04/16/2015 04:00 EDT | Updated 06/16/2015 05:59 EDT

Ontario To Hike Taxes On Beer, Sell Off Majority Of Hydro One


TORONTO -- Ontario's Liberal government plans to hike the tax on beer and sell a majority stake in Hydro One, a huge transmission utility, to raise about $4 billion to fund infrastructure projects.

The government's revised agreement with the foreign-owned Beer Store shows it will raise $100 million a year "by applying a volumetric tax or markup'' on all beer sold in Ontario.

However, the province struck a separate deal with major brewers to cap prices on their most popular brands for two years "unless there are material changes to the industry,'' which will cover about half of all brands sold.

Ontario will also allow beer to be sold in 450 grocery stores, start a pilot project to sell 12-packs of beer in 10 Liquor Control Board stores, and make it easier for craft brewers to list their products in the Beer Store's 447 retail outlets.

Modernizing beer sales was recommended by a government-appointed panel, headed by former TD Bank CEO Ed Clark, which examined Crown assets to find ways to squeeze out the maximum value for the Liberals' infrastructure plans.

It recommended the province sell up to 60 per cent of Hydro One, but not allow any one shareholder to own more than 10 per cent, so the government's 40 per cent gives it "de facto control'' of the utility.

Clark said the province could generate about $9 billion from the Hydro One sale, with $5 billion of that going to pay the utility's debt and $4 billion to fund infrastructure projects.

He admitted there were concerns about the "spectre'' of past asset sales like the privatization of Highway 407 by the previous Conservative government, but said this time the province will retain control.

The opposition parties warn a sale of Hydro One will drive up electricity prices, but Clark predicted rates could actually go down with private investment and a more business-like approach at the utility.

"Injecting more capital and private sector discipline will almost certainly improve Hydro One's business performance,'' he said. "We believe that there will be a favourable impact on hydro rates over time.''

Hydro One Brampton will be merged with Enersource, PowerStream and Horizon Utilities to create the province's second-largest local distribution company.

The Progressive Conservatives say they don't trust the Liberals to put the money raised from a Hydro One sale to debt and infrastructure, and fear the Liberals will use it to pay down the $10.9-billion budget deficit.

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