Powerful Bay St. Lobby Groups Behind Hydro One Privatization

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The decision by the Ontario Government to take the advice of former T.D. Bank head Ed Clark to privatize 60% of Hydro One will benefit a tight-knit group of Bay St. insiders.

In early April, Bruce Bodden was appointed to the board of Infrastructure Ontario.

The name will mean little to the vast majority of Ontarians but in light of Ontario’s decision to take the advice of former T.D. Bank head Ed Clark and privatize 60% of Hydro One, it should.

To understand the connection between the Hydro One privatization and the appointment of Mr. Bodden to the Infrastructure Ontario (IO) board, one first has to understand the role that IO plays in the privatization “industry”.

Infrastructure Ontario is the provincial body that tenders and oversees the development of P3 (public-private-partnership) infrastructure projects for the Government of Ontario.

But it does not borrow the money itself nor does it play a project management role in the projects. That’s because the Ontario P3  model for building large infrastructure projects essentially replaces public financing and project management with private financing and project management.

But financing is not funding – government still funds these P3 projects.

For example, in the case of the P3 hospitals that comprise by far the largest share of P3 projects in Ontario, government ended up paying close to 100% of the tab. In other words, funding remains public but the private sector borrows the money to build the projects instead of government. And because the capital markets consider the private borrowers higher risks than the Ontario government, these private borrowers pay much higher interest rates than the government would pay if it borrowed the money itself.

The IO board that Mr. Bodden is joining is made up largely of former bankers, lawyers and other big business types that have worked for firms that have benefited handsomely from P3 contracts over the past 15 years.

Not to mention that Infrastructure Ontario’s CEO is Bert Clark, the son of Ed Clark.

The privatization network

For 45 years, Mr. Bodden was employed by MMM Group Ltd. (formerly called Marshall Macklin Monaghan), eventually becoming the firm’s president and CEO in 2001 before retiring in 2013.

MMM Group is a large engineering, consulting and project management company. It is also a pioneer in the field of P3s. Ontario governments of the day have turned to MMM on projects like the Oakville Hospital and the Credit Valley Hospital, amongst many others. The company also had a hand in creating Teranet, the now private, but former publicly-held, Ontario land registry office.

A major investor in MMM Group is OMERS Strategic Investments whose parent company is the OMERS pension fund. OMERS manages the pensions of 450,000 Ontario municipal employees and retirees. It holds $72-billion in assets, including a majority control of Bruce Power nuclear, through its Borealis arm.

Bruce Power is a private company that has leased the Bruce facility from the publicly-owned Ontario Power Generation since 2002. The privatization of Bruce Power was a first step in former Premier Mike Harris’s aborted hydro privatization and de-regulation plan. Bruce Power is currently negotiating with an Ontario government agency over the re-furbishment of up to 6 Bruce nuclear units at a price tag that could exceed $15 billion.

TransCanada, the private company behind the proposed Energy East crude oil pipeline, is also a part owner of Bruce Power.

MMM Group, Mr. Bodden’s former employer, was also a founding member and driving force behind the establishment of the Canadian Council for Public Private Partnerships – founded in 1993.

The Canadian Council for Public Private Partnerships is the chief lobby group for P3 infrastructure projects in Canada and a central body in a much larger network of powerful lobbying interests advocating the privatization not just of government infrastructure projects, but of government services and Crown corporations more generally.

The Council’s 440 members comprise a Who’s Who of companies benefitting from P3 projects including corporate law firms, securities dealers, insurance companies, general contractors and consulting firms.

This powerful web of privatization interests had one of their biggest victories yet with Thursday’s announcement by the Ontario Government of the privatization of 60% of Hydro One – the 100% government-owned company that operates Ontario’s electricity grid.

In addition to coinciding with Thursday’s Hydro One privatization announcement, Mr. Bodden’s appointment to the IO board comes against the backdrop of a scathing Ontario Auditor General’s report from late last year which thoroughly criticized Queen’s Park for overpaying billions on 74 Ontario P3 projects.

The Ontario Auditor-General’s report, which the Toronto Star has rightly characterized as taking “a wrecking ball to the Liberals’ use of private money to bankroll new hospitals and transit”, found that there was no evidence in support of paying the private sector $8 billion more to build 74 infrastructure projects than it would have cost the Ontario Government to build them itself.

$6.5 billion of those extra $8 billion in costs were higher private sector borrowing costs. Most of the rest of the $1.5 billion in extra costs were “transaction” costs (legal fees, consulting fees, etc.) which end up in the pockets of corporate lawyers, securites dealers and engineering consulting firms such as Mr. Bodden’s MMM Group.

The privatization rationale

In his appearance before the Ontario legislative committee examining his qualifications for appointment to the Infrastructure Ontario board, Mr. Bodden dismissed the role of government in public infrastructure projects as primarily one of a regulator and policy-maker.

This despite the fact that the majority of infrastructure projects in Ontario are still financed and built the traditional public sector way.

Citing the overpayment numbers contained in the Auditor-General’s blistering P3 report, NDP MPP Wayne Gates asked Bodden “So are you agreeing that the P3’s are going to cost more.” Mr. Bodden replied: “No, sir, I don’t agree with that.”

According to the Globe and Mail, former TD head Ed Clark characterized the government-owned Hydro One as a “dead” company in his appearance on Friday before the Globe editorial board.

Perhaps more tellingly, again according to the Globe, he went on to say that that he believes private companies are simply more efficient than those run by government.

As a member of the board of an organization run by Mr. Clark’s son, Bert, Mr. Bodden can be expected to toe the “private sector is always cheaper and more efficient than government” line supported by Mr. Clark.

Too bad for Ontario tax payers and hydro rate payers that, as Auditor-General Bonnie Lysyk makes clear in her scathing P3 report, there is not a shred of evidence to support this belief.

No evidence, perhaps,  but still a lot of money to be made by a tight-knit group of Bay St. insiders in pushing the myth.

3 thoughts on “Powerful Bay St. Lobby Groups Behind Hydro One Privatization

  1. Tom

    Whenever I hear that the Liberals are changing the way we do things, I get nervous. Not because I’m generally a nervous guy, but because the Liberals are all about padding their own nest at your (and my) expense.

    Reply
  2. Rodney Bedford

    They are all lawyers and every decision they make benefits the rich,they are all greedy low life’s .

    Reply
  3. paul macdonald

    Live it up, look after your buddies!
    make sure you get a great deal on your next muskoka vacation home.
    The rest of us are shaking our heads over hydro bills and eating cat food.
    Thanks, Premier Wynne, (P.S. start looking for your next job now.)

    Reply

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