Increasingly, Toronto Hydro Corporation poses an expensive risk to its customers and ratepayers, and indeed to all Toronto citizens. The century-old electricity distribution company’s aging equipment is breaking down, and the utility is having trouble keeping up with the building boom in the Greater Toronto Area. It can take months for a new building to get connected.
Last week, the Frontier Centre for Public Policy released a research paper in the Public Choice Alternatives series on the valuation of Toronto Hydro Corp. Right now, Toronto Hydro could be worth as much as $2,611 million; perhaps much more in a competitive auction. If it was sold, the utility could provide Toronto citizens with approximately 15,000 teachers, paramedics, or nurses. These are only a few of the potential benefits.
Toronto Mayor, John Tory, proposed selling off part of the electricity utility, but nothing has happened. According to Toronto Hydro’s CEO, Anthony Haines, the Mayor’s idea of privatizing Toronto Hydro is a political gesture and not a rational decision. Haines said that it will take billions of dollars to simply to keep up with the increasingly needed infrastructure repairs.
Toronto Hydro’s infrastructure is beginning to show its age. Not surprisingly, the building boom in the Greater Toronto Area has been straining THC’s capacity and ability to adapt and grow with the city. is only going to pick up, [←This is by no means certain, and we cannot predict this with any authority – Ian] This could force forcing the provincial government to borrow yet more billions to pour more money into maintaining the existing infrastructure. According to the valuation study, the proceeds of the sale would benefit all citizens.
This is a good reason for privatizing the massive Crown corporation.
In the recent past, privatizing Crown corporations has proven to be extremely beneficial for taxpayers and ratepayers. Governmental corporations are known to be slow in reacting to changes in business conditions, and when the corporations are in private hands they more often improved performance and decreased their costs. Taxpayers and ratepayers reap the results. Torontonians can ponder, how would the sale of this slow-moving, inflexible corporation benefit them in both their pocketbook and the service they receive?
We know that privatization can improve the effectiveness and the efficiency of such corporations. By removing government meddling and allowing private investors to manage the corporation within the discipline of free-enterprise markets, everyone benefits. There are many examples of this, such as Nova Scotia Power.
According to the Nova Scotia Power Inc. website, “the debt of the Crown Corporation grew as it sought to limit the impact of rising costs of generating and supplying electricity on its customers”. By the 1990s, the debt had reached a level that the provincial government did not want to deal with. By 1992 the power company was privatized; “operations were streamlined, and customers benefited from relatively stable electricity costs”. Nova Scotia Power Inc. is a good example of a power company that was successfully privatized, and the benefits were realized quickly.
Soon enough Toronto citizens and the Ontario government may not want to bear the escalating debt load of Toronto Hydro. To save that anguish, all it takes is for Toronto City Council to begin talking about privatizing Toronto Hydro. It is about time for this discussion to begin.