The next four years of government in Ontario will be quite different from the last four years. Senior political analyst Jaime Watt of Navigator told an audience of more than 500 people at the APPrO 2011 conference on November 15 that in a minority situation the government has to be more sensitive to public opinion and this will create some important opportunities for stakeholders, especially those in the power industry. “The political lens becomes much more important. Each decision will be viewed as to how it will be seen by various stakeholders in various parts of the province,” he said.
Watt stressed that there is a substantial challenge and an attractive opportunity in the minority government situation. “Each party needs new friends before the next election to achieve their goals,” he said. “This sector now faces a broader, more difficult task but one which comes with a broader, more sustainable outcome – public persuasion.”
Summarizing his analysis of the October 6th provincial election, Watt said the election didn’t turn out the way anyone expected. None of the leaders got what they wanted or what they had hoped for. The NDP’s Horvath increased her party’s seat standing, and did win in parts of the province where the NDP had previously been shut out. She even successfully made the case she was ready to be the leader of the opposition. But she failed to break through as a potential Premier.
Tim Hudak’s campaign delivered 55 per cent more seats than he had when the election was called, but he failed to achieve government.
Dalton McGuinty fought the campaign of his life. He came back from “political death” but fell “heartbreakingly” short of that historic third majority mandate.
And while the Premier has successfully spun a loss of seventeen seats and four cabinet ministers into a “major minority,” underlying the results lies the reality that Ontario is now a province divided — in terms of popular vote, much more closely divided than the seat count would indicate: 37 for the Liberals, 35 for the PCs and 22 for the New Democrats. And in terms of geography, much more starkly divided than before. With the exception of some urban centers, Dalton McGuinty was thrown out of Southwestern Ontario.
One of the major factors in that was the issue of wind turbines and where they should go. “The turbine issue did something that you rarely, rarely see,” Mr. Watt said. “It took people who are not politically engaged and it turned them in to political activists. People who otherwise would have just voted became active participants in the processes when they otherwise wouldn’t have.” The result: they contributed to booting out four sitting cabinet ministers, decimating the Liberal’s rural base.
In the re-drawing of the political map, Ontario’s agricultural heartland and rural communities belong to Tim Hudak and the Ontario PCs.
The north, meanwhile, was claimed by Andrea Horwath’s New Democrats.
The Premier’s power base was and remains Fortress Toronto.
Looking ahead at the implications of this dynamic on the challenges that sector participants face as leaders in the energy sector, Mr. Watt used four lenses:
• Parliamentary and political
• Macroeconomic
• Legacy
• Leadership.
1. Parliamentary and political lens
The Premier has a renewed sense of moral authority to govern the province, and is emboldened by it. Other than a nod to restraint by reducing cabinet’s numbers, it was a “steady as she goes” cabinet. No one was fired. He even promoted his finance minister to Deputy Premier.
Perhaps even more crucially, being reduced to minority status means the Liberals have lost a series of procedural levers. The government today is no longer just the Liberal Party.
In a minority situation, government is forced to be extra sensitive to public opinion for two reasons:
• An election is always a confidence vote away; and
• Committees, now made up of a majority of opposition members, have a new level of influence on not only policy and legislation but on the very debate itself.
“The Premier needs to be careful if he thinks he can govern as though he was given a majority,” Mr. Watt said. “The Ontario Liberal Party no longer enjoys the luxury of making enemies. In this new environment, stakeholders don’t have to let the government win. In this divided province, the political lens becomes much more important. Each decision will be viewed as to how it will be seen by various stakeholders in various parts of the province.”
Past allegiances are unlikely to be predictors of future support. Each party needs new friends before the next election to achieve their goals, he said. It will be necessary to look at new approaches to government relations.
The power sector will have to deal not just with government but also with the opposition and other stakeholders. Taking on these broader challenges will require more attention to public persuasion, activating support, and “making it clear that you both understand what voters want and have solutions to meet their needs. That is also the world the Premier and his government understand. It follows, then, that when dealing with this new government, and in fact with all legislators, proponents need to remember that Campaigns Matter.”
