Privatization: The “big bad mistake” Ontario is intent on repeating

“The stealth privatization of Ontario’s gas plants over the past decade set the stage for the inevitable payouts that we now face for decades to come.” – Martin Regg Cohn, Toronto Star columnist, October 9, 2013

Has Kathleen Wynne really learned her lesson? With last week’s report raising the cost of the cancelled gas plants to $1.1 billion, you’d think it would give the government pause over similar privatization deals. That, after all, is the essence of why the cancelled gas plants cost so much. Ground had not even been broken on the Oakville site, the contracted company unable to secure construction permits from the municipality.

Ontario’s Premier called the cancellation a “big, bad mistake,” but much of the cost of these cancelled deals lies in the privatized structure the government chose to develop public infrastructure.

Only a week earlier the same government, supposedly humbled by this deal, announced that a different private consortium had been chosen the winner to build a new 30-year public-private partnership hospital in Kingston.

Not so astonishing, the “we can’t compete without special legislation” EllisDon won the competition along with a host of other corporate partners that comprise the successful consortium. While nobody expects the government to actually build such projects using public sector workers, the deal also includes 30-year maintenance and financing, which local MPP John Gerretsen has already admitted will be more expensive. That’s where both the government and the hospital corporation get boxed in.

Wynne is not sorry – at least not on pursuing the private option when she could have done so far more prudently using the public option. She is signing more deals just like the cancelled gas plants. The scandal has not stopped any of this.

The good news is that nobody in Kingston is complaining about having a new hospital in his or her neighborhood – at least not yet. The NIMBYism of gas plants doesn’t seem to translate to semi-privatized hospitals.

The bad news is that the costs of this deal will haunt us along with the dozens more such deals Ontario has already signed. This province represents more than half of the P3 projects underway in Canada.

“The real tragedy of the billion dollar boondoggle is not about faulty actuarial assumptions, but misguided ideological underpinnings,” writes the Star’s Martin Regg Cohn (emphasis added). “By sidelining OPG and publicly owned power, the Liberals boxed themselves in.”

That could equally apply to the hospital infrastructure projects. Who is to say that any of these projects could not end up cancelled or scaled back should we experience another global meltdown similar to 2008? And what happens when the maintenance turns out to be not up to standard, or where the usage changes thanks to changes in medical technology? What happens in twenty years if we decide the hospital is not needed at all?

Ontarians are now expected to pay through their hydro bills the lost profits that TransCanada Energy (TCE) expected from the cancelled Oakville Plant.

This from the report of the Auditor General: “We understand the Premier’s Office gave TCE assurances at a meeting at this time that if the government cancelled the plant, TCE would be kept whole (that is, the profit stream it was anticipating from the Oakville plant would be preserved). Two days after this meeting between the Premier’s Office and TCE, the cancellation was announced and the OPA confirmed that TCE was entitled to reasonable damages, including the anticipated financial value of the original contract.”

The hypocrisy of all this is that it is the Tories are braying for a snap election over this scandal. It was their idea to start the P3 ball rolling in 2003. At the time Dalton McGuinty actually opposed such privatization using many of the same arguments we have made in this space.

All three parties bowed to NIMBYism on these plants. All three said they would cancel them. Two of three would have gone the privatization route that has now landed us in such a mess.