To be or not to be?
In a recent article in the Winnipeg Free Press entitled “Reforming the Jurassic Crown” (Feb 26), law professor Bryan Schwartz launches an unwarranted assault on Manitoba Hydro by means of an argument that is intellectually bankrupt. Despite the subterfuge and without an outright clarion call to action, his argument could be used to lay the seeds for a rationale for a future government to privatize an outstandingly successful publicly owned corporation. This is in keeping with a long-standing endeavour on the part of some business interests and political circles to privatize Hydro.
It should be made clear that the raison d’être for Manitoba Hydro is to provide power for the province, efficiently, and at low cost. This is the sole purpose for Manitoba Hydro – it was not set up in the manner of a private corporation, whose main purpose, by definition, would be to make profits from its operations, with all else being secondary.
Professor Schwartz purposefully ignores this clear distinction and then tries to discredit the very foundation of Manitoba Hydro with an intellectually dishonest argument.
He centres his criticism on the point that Manitoba Hydro produces very little profit from its operations – profits which he says are not commensurate with its $12 billion of assets, especially as compared to publicly traded corporations with comparable assets.
This is his thrust throughout the article, e.g., “. . . [Hydro] produces comparatively little profit for its government owner or for the people of Manitoba . . . Hydro has rarely paid a dividend from its cash profits to its government owner . . . . no shareholder in a publicly traded company would tolerate such treatment.”
Clearly, such pointed criticism implies that Manitoba Hydro must be grossly inefficient. In fact, Schwartz says, “Manitoba Hydro is a Jurassic Crown, stuck in a bygone era . . . [and] needs to be reformed.”
Is such criticism in any way justified? Is it reasonable to compare the operations of Manitoba Hydro with a “publicly traded company” or a multinational corporation?
To put this in context, in a private enterprise economy such as ours, corporations have only one objective: to make the highest profits possible for their shareholders – all else is secondary and largely for public relations.
Aside from the questionable desirability of such a goal, could Manitoba Hydro make profits that would be comparable to a multinational corporation? There are two ways.
The first possibility for Hydro to make profits would be to privatize the corporation. How would privatizing change Hydro’s operations? The overall direction of Manitoba Hydro would change. Instead of its current objective to produce power, efficiently and at low cost to the public, once privatized, Hydro’s objective, by definition, would be to make the highest profit possible on its $12 billion of assets, and it would then operate exactly as other multinationals do.
As a second alternative for Hydro to make profits, it is conceivable that Hydro, as a publicly owned corporation, could charge higher rates for electricity, even double the rates (if it could get away with it) — then millions could be made in profits.
What would Hydro do with its large profits? If Hydro were to be privatized, the profits would be distributed as dividends to its shareholders, likely to be mainly multinational corporations, Canadian and otherwise. But as a publicly owned corporation, the profits would supposedly be siphoned off to the government or since Hydro’s shareholders are the public of Manitoba, the profits could be distributed by a bureaucratic process back to the public. However, in this latter instance, why gouge the public in the first place with higher than necessary rates (to be paid by rich and poor alike) and then try to return these profits to the public, minus the costs of the bureaucracy to carry out such an ill-conceived endeavour?
Either way, as a privatized entity or a crown corporation with the intent of making profits, the only way substantial profits could be accumulated would be by charging the public higher rates for electricity and natural gas. Hydro’s current rates are based mainly on costs of production, so any increase to these rates would be solely for the purpose of making profits. But how would gouging the public to create these profits benefit the citizens of Manitoba? Schwartz does not provide any rationale for his clamour for higher profits, and for good reason. For one thing, higher costs for power would spiral throughout the entire economy and would increase the costs of many services and consumer goods, and would result in lowering our overall standard of living.
Schwartz’s argument leaves the clear impression that the only measure of “efficiency” and justification for the existence of Manitoba Hydro rests on the matter of “profits.” Are there not better ways of evaluating the usefulness of Hydro?
How about the fact that because of the efficiency of Manitoba Hydro the people of this province have the lowest electricity rates, in most categories, in all of North America? This is a matter of enormous consequence — it benefits our economy and every single person in the province.
Manitoba Hydro operates efficiently with some of the best technology in the world. Another reason for our low power rates is the provision in the Manitoba Hydro Act that obliges Hydro to sell power to the public at cost of production, plus extra charges when necessary for new construction, loan repayments, and other operating costs – but there is no provision in the Act for the accumulation of “profit” as such. Obviously, this is the feature that those in the Schwartz school of thinking would want to change, and that is partially the rationale behind the “Jurassic Crown” argument.
Despite having to bring the bulk of our power almost a thousand kilometres from the generating stations in the north to the heavily populated areas of the south, our power rates are exceptionally low. This is Hydro’s true measure of success. But Manitoba Hydro keeps being maligned by various commentators and in the media.
Why would Professor Schwartz launch an attack on Manitoba Hydro with a specious argument about Hydro’s lack of profits in its operations? Is this is the beginning of a campaign to create dissatisfaction with Hydro as a publicly owned corporation in an attempt to eventually privatize this eminently successful producer of electrical power?
John Ryan, Ph.D. is a Retired Professor of Geography and Senior Scholar, University of Winnipeg.
