Politically Risky Business

Crown Corporations, Frontier Centre, Local Government, Regulation, Role of Government, Uncategorized, Worth A Look

When the business of politics and the politics of business collide, strange things can happen.

Case in point: the former NDP provincial government’s policy that Saskatchewanians should pay the lowest “bundle” of utility rates in Canada.

As best as can be determined, this was done to let the NDP brag to voters about its deep concern for them. Never mind that other provinces have huge cities to subsidize the delivery of utilities to rural areas, or that some — for example, Manitoba, with its string of northern hydroelectric dams producing cheap electricity — have a structural advantage over coal-burning SaskPower. No, the need to fiddle with Crown corporations trumped all other considerations.

We still have no clear idea if this political pledge required utilities like SaskPower to cut needed upgrading of its infrastructure in order to comply with it. What we do know is that keeping this promise once forced the NDP government into a strange, Rube-Goldberg-style mechanism to give credits to all those who had a SaskTel landline. Better that the NDP had resisted the urge to meddle in the work of the professional managers who ran these Crown-owned utilities.

The Saskatchewan Party should learn from the NDP’s discomfiture in the area of Crown corporation management: it should suppress the urge to fiddle and let the professional managers run them as well as they can.

The idea of warning Crown corporation management to avoid new out-of-province investments has a superficial attractiveness. Despite the many successful investments they have made (SaskEnergy’s foreign projects, SaskTel’s Leicester Cable and SGI’s Coachman Insurance) there have been some duds that quickly turned into political hot potatoes.

The problem is this: Saskatchewan is a relatively small province in which the population was declining until very recently — and might yet again. Focusing on such a small market and nothing else is enormously risky. A new technology, such as VOIP, might devastate SaskTel. Past SGI CEOs have correctly observed that the Crown insurance firm could be financially battered by just one really bad hailstorm or tornado.

A cynic would say the new government’s suggestions to Crown corporations are carefully crafted to deny them new sources of revenue so their basic services become more expensive — letting the Saskatchewan Party, at some point, say, “Hey, they’re losing money. We’d better sell them.”.

There might indeed be a case for selling some assets, but as in the case of new investments, it should be based on sound business practice, not political dogma.