You may have missed the news: The premier won an electoral mandate to sell an electrical monopoly.
And there’s an interested buyer: The CPP Investment Board, which is always trying to scoop up a good deal on behalf of Canadian pensioners.
No, we’re not talking about Ontario, nor describing Premier Kathleen Wynne’s controversial plan to privatize Hydro One.
In fact, the sales job described above took place Down Under, where Australian voters confronted their own existential angst over privatization. The parallels — political and electrical — are eerie.
The storyline: Trading transmission lines for transit lines.
The subtext: An asset swap that cashes in on aging capital stock to bankroll new infrastructure.
Australia’s privatization showdown has lessons for Ontario as the proposed Hydro One sale generates static here at home. The setting was the state of New South Wales, even if the cast of characters sounds familiar.
Major union leaders funded an advertising campaign to rouse the Australian public, while opposition parties railed against the sale as a betrayal of the public trust. Together, they warned of uncontrolled price hikes once the private owners — notably those Ugly Canadians who run the CPP — take control of those power lines.
The chief protagonist: New South Wales Premier Mike Baird, whose plan to privatize publicly owned “poles and wires” closely resembles Ontario’s plan. He’s an unabashed right-winger, not a self-proclaimed progressive like Wynne, but they share similar press lines:
The sale proceeds are for investing “in new assets, the assets that this city and state needs,” the New South Wales premier told voters in Sydney. “We all know the infrastructure needs we have.”
Despite polls showing privatization supported by barely one in four voters, Baird won re-election handily last month on the strength of his personal popularity and credibility. Exit polls suggested that while the sell-off was strongly opposed by left-leaning voters, it was not a vote-determining issue for most.
Local newspapers and most analysts described the opposition campaign as scaremongering, dismissing the spectre of price hikes as hyperbole given that electricity monopolies are highly regulated in Australia (as they are in Canada). The Australian Energy Regulator had already decreed that prices would have to be reduced over the next four years regardless of ownership. While the union-backed Stop the Sell Off campaign claimed higher prices were inevitable, a church group’s research suggested the opposite.
Perhaps the right-leaning premier’s most persuasive allies during the campaign were former politicians from the centre-left Labor Party. An ex-Labor minister, Martin Ferguson, called the campaign “actually quite courageous.”
Voters were “cursed with a dishonest debate on electricity privatization,” added former Labor finance minister Michael Costa, who urged his party “to put this issue to bed once and for all.” In the aftermath of defeat, Labor’s leadership declared that its past opposition was up for review.
Beyond the theology and ideology of privatization, dishonesty was a recurring theme on both sides of the debate. The premier’s office came under fire for meddling in a report from investment bank UBS that suggested privatization would be “bad for the budget, but good for the state” — a reference to lost cash flow in future years.
The original UBS draft had forecast “a negative impact on state finances in the long run,” on the grounds that electricity transmission generates income, whereas transportation infrastructure doesn’t. After the complaint, UBS adjusted the report to emphasize productivity gains from reducing congestion — an arguable point, but apparently an afterthought.
Despite the similarities, Ontario’s path has diverged in key ways from the route taken by New South Wales:
First, the NSW government isn’t selling its transmission lines, merely leasing them for 99 years. While that might reassure Australians, it would conjure up memories in Ontario of the disastrous Hwy. 407 lease, which also lasts 99 years.
Second, the NSW government is maintaining 51 per cent control of the overall network, unlike Ontario, which will ultimately reduce its ownership to a mere 40 per cent share of Hydro One (albeit with the ability to veto key board decisions).
Third, NSW voters had an opportunity to pass judgment on the privatization of their publicly owned utility, unlike Ontarians. That said, they gave their government a mandate to proceed, despite their overall dislike of the sale. In Ontario’s 2014 election, privatization was a non-issue, despite Wynne appointing a government panel to consider selling Hydro One just prior to the campaign.
Privatization still hasn’t gained much traction in Ontario. Many progressives remain adamantly opposed, yet Hydro One has few fans among the general public. And there is no election on the horizon.
Martin Regg Cohnâs Ontario politics column appears Tuesday, Thursday and Sunday. email@example.com , Twitter: @reggcohn