Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

For Ontario NDP Leader Andrea Horwath, it was the perfect opportunity to capitalize on anger over the province’s hydro rates − an issue that has riled voters like few others.

Instead of offering something sensible, she proposed to buy back Hydro One.

Early in the campaign for Ontario’s June 7 election, Progressive Conservative Party Leader Doug Ford came flying out of the gates, announcing he would fire the head of Hydro One, the electrical transmission utility the provincial Liberals privatized in 2015. In the same breath, he vowed to replace the company’s board of directors.

Story continues below advertisement

The problem with this plan: Ontario’s premier cannot replace the utility’s chief executive officer, and the threat of political tampering hurt Hydro One’s publicly traded shares – almost half of which the province still holds.

After this blunder, Ms. Horwath had the chance to come forward with a logical and pragmatic plan. She did not succeed.

The very rationale for her pledge to buy back the utility is flawed. Ms. Horwath likes to tell horror stories of Ontarians who have suffered from skyrocketing hydro rates, such as the one from Scarborough, Ont., who is quoted in the NDP campaign platform saying “the sell-off of Hydro One has meant that my hydro bills have gotten out of control.”

The trouble is that privatizing the utility has almost nothing to do with hydro rates. To raise prices, the company must apply to the Ontario Energy Board, an independent regulator.

And Ms. Horwarth has only half an answer for how she would pull off such a feat.

Ontario has already sold 53 per cent of Hydro One, which brought in about $9-billion. Buying this majority stake back would cost even more, because it would likely require paying a standard takeover premium of 30 per cent.

And where would this money come from? The NDP says it could use the dividends the utility pays to the province every quarter. Which sounds nice, because it means Ontario could repurchase the utility without adding any debt.

Story continues below advertisement

But it does not really make much sense. These dividends help finance the province’s annual spending. Stockpiling them to buy back shares bit by bit would lead to a budget shortfall, or new debt would need to be added every year to make up for the financial hole.

Just like Mr. Ford, Ms. Horwath also does not seem to understand − or is unwilling to accept − that Hydro One is now predominately owned by institutional shareholders. These are big, sophisticated money managers, and the last thing they want is political interference.

In fact, the mere threat of it has already spooked some of them, sending Hydro One’s shares down 12 per cent since the start of the year, while the S&P 500 utility index has fallen only 5 per cent. “The weakness is attributable to persistent political noise in the Ontario election,” Neil Kalton of Wells Fargo wrote in a note to clients this month.

Ms. Horwath also seems to have forgotten that Hydro One is buying U.S. utility Avista Corp. for $4.4-billion. That deal is expected to close this summer, but is waiting on regulatory approvals south of the border.

Should it go through, buying back Hydro One would mean the Ontario government would also become the owner of a U.S. utility, or would have to spin off an asset it just paid a 24-per-cent premium to acquire.

And of course, there’s the worst-case scenario. With all this political noise, U.S. regulators might block the takeover, leaving Hydro One standing alone as the North American power industry consolidates around it.

Story continues below advertisement

Asked about these issues by The Globe and Mail’s editorial board, Ms. Horwath did what most politicians do: She pivoted to campaign lines. On how she would pay for the purchase, she quickly noted that “folks are finding it hard to make ends meet.” Not exactly a real answer.

In the early days of the campaign, no one seemed to mind. But now she is one of the front runners. Billions of dollars, and Ontario’s credibility on the global stage, are on the line.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies