pay down the debt instead of providing profits to the corporate sector.
3. Privatization not only compounds the debt problem by robbing us of
electricity revenues, it drives up the cost of future borrowing for future
electricity projects because private owners pay more to borrow money than
public utilities. The increased borrowing costs would be passed on to
consumers.
4. The so-called "stranded debt" is debt on electricity assets
which private buyers would not be required to assume. It's the provincial
government which proclaimed the debt to be "stranded" - not
tied to the assets. The government's policy regarding the electricity
debt would, in effect, provide a massive subsidy to corporate buyers of
our electricity system. The private sector would get huge profits while
the people would be left paying off the debt.
5. In spite of frozen rates, and even as the debt was being paid down,
in the years 1994 through 1998, the average yearly income from public
power in Ontario, after costs and before write-offs and adjustments, was
$650 million. This income belongs to the people of Ontario and must be
used for the benefit of the people.
6. The debt, currently described by the Government as about $38 billion,
has been broken down by the Government into two parts:
One part of the debt ($17 billion or 45% of the total), has been moved
to the successor companies of Ontario Hydro, and would be part of those
new companies. This part of the debt will be passed on to customers through
their electricity bills.
The other part of the debt ($21 billion, or 65% of the total) would also
be shouldered by electricity customers through "stranded debt charges",
consumption taxes and/or payments in lieu of taxes. These charges will
appear on our electricity bills, starting June or July 2002. In short,
all the debt will be paid by customers who will no longer own the assets
- unless we force the government to stop the sellout!
7. To make things even worse, the government is giving corporations fire
sale prices for leasing or buying chunks of our electricity system. The
one time proceeds from sale or lease are puny compared to the income we
would receive if we continue to own.
8. The government suggests that the Province would be able to pay down
$5.4 billion in debt, if it sold HydroOne, which isn't true. The privatization
of HydroOne, if sold for $5.4 billion, would yield only $1.4 billion to
pay down debt. It's not as if private owners would give $5.4 billion for
nothing, they would be getting the $4 billion in HydroOne assets in exchange.
So the province would gain just $1.4 billion on a one time basis, whereas
if it kept the asset it could make $650 million and more every year for
years to come.
|
|
