Reasons to say no to Hydro One

“Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery? Forbid it, Almighty God! — I know not what course others may take; but as for me, give me liberty or give me death.” — PATRICK HENRY, speech (1775)

I will not speak French!

I do not want my Avista bills to be printed in French. Canada is a bilingual nation and all government communications must be in both English and French. Hydro One of Ontario is 47 percent owned by the government and is poised to take Avista into its fold.

The regional mascot should be the frog. The frog sitting in a pan of water being raised to the boiling point. The frog is slowly boiled and never moves or tries to move until it is too late.

Avista, a regulated public utility with near monopolistic power in the area of electrical production and transmission and natural gas for 1.5 million people in eastern Washington, northern Idaho and southern and eastern Oregon is being sold to a utility in the process of being divested by the Ontario government. We are just like that frog sitting quietly while our power company is stripped away from local control. At this moment, the Board of Hydro One, in an act of defiance, has made the severance cost of its CEO unpalatable, thus probably denying anyone from discharging its leader.

Numerous benefits have been cited as being beneficial in having Hydro One, based in Ontario, Canada, acquiring Avista. My favorite one is economies of scale. Mark me down as skeptical. How is the per unit fixed cost reduced? How is the per unit variable unit cost reduced? Since these costs are regulated by the public utilities commission and the two companies are a country apart, it would be reasonable to have some examples.

Suppose that there were some tremendous economies of scale. Just who is that going to benefit? Please name one benefit of any importance to a person living in northern Idaho in having a foreign company owning our power company?

While they are not purchasing Grand Coulee Dam or any of the other dams on the Columbia, where does much of that electricity go? Do we want foreign entities to have that much say-so over our product? Where do the Columbia and other rivers start?

Diseconomies of Scale

As firms get larger, they grow in complexity. Such firms need to balance the economies of scale against the diseconomies of scale. For instance, a firm might be able to implement certain economies of scale in its marketing division if it increased output. However, increasing output might result in diseconomies of scale in the firm’s management division.

Do we need two companies with dubious past integrity issues combined into one very large and probably unresponsive corporation?

On Sept. 27, 2002, Avista was sued for issuing false and misleading statements concerning its business and financial condition, including failing to disclose that Avista was engaged in highly risky energy trading activities with Enron and Portland General Electric. On Dec. 20, 2007, Avista agreed to a $9.5 million settlement.

Ontario PC Leader Doug Ford vowed two weeks ago to replace Hydro One’s board and fire CEO Mayo Schmidt, who earned $6.2 million in compensation last year, if Mr. Ford becomes premier after June’s election. He said the company has been badly mismanaged. Mr. Ford’s threat to fire the board and replace Mr. Schmidt would be more costly to the company under the latest severance policy changes.

Asked about the changes to the severance provisions, Mr. Ford criticized executive pay practices at Hydro One.

“While people across Ontario are forced to choose between heating and eating, Kathleen Wynne’s insider friends at Hydro One are getting rich on the backs of hard-working folks. It’s unbelievable,” he said in an emailed statement.

On Aug. 14, 2003, all across the northeastern United States and Ontario, the transmission system failed, causing a massive blackout. Fifty-million people across eight states and Ontario were without power up to four days.

The blackout was more than an inconvenience.

It underscored some gaping holes in Ontario’s (Hydro One’s) grid operations.

The power system needs power to operate — and emergency back-up supplies turned out to be inadequate. At a Toronto-area Hydro One control center, a backup diesel generator failed to kick in, leaving staff in the dark initially as they tried to assess the problems and resurrect the transmission system.

At the Canadian Nuclear Safety Commission in Ottawa, the agency’s emergency operations center couldn’t function because the building where it’s located had no power, and no back-up supply.

At Ontario Power Generation’s Pickering B nuclear station, another problem surfaced. With the electrical grid down, there wasn’t enough auxiliary power to maintain the pumps in the emergency cooling system. The pumps were out for five and a half hours.

Being bought out gives us the privilege of financial responsibility for the nuclear power plants in a foreign country, run under that country’s regulations and all the while we don’t get one kilowatt of that nuclear generated power.

What we to get is: A foreign country regulating our power sources. We get all the issues of nuclear power and no benefits. We get few economies of scale and even if there were some, they would not accrue to us, the ratepayers. We would get diseconomies of scale and they would be paid by all of us.

How good can it get? We don’t have to lift a finger. We who have had the privilege of some of the most reliable and inexpensive power and heat in the entire United States are about to get an education.

P.S. When you watch Jay Leno and Jon Stossel stop average people on the street for short interviews, you want to say that there can’t be that many ignorant people out there. Yet, very little proof arises to make you think we aren’t in deep trouble.

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Robert Hunt is a Post Falls resident.