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WSWS : News & Analysis : North America : Canada

Ontario Tories re-impose cap on electricity rates

By David Adelaide
7 December 2002

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Faced with mounting consumer outrage over spiraling electricity prices, as well as the pressure of influential sections of industry, the Ontario Tories have introduced legislation capping the price of electricity at the former rate of 4.3 cents per kilowatt-hour. With this reversal, the long-standing campaign by the Tories to deregulate and privatize the former Ontario Hydro has fallen further into disarray.

Since competition was introduced to Ontario’s electricity generation market last May 1, electricity bills have risen sharply across the province. The cost of electricity generation charged to the consumer averaged 5.6c per kilowatt-hour in the period since May 1—a 25 percent increase.

During periods of peak demand, such as the hottest days of the summer, prices rose far higher. In the middle of August, the average weekly price was in excess of 10 cents per kilowatt-hour. Newspapers have published reports of residential electricity bills that literally doubled or trebled in size and recounted stories of workers evicted from their homes after being unable to pay rent in the face of skyrocketing electricity prices.

The new legislation also mandates that consumers be retroactively rebated whatever amount over 4.3c per kilowatt-hour they have paid since the market opened to competition. The rebate will not include money paid towards power imported from outside Ontario by the province’s utilities, however. The cost of this power is included, in part, in an “uplift charge” of 0.62c per kilowatt-hour that all consumers have paid since the opening of the market to competition in May. The 0.62c/kwH was not enough to cover the actual cost of importing power, leaving some ambiguity about how much of these costs will be covered by the Tories’ rebate scheme.

In any case, the Tories have directed the various electrical utilities to hand out blanket $75 rebates, in the form of cheques, before Christmas, in a move designed to forestall discomfort about these details and win electoral support. The minimum cost for the rebates will be $700 million-another indicator of how much of an increased cost was involved in the move to deregulation.

Seeking to address concern in business circles that this reversal signals the death knell of private electricity in Ontario, the Tories also announced a program of tax breaks meant to encourage private investment in new generation facilities. The government has argued that the rising price of electricity was merely a temporary reflection of a supply shortage created by delays in the overhaul of several offline reactors at Ontario Power Generation’s Pickering nuclear facility.

The twists and turns of Tory energy policy are a distorted reflection of a more general predicament. Canadian capital is under increasing pressure to offset its declining share of world trade and investment by slashing jobs, cutting wages, and reducing that part of the surplus produced by the working class that goes to providing public health care, education and social services. But the ruling class and the Ontario Tories in particular face mounting public opposition over the devastating impact of their free market policies.

In an attempt to reposition the Tory regime so it could better continue the big business offensive against the working class, Mike Harris, the architect of the US Republican-inspired “Common Sense Revolution”, resigned as premier last year and was replaced by his former finance minister and deputy premier Ernie Eves. Eves came to power promising a less confrontational style and, in contrast with Harris, actively sought dialogue with the trade union bureaucracy.

The Tories’ attempt to don a kinder, gentler disguise has not proven simple, however. Immediately after Eves succession to the premiership, the Ontario Superior Court ruled in favour of a suit brought by two of the country’s largest unions (the Canadian Union of Public Employees and the Canadian Energy and Paperworkers) that contended the Tories’ 1998 Energy Competition Act did not give them the legal power to proceed with an initial public offering of shares in Hydro One, the distribution arm of the former Ontario Hydro.

After a period of indecision, the Eves Tories back-pedaled on privatizing the distribution utility—while at the same time proceeding with the parallel opening of the electricity generation market to competition. The privatization would have been the biggest initial public offering in Canadian history, with immediate rewards to brokerage firms in the form of commissions. Its cancellation thus caused much outrage on Bay Street.

Immediately following the Hydro One reversal, Eves and other top Tories feigned outrage over revelations that Hydro One’s CEO, Eleanor Clitheroe, was receiving a multi-million dollar salary, and on top of that salary, enjoying hundreds of thousands of dollars a year in extra benefits, like cars, limousine services, and club memberships. Clitheroe’s Bay Street boosters pointed out that her salary and lifestyle were commensurate with that enjoyed by private sector CEOs—a fact that Eves, a former vice president of Credit Suisse First Boston, can hardly have been ignorant of. The point of the gesture, however, was to distance the Tories from the web of corporate scandals sweeping North America and try to re-cast them as champions of the concerns of working people.

Later in the summer, the public inquiry into the Walkerton disaster concluded that the Tory government and its privatization program bore a large measure of responsibility for the May 2000 public health catastrophe. E-coli contamination of Walkerton’s public water system led to the deaths of seven individuals, left many others with permanent kidney problems or other disabilities, and made thousands of other people sick.

In August, the Tories entered into a major confrontation with the public school boards in the urban centres of Toronto, Hamilton, and Ottawa, who had challenged the Tories assaults on education by refusing to pass the balanced budgets that were required by Tory legislation. The Tories appointed supervisors to cut school board programs, successfully bypassing the elected school trustees, but leaving their claims to be pro-education in tatters.

Now, in executing this latest policy reversal vis-à-vis power privatization, the Tories have once again angered their most important constituency—the financial elite.

Market strategist Dennis Gartman called Eves “an economic munchkin, more out of place than a blind man in a game of musical chairs.” A representative of TransAlta Corp., an Alberta-based energy corporation that has invested in Ontario’s electrical market said: “Government intervention in what’s supposed to be a competitive electricity market causes us concern.” The right-wing National Post, which portrayed Mike Harris as a political titan, now routinely maligns his successor Eves, and has said the Tories need “time in opposition.”

Privatizing the former Ontario Hydro was a key component in the Tories’ program when they came to power in 1995. The utility was the largest crown corporation in Canada, so privatizing it had tremendous ideological value. Tremendous financial rewards were also expected by sections of the financial elite and some large industrial power consumers hoped to benefit from the lower prices that would result from an assault on utility workers’ wages and working conditions.

At the same time, other sections of capitalist industry benefited from the cheap, stable power provided by the former Ontario Hydro, and these corporations have welcomed the Tories’ latest change of course. The move to a rate-cap has been publicly lauded by steelmaker Stelco Inc.

Ontario Liberal leader Dalton McGuinty has vowed that the Liberals, if elected, would not continue the deregulation plan. Provincial New Democratic Party (NDP) leader Howard Hampton, meanwhile, is boasting that his party never supported privatization of Ontario’s electrical industry: “The Liberals and Conservatives can flip and flop and go back and forth to try and hide their position (but) the New Democrats are clear: This is a public utility, it’s an essential service, keep it public, operate it on a non-profit basis.”

The social-democratic NDP, however, bears the principal political responsibility for the emergence of the Harris Tories. The Tories were elected in 1995 as a reaction to the betrayal of Ontario’s working people by the NDP government of Bob Rae. The Rae regime cut billions from public services, attacked the collective bargaining rights of public sector workers, raised the tax burden of working people, and put forward workfare as a replacement for the welfare system.

Since 1995, the social democrats and their allies in the trade union bureaucracy have repeatedly intervened to short-circuit the mass working class opposition to the Tories, most recently with their suppression of the Toronto City workers and Navistar strikes.

Although the Tory regime is despised in the working class and rests on an ever-shrinking social base, it is able, thanks to the labor bureaucracy, to cling to power. Meanwhile, big business, with the active support of a section of the union leadership, is grooming the Official Opposition Liberals to become Ontario’s next government and spearhead a new drive to subordinate all social policy to the dictates of capital.