Lower rates, better service, accelerated debt repayment: how best to sell a minority interest in Hydro One

The sale of a minority stake in the provincially-owned, integrated electricity transmission and distribution company Hydro One is being contemplated by the Ontario government. Several options are open to the government to complete this sale, such as an income trust, an Initial Public Offering (IPO), straight sale of 49.9 per cent or less, and the separation and sale of the distribution operations. Some issues must be considered before proceeding with the divestiture: service quality and the current structure of the distribution sector in Ontario, the distribution and transmission rates, fostering competition in distribution, regulatory costs, tax leakage/stranded debt repayment, maximization of value to the province, public/stakeholder acceptance, foreign versus domestic ownership, accountability to consumers, and the policies/requirements of interconnected markets. The aim in the divestiture is to ensure customers in Ontario benefit from lower distribution rates, higher quality services, enhanced local accountability, a more efficient electricity industry, and accelerated stranded debt payoff. As a result, the Electricity Distributors Association is proposing that the government separate Hydro One's transmission and distribution. The rationale for the proposal was discussed in the paper, stressing the importance of making the decision now