Power at Cost: Ontario Hydro and Rural Electrification, 1911-1958 9780773563100

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Power at Cost Ontario Hydro and Rural Electrification, 1911-1958 KEITH R. FLEMING

McGill-Queen's University Press Montreal & Kingston . London . Buffalo

McGill-Queen's University Press 1992 ISBN 0-7735-0868-6 Legal deposit first quarter 1992 Bibliotheque nationals du Quebec

Printed in Canada on acid-free paper

Canadian Cataloguing in Publication Data Fleming, Keith Robson, 1956Power at cost: Ontario Hydro and rural electrification, 1911-1958 Includes bibliographical references and an index. ISBN 0-7735-0868-6

1. Rural electrification — Ontario - History. 2. Ontario Hydro. I. Title. 1109685.03405 1991 333-79'32 091-090375-1

This book was typeset by Typo Litho composition inc. in 10/12 Palatino.

For Graeme

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Contents

Preface ix Maps xii 1 Introduction 3 2 Laying the Foundations 20 3 Rural Power Districts and the Municipal Connection 39 4 The Uniform Rate and Rural Bonuses 55 5 Consolidating the Rural Network 74 6 The Battle for the Bruce 100 7 Remnants of Discontent and Political Plums 126 8 Responses to the Depression 154 9 The Rural System during the Second World War 177 10 Sarnia and the Uniform Rate Revisited 197 11 The Five Year Plan 221

viii Contents 12 Conclusion

248

APPENDIXES

A Premiers of Ontario, 1905-1985 261 B Officials of the HEPC, 1906-1974 262 c

Rate Classifications for Rural Customers, 1909-1970 264

D Statistical Summary of the Rural System in Southern Ontario, 1912-1971 266 Abbreviations

269

Notes 271 Bibliography 309 Index 317 Illustrations follow page 176

Preface

Few institutions have had a more lasting or pervasive influence on the lives of Ontarians than has Ontario Hydro. Almost from the moment that the Conservative government of James P. Whitney created the Hydro-Electric Power Commission of Ontario (HEPC) in 1906, the utility became central to the social, political, and economic life of the province. The HEPC was Ontario's novel answer to the controversial question of which interests, Canadian or foreign, private or public, should be entrusted with the vital responsibility for harnessing and distributing the province's abundant water-power resources. Born of controversy, the publicly owned HEPC has seldom escaped the spotlight. As I write. Hydro grapples with such contentious matters as the routing of its high-voltage transmission lines and a burgeoning financial deficit. An even greater quandary looms large as the twenty-first century approaches: firmly committed to nuclear generation, Hydro must somehow balance Ontario's rapacious demand for electrical energy with society's growing antipathy to technologies that further threaten an environment already in danger. Remarkably, considering Hydro's long-standing importance and influence, much of its history remains unwritten. Thanks to the pioneering work of H.V. Nelles, Kenneth Dewar, and others, Hydro's origins are well known. In contrast, the year-by-year record of its manifold activities since the death in 1925 of its domineering founder and first chairman, Sir Adam Beck, has attracted few researchers and is still poorly understood. By recounting the HEPC'S campaign to extend electrical service to the farms and hamlets of rural southern Ontario between 1911 and 1958,1 attempt in this book to tell at least part of this story. The decades that I have chosen to study were truly formative. The HEPC first set, and then aggressively pursued, its goal of monopo-

x Preface lizing the generation and distribution of electrical energy in Ontario. In achieving that goal, Hydro amassed assets sufficient to become not only Canada's largest utility, but one of the nation's largest business enterprises. This was also the period when the unique relationship between Hydro and the provincial government solidified. That arrangement, in which the utility was ostensibly subordinate to the government yet in reality enjoyed extensive autonomy, has rankled critics of Hydro down to the present. The story of Hydro's rural electrification program is thus part of a larger drama acted out on the provincial stage. By examining the policies that the HEPC and successive provincial governments devised to make electrical conveniences widely available across rural southern Ontario, a much clearer understanding of Hydro's modus operandi becomes possible. If the thematic focus of my book is policy making, its geographical focus is southern Ontario. By this I mean the eastern, central, and western sections of the province lying south of Lake Nipissing and the French and Mattawa rivers. North of this boundary lay the vast, resource-rich, and largely unsettled region which had been optimistically dubbed "New Ontario." The term "Old Ontario" in the early twentieth century was often used by provincial spokespersons, Hydro officials included, to refer to the older and more settled area of the province south of the Nipissing-French-Mattawa limits; it is in this geographical sense that I use the term here. The HEPC initially concentrated its activities in Old Ontario, and it was there in the years from 1911 to 1958 that it made its most significant inroads into the domestic, commercial, industrial, and rural power markets. Also, throughout the book I use interchangeably the three forms by which contemporaries most often identified the utility - "the HEPC," "Hydro," and "the Commission." Many people helped me in numerous ways to write both this book and the PHD dissertation on which it is based. At the Ontario Hydro Archives (OHA) in Toronto, Wendy Jackson, Lisa Philp, and Trish Wilcox always responded cheerfully and promptly to my interminable requests. Lynn Campbell, at the Ontario Agricultural Museum (OAM) in Milton, simplified my search for photographic and other illustrative materials. The OHA and the OAM kindly gave me permission to reproduce the material presented in the section of illustrations. The detail on page 2, from an HEPC advertisement (Farmer Magazine, May 1939), is also from the OAM collection; the ad read in part: "Two cents per day will light the family farm." James J. Talman of the Department of History at the University of Western Ontario took an early and sustained interest in my work;

