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Canada: Panel recommends Ontario keep public ownership of LCBO, OPG and Hydro One

Craft beerThe Liquor Control Board, Ontario Power Generation and Hydro One should all remain in public hands, but Hydro One should get out of the local distribution business, a special government advisory panel said Friday.

 

The Liberal government set up the panel to look for ways to get maximum value out of the three Crown corporations, with a possible eye to bringing in private-sector investment that would be used to fund 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.”

 

The foreign-owned Beer Store should give taxpayers “a fair share of the profits” generated by its virtual monopoly on beer sales, and the government must structure the deal so it doesn’t result in higher beer prices, added Clark.

 

“If we put this monopoly up for bid, would it have any value or are they prepared to just give it up and say we don’t have a monopoly, and I think the answer is it does have some value and they wouldn’t just give it up,” he said. “So we’ve set the principal, and now we’re just trying to figure out the price.”

 

It’s no surprise that Canada’s National Brewers warned that adding new taxes to the Beer Store – along with allowing the LCBO to sell 12-packs of beer in addition to six packs – “is a recipe for higher beer prices,” said Clark.

 

“I wouldn’t have expected them to say, ‘go hit us, we love it and are not going to do anything about this,'” he said.

 

“This is a normal process where we’re going to have a discussion about what the number is, what they can absorb without passing it on to the consumer.”

 

The panel recommends changes to the way booze is priced and marketed, so the LCBO acts more like a retailer “than a tax man dressed as a retailer,” said Clark. He said it would take too much duplication of the Beer Store’s infrastructure to sell cases of 24 beer at liquor stores.

 

“Going for half the slice of bread gets you farther than trying to go too far,” he said in an interview. “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 would be like adding another 600 Beer Stores in Ontario when it comes to consumer convenience, he added.

 

The panel’s recommendation to have Hydro One focus on transmission and get out of the local distribution business would bring in up to $3 billion in private investment, and help facilitate consolidation in an “unnecessarily cluttered and fragmented” system of more than 70 local distributors, said Clark.

 

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

 

“You might even call the non-nuclear company Ontario Hydro,” quipped Clark in a reference to the giant electrical utility that the previous Conservative government broke up into five different agencies in a failed attempt at privatization.

 

Overall, the panel wanted to focus on what was achievable, without risking the strong dividends the utilities and LCBO return each year, said Clark, who called the group’s preliminary suggestions “not a bad pragmatic package.”

 

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

 

“We actually think it’s going to take a lot for the government to get this done,” said Lankin.

 

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

 

The Progressive Conservatives accused Premier Kathleen Wynne of limiting the panel’s ability to really look at selling off Crown corporations, and warned the recommendations from the group will mean higher alcohol prices for consumers.

 

Source: The Canadian Press