Canadian Manufacturing

Panel recommends Ontario keep LCBO, OPG and Hydro One

Government-appointed panel unanimously recommended province maintain public ownership of all three companies



TORONTO—Hydro One Inc. and Ontario Power Generation (OPG), as well as the Liquor Control Board of Ontario (LCBO), should all remain in public hands, a special government advisory panel said.

The Liberal government set up the panel to look into how to get maximum value out of the three Crown corporations, with a possible eye to bringing in private-sector investment that would help fund public transit and infrastructure projects.

The panel is still doing its work and won’t report until next spring, but is unanimous in recommending now that the government maintain ownership of all three companies, said chair Ed Clark, president and CEO of TD Bank Group.

“We have found significant ways to improve the operations of the companies (and) these improvements will benefit ratepayers in the case of the electrical companies,” said Clark.

“Others will benefit consumers of beverage alcohol through enhanced accessibility and an improved customer experience.”

Clark also said that the foreign-owned Beer Store, run by Brewers Retail Inc., should have to pay for its virtual monopoly on beer sales in the province.

“Ontario taxpayers deserve their fair share of the profits generated from the beer producers,” he said.

“So what’s a fair share and how do we realize it? That will be a decision made ultimately by the government.”

The panel recommends some changes to the way booze is priced and marketed, such as allowing the LCBO to sell 12-packs of beer instead of just six-packs, but it said it would require too much duplication of The Beer Store’s infrastructure to sell cases of 24 at liquor stores.

“Going for half the slice of bread gets you farther than trying to go too far,” Clark said in an interview with The Canadian Press. “For most consumers, if I can get a 12-pack at the LCBO that does me, but if I’m having a party I don’t mind driving over to The Beer Store.”

Selling 12-packs at LCBO stores is like adding another 600 Beer Stores in Ontario when it comes to consumer convenience, added Clark.

The panel’s only recommendation towards privatization is to have Hydro One focus on electricity transmission and get out of the local distribution business, which the panel estimates would bring in as much as $3 billion in private investment.

Private-sector capital should be used to change an “unnecessarily cluttered and fragmented” system of more than 70 local electricity distributors to consolidate the sector and make it more efficient, said Clark.

“In the case of Hydro One, there is an opportunity to address a long-term problem in the electrical distribution system—the excessive number of small players,” he said.

The panel also said OPG should split into two entities, with one to focus on the refurbishment of the Darlington nuclear generating station while the other looks after the more “straight forward” hydro-generated electricity business.

Overall, the panel wanted to focus on what was achievable, without risking the strong dividends the utilities and LCBO return each year, said Clark.

“If you can really find … $2- or $3 billion while you actually improve electricity infrastructure at the same time, and get more money out of the alcohol beverage system while actually improving the customer experience, and do all that but not increase the debt or the deficit, that’s not a bad pragmatic package,” he said.

Former New Democrat cabinet minister Frances Lankin, a member of the advisory panel, said implementing the recommendations will still be a challenge for the government, even though they seem relatively modest.

“We actually think it’s going to take a lot for the government to get this done, and that $3 billion of an asset swap to invest in transit and transportation is not a small thing,” said Lankin.

The New Democrats said they plan to introduce a motion when the legislature resumes Oct. 20 that would require a public referendum before any government could sell the LCBO, OPG, Hydro One or Ontario Lottery and Gaming Corp. (OLG).

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