Underlining a theme that came up several times during the APPrO conference, Watt pointed out that the oft-stated desire to get politics out of the energy sector is unrealistic. In fact, the government has doubled down on the politics of energy.
2. The macroeconomics lens
The euro-flu is spreading. The Organization for Economic Co-operation and Development is predicting that none of the world’s major economies will escape a slowdown. Watt suggested that, “We are in for some difficult times without the range of fiscal tools governments used to smooth the last economic turndown. Government revenues are under pressure. Fiscal capacity is stretched to the breaking point. The estimated capital costs for Ontario’s Long-Term Energy plan – which includes a new and refurbished energy supply, transmission and distribution infrastructure and conservation investments – is nearly $90 billion dollars. And that’s on top of the infrastructure deficit in this province, which is estimated to be more than $100 billion dollars.”
“TD Bank’s former chief economist Don Drummond has been asked to review government spending. His report is due out early in the new year. There can be no doubt but that the Premier’s office is looking to hide behind Drummond’s proverbial skirt for cover to make cuts that were heretofore unthinkable. Much needs to be built, but there’s no money.”
One result, Mr. Watt said, will be a recourse to inventive financial solutions — P3s, private sector generation, alternative financing models and risk-sharing proposals.
3: The Premier’s legacy now includes green energy
Dalton McGuinty is often called the education premier, but he will also be remembered as the energy premier. He will try to use green energy to save jobs, and to resurrect Ontario’s decimated manufacturing sector.
Ontario is in the midst of the FIT Review process, with a possible decrease in the price for renewable power, for two reasons: public concern over the cost of electricity, and the need to slow down and clear up grid congestion. Such a slowdown would also help the Premier mitigate some of the political backlash in rural Ontario mentioned earlier.
But whatever technical merit those points hold, one can’t forget two key facts, Watt said. First, the premier campaigned on his record, including turbines and the costs, and won. Second, he campaigned on the need for these new economy jobs, and won.
4. The Leadership lens
Mr. Watt suggested two predictors regarding the timing of the next election: the Liberals success in attracting a floor crosser (a likelihood, he thinks), and the size of the PC Party’s debt. If that debt is more than about $ 3 million dollars, no election is likely any time soon, he thinks.
Promoting Chris Bentley to Energy Minister is not a poisoned chalice, as some have seen it, Watt said. Being Minister of Finance for a province is not at all the same as being Minster of Finance in Ottawa. Chris Bentley holds Ontario’s economic future in his hands, he said. The new Minister is a thoughtful, measured person, respected by colleagues and stakeholders, tough when he needs to be, accommodating when he can be. He will be a very competent energy minister.
The first minority government in Ontario since the mid-1980s presents a number of opportunities, Mr. Watt said. The political parties can’t afford to make enemies. What they actually need to do is activate new groups of supporters. The task of energy sector participants is determining how to exploit that process. The sector needs to change its approach to government relations and recognize that campaigns really do matter. It needs to embrace the strategic value of politics and communications.
Second, Ontario is entering uncharted water economically. There will be a real premium placed on innovative thinking when it comes to infrastructure renewal in the energy sector – and those who are first to the table with creative solutions will benefit.
Third, Premier McGuinty has committed to the bet that green energy will revive the Ontario manufacturing sector.
Last, there isn’t likely to be another election any time soon. The main opposition threat is still licking its wounds and, for the time being at least, there is no public appetite.
While the long-term fundamentals of the energy sector remain more or less the same, Mr. Watt said, in the short-term we will see that anything can and will change. And it will be politics driving that change.
Government in Ontario will not operate like it did in the past, Watt warned, advising participants in the power sector that “It’s time to move beyond conventional government relations.” Government and opposition parties will be more than interested in hearing ideas from the sector: “What they actually need to do is activate new groups of supporters.”
It’s a challenge for increased political engagement by energy sector participants if there ever was one.