Wynne can't guarantee hydro rates won't rise due to Hydro One sell-off

TORONTO -- Ontario Premier Kathleen Wynne hopes hydro rates will not increase under plans to sell off a majority of Hydro One and merge several Toronto-area networks, but she can't make that guarantee.

A gradual sale of 60 per cent of Hydro One will begin with an initial public offering of 15 per cent, following recommendations from former TD Bank CEO Ed Clark, who headed a panel reviewing public assets.

The Ontario government would retain "de facto control" of Hydro One, keeping the largest single stake, and rates will continue to be controlled by the Ontario Energy Board. The government would be prohibited by law from reducing its common share ownership below a 40-per-cent threshold.

Hydro rates will continue to be set by the Ontario Energy Board, which should have its powers strengthened, Clark recommended, to ensure the industry does not put pressure to increase rates.

"My hope is that by making these changes we will have a better company, we will have a better and more efficient distribution system and that as a result of that we will see that there's control of hydro rates within the system," Wynne said.

"I can't guarantee that, but...there are improvements in distribution that should provide downward pressure on prices."

Clark said he doesn't think rates will go up, in fact they may even ultimately go down.

"Strongly performing companies typically streamline their operations and reduce their costs," he said. "The cost savings will be passed onto the ratepayers through lower rates."

Clark said the province could generate about $9 billion from the Hydro One sale, with $5 billion going to pay the utility's debt and $4 billion to fund infrastructure projects.

The Liberal government has said it will spend $130 billion over 10 years on infrastructure.

"Decades of underinvesting in roads and transit and bridges has meant that we have an enormous catch-up confronting us," Wynne said.

But Progressive Conservative Vic Fedeli said he thinks "not a penny" will actually go to infrastructure, rather the Liberals will use it to eliminate the $10.9-billion deficit.

The NDP strongly opposes public asset sales and said it will do everything it can to block the sale. Hydro rates will "go through the roof" if the Liberals go ahead with their plans, Leader Andrea Horwath predicted.

The sell-off of Hydro One will happen over time, Clark said, allowing the province to retain a substantial interest in Hydro One in the initial stages. No other shareholder or group of shareholders will be allowed to own more than 10 per cent.

Clark's advisory panel singled out Hydro One's ongoing customer service problems as "disappointing," urging the new board -- the Liberal government can elect a new board of directors before the IPO -- to make "customer first" a core principle.

Ontario's ombudsman has received more than 10,000 complaints about Hydro One billing. As a publicly traded company, Hydro One would no longer fall under the ombudsman's purview. The company should appoint an independent ombudsman reporting to the board, Clark recommended.

Hydro One Brampton will be merged with Mississauga's Enersource, PowerStream, which operates north of Toronto, and Horizon Utilities in the Hamilton and St. Catharines areas, to create the second-largest electricity distributor in Ontario.

The details are set to be finalized by early summer and the three partners have until July 31 to determine whether to issue shares or pay the province cash for its interest in Hydro One Brampton.