xi Preface

I am privileged to be among the students of Ontario history who have shared in his long and distinguished career. Robert Young of the Department of Political Science at the University of Western Ontario provided cogent advice on revising my dissertation for publication, as did Christopher Armstrong of York University, another member of my board of examiners. The two anonymous readers who assessed the manuscript for the Social Science Federation of Canada also offered several helpful suggestions. I wish to thank as well A. P. Bates of London, Ontario, who applied his keen editorial skills to parts of the manuscript. Edwin Procunier, also of London, and Marion McDougall, of St Thomas, Ontario, kindly permitted reproduction of Clark McDougall's painting on the jacket. Gordon Shields, of the Cartographic Section, Department of Geography, University of Western Ontario, prepared the maps, which follow this preface. At McGill-Queen's I have benefited from the sound guidance of Philip Cercone and Joan McGilvray and the meticulous copy-editing of John Parry. My greatest debt is to Peter Neary, who as my thesis supervisor and colleague at the University of Western Ontario has been a mentor and friend for over a dozen years. He has provided invaluable encouragement and advice at every stage of this project. All of the above have improved this book in various ways; I alone am responsible for whatever shortcomings it exhibits. This book has been published with the help of a grant from the Social Science Federation of Canada, using funds provided by the Social Sciences and Humanities Research Council of Canada. I acknowledge the assistance of the J.B. Smallman Publication Fund, Faculty of Social Science, University of Western Ontario, for supporting my work with a grant-in-aid toward publication. After completing the manuscript I took the unusual step of asking the subject of my study, Ontario Hydro, for financial assistance in defraying subsequent publication costs. I wish to thank Ontario Hydro, and in particular its then chairman and president, Robert C. Franklin, for generously supporting my work without in any way influencing my words. Most important, thanks to my wife, Cathie, who has repeatedly sacrificed her own interests in order that 1 might have the opportunity to pursue mine, of which this book has been only one. Not long ago she and I welcomed Graeme Michael Fleming into our lives. We would like to dedicate this book to him.

Map i Southern Ontario, 1958 (Prepared by Gordon Shields)

Map 2 density of farm electrification in southern ontario by county,1948(prepared by gorden shields)

Map 3 Distribution of Annual Operating Surpluses and Deficits by Rural Power District / Rural Operating Area (RPD / ROA), 1948 (Prepared by Gordon Shields)

Power at Cost

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CHAPTER ONE

Introduction

Early in 1946, an article in the Family Herald and Weekly Star of Montreal provided a futuristic account of what farm life would be like in the year 1990, once hydroelectricity had become commonplace in the homes and workplaces of rural Canada.1 Set on the imaginary "Swampy Acres" farm of Timothy Buckwheat, the article described in idyllic detail the myriad ways in which electrically powered domestic appliances and farm machinery would revolutionize rural life. Jules Verne, it would seem, had donned coveralls. Farmer Buckwheat was awakened in the morning by an electrically controlled mechanical hand that gently stroked his head and sprayed a mist scented like apple blossoms throughout the bedroom. A recorded voice then whispered that it was time to summon the "hired man." Still reclining in bed, Buckwheat responded by pushing a nearby button, whereupon the "hired man Hydro" automatically commenced the day's chores. From sunrise to sunset, electrically powered equipment completed effortlessly the obligatory round of backbreaking tasks that had sent previous generations of overworked Buckwheats to an early grave. By substituting hydroelectric power for muscle power, Buckwheat had wisely - and of course profitably - traded a life of physical toil for one of simple buttonpushing and switch-pulling. Much of the electrical gadgetry of Timothy Buckwheat's "Swampy Acres Farm" never materialized on real farms. But the hundreds of other labour-saving adaptations for electricity that did appear revolutionized rural living and working patterns. This book presents the story of how the publicly owned Hydro-Electric Power Commission of Ontario (HEPC) played the leading role in bringing that revolution to southern Ontario. My specific concern here is with the development and implementation of policy, in particular those pol-

