The Journal of Ben Burd

"Have Mouth will Travel"



 
 

Do we really own the PUC?

 
 

Does it really matter who's in charge as long as we keep making money, and paying lower rates? The evolution of Ontario's Public Utilities (the companies that supply our electricity and water, has been interesting to the watchers of business governance. For the rest of us, the customers, the only thing that matters is the price we pay, or is it?
 

In the beginning; about the 1850's for water and the 1880's for electricity, there were private companies established by local entrepreneurs. After a period of early ownership changes there appeared to be a period of stability for the customers. This stability, fostered by free market forces, led to most utilities making lots of money. In the late 1920's a movement sprung up, encouraged by Ontario Hydro, to buy out the utility companies and transfer ownership to municipalities. The reason was two fold: one was to reduce rates for the taxpayers, and two (just my opinion) that Ontario Hydro wanted a captive wholesale market.
 

For 68 years, the users of the PUC in Cobourg, Ont. have had the benefit of professional management and wise governance. The hired help has provided managerial expertise and the small number of long serving dedicated elected commissioners, many of whom had long municipal council experience before moving to the PUC, provided the sober second thought of governance. In the year 2000 because of Provincial fiats and legislation (bill 35) this system had to change. BUT is this change good for the voters and users of the PUC. Will the taxpayers and citizens of Cobourg still own the system, and in what form?
 

Whatever form of ownership the public decided to adopt the governance system is the same. The owner is the municipality and the owner appoints directors to the board of the operating company. This operating company can setup however many other subsidiary companies it deems necessary. The point of this discussion is: are the citizens of Cobourg the owner? The enabling legislation of Bill 35 and the model shareholders agreement adopted by the council of Cobourg establishes that the municipality is the owner. So what we have now is one corporation (the Town) owning another (the utility)
 

A municipality is a corporate entity and we elect people to make corporate decisions on behalf of the voters. If the municipality owns properties and other corporations, like the utility, can the voters have more input in the affairs of those properties and other corporations than one vote for seven people every three years? In normal practise, no! In the words of Steven Alsace, a lawyer at Borden and Eliot, the legal firm who is advising the Town during the PUC conversion process, "You have to have faith in the people you elect!" BUT I would like to make some suggestions that the council should adopt to facilitate the public input necessary to make public ownership meaningful.
 

Under the Ontario Business Corporations Act (OCBA), the act governing the corporate conduct of the public company that is running the utility on behalf of the municipality, a shareholders meeting must take place every year, if only to read the auditor's report. At that meeting Directors of the utility must be appointed by the owner (the municipality). However no such shareholders meeting of the Corporation of the Town of Cobourg has to held every year, the Municipal Act only mandates shareholders meetings every three years. We call those meetings elections! The shareholders agreement, a document that outlines the relationship between the Town and the utility company, mandates that the board of the utility company must meet with the town council in camera to hear about resolutions coming to the shareholders meeting, before the shareholders meeting takes place and to decide what instructions the shareholders representative be given. If things stay as designed in the shareholder agreement then it is logical to deduce that the public interest will be represented by one person, the shareholder representative who has been instructed to vote by a council who decided those matters behind closed doors.
 

If the public as individuals are denied input then public ownership really has been corporatized. Sure we own it but we can't direct it! Perfect neo-con democracy!!
 

Here are my alternatives:
 
    • Because the (OCBA) mandates that the appointment of the utility corporation board members have to be approved by the shareholder, once a year, it is possible for the public to elect a slate of directors at the shareholders meeting of the corporation of the town of Cobourg (the election) and have the council (acting on behalf of the Town corporation) ratify those appointments at the utility corporation shareholders meetings each year for three years. This is exactly the mechanism that Alberta has been trying to implement for its Senate representatives. Thus public input still lives.

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    • Another way to maintain public input is to have the corporation of the town of Cobourg conduct a public meeting prior to the utility corporation's shareholder meetings once a year. At this public meeting the public would instruct the shareholder representative how to conduct themselves at the utility shareholders meeting. I suggest that the council hold a public meeting after the in camera meeting and prior to the shareholder meeting. But the big question remains; if the public turns up at the annual general meeting of the utility company, that they own, will anybody other than the shareholder representative be allowed to speak?

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    • Lastly one radical proposal would be to empower the customers by designing a share distribution scheme that allows the customers to be majority shareholders. Either divide the 9.999,999 available shares equally among all the customers or just distribute 51% of them and the balance going to the Council. In order to prevent the sale to private enterprise poison pills and "first right buybacks" can be part of the distribution agreements. That would allow the customers, wearing their owners' hats to vote at the shareholders meeting and really control the company.

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This whole discussion is based on the premise that the PUC's are still publically owned. But if the publically owned structures mimic private corporations what's the difference if all we do is argue about the dividends. Again the legislative designers have managed to con us with our own money and reduce the effectiveness of real democracy.  


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