4 Power at Cost

icies by which the HEPC extended its services into rural areas. As Hydro's policy-makers rapidly discovered, developing and serving a rural market were very different tasks from catering to the needs of the essentially urban clientele that had been the early focus of the utility's efforts. To describe the impact of rural electrification as anything less than "revolutionary" would be an understatement. Even as late as the end of the Second World War, life in much of rural Ontario, on farms especially, was an existence of unmitigated drudgery. Centralstation electrical service had become a basic amenity in most urban communities by the 19205. By contrast, most rural residents for many years to come had to cook their meals, heat and light their homes, pump their water, and work their farms in the same manner as had their nineteenth-century forbears. Farming had always entailed greater isolation and economic uncertainty than most occupations. The dearth of electrical service in rural districts merely accentuated these differences, so that practically every other form of livelihood appeared attractive by comparison. John Kenneth Galbraith, the Harvard economist, was one son of the Ontario soil who doubted whether there were any activity less desirable than farming. Reflecting on his own upbringing on a farm in Elgin County during the 19108 and 19205, he wrote: "Work on an automobile assembly line, a construction crew or possibly even collecting garbage, all in the company of congenial companions and improved by the higher pay," shone "by comparison with that on a farm."2 Galbraith knew at first hand the tedious treadmill of life on the back concessions of early-twentieth-century Ontario, and he, like thousands of others of his generation, regarded leaving as the only means of escape. One cannot attribute the human exodus that depleted the communities of rural Ontario in the years before the First World War solely to the general lack of rural electrical service, yet the glitter and allure of the city lights, then as now, proved irresistible to many ambitious and discontented country folk like Galbraith. This migration could not be ignored; indeed, it was widely perceived as a threat to the unique mix of community values and late Victorian morality that many Ontarians believed defined their province and made it great. The solution seemed obvious: if Ontario's rural character was to be preserved in the midst of rapid urbanization and industrialization, then living standards in town and on the farm had to be brought into line with one another. This, it was believed, could be done by introducing to rural communities more of the conveniences hitherto available only in urban centres - foremost among them a reliable and affordable supply of electricity.

5 Introduction

Because my emphasis here is on policy, I will make only passing reference to the specific ways in which electricity altered the rural way of life. In truth, the social implications of rural electrification were so great that they warrant a separate study. The historian William E. Leuchtenberg has noted that in the early twentieth century the United States was divided into two distinct nations based on the availability of electric power: city dwellers had access to electrical conveniences, and "country folk" did not. Leuchtenberg tells of farmers being forced to toil "in a nineteenth-century world" and of farm women "who enviously eyed pictures in the Saturday Evening Post of city women with washing machines, refrigerators, and vacuum cleaners," while they themselves "performed their backbreaking chores like peasant women in a preindustrial age."3 These two nations were equally visible in Ontario and did not soon disappear, despite efforts by the HEPC to ensure that all residents of the province benefited from Ontario's vast waterpowers. It was against this background that the HEPC, beginning in 1911 and continuing through to the 19605, pursued the goal of making electrical energy as widely used on farms and in rural hamlets as it was in urban centres. Before that objective could be feasible, technologically as well as economically, Hydro needed to develop a complex electrical generating and transmission network able to satisfy the enormous appetite for energy of its urban domestic, commercial, and industrial clientele. These extensive urban undertakings quickly dwarfed Hydro's rural network. Consequently, when it deliberated over how best to satisfy Ontario's energy needs, the Commission had to weigh many factors, not just the reputedly baleful effects of rural depopulation. Indeed, from start to finish the HEPC continually revised its rural strategy as changing economic conditions, technological developments, and political considerations demanded. Hydro's rural electrification policies offer some useful insights into the collective outlook of rural Ontarians during a period of rapid social and cultural change. As the proportion of rural dwellers in the provincial population declined, their collective voice, although still influential, gradually became less of a political force to be reckoned with at Queen's Park. Rural residents became understandably anxious lest their waning political influence made it increasingly difficult for them to secure a fair share of the provincial bounty. And what better represented this bounty in the years following the First World War than a reliable and cheap supply of electricity? What did rural Ontarians expect of the publicly owned utility, given their widespread opinion that a hydroelectric hook-up would bring an improved standard of living? And what did they consider to be their

6 Power at Cost

rightful share of the "peoples' power"? Again, were rural residents as a group predisposed to shed their traditional working practices in favour of the new technology? Or did innate conservatism inhibit them from trusting the HEPC sufficiently to make the steep financial commitment that a Hydro service contract entailed? The rural electrification policies of the HEPC also reveal much about Hydro's inner workings, particularly from 1930 to 1960, a period hitherto largely ignored by historians of the utility. Whereas reasons for creation of a publicly owned system have been thoroughly documented, far less is known about the utility's subsequent performance and how well it responded to the needs of Ontarians.4 For instance, when Ontario opted in 1906 for a publicly owned as opposed to a privately owned system of power generation and distribution, did this choice guarantee that the utility would be more responsive to the various constituencies it was intended to serve?5 Alternatively, did Hydro tend to place its own needs and objectives foremost, while ignoring the wishes both of the public and of successive provincial governments? Pending further research into other spheres of the utility's multifarious activities, only a tentative answer can be given. Admittedly, one does not need to look far to find instances where Hydro overstepped its authority. As early as 1921, a royal commission was investigating the HEPC'S spending and administrative practices. Headed by W.D. Gregory, the commission harshly criticized the utility for its unrestrained spending during construction of a number of generating facilities. These criticisms gave more than a little credence to the fears of E.G. Drury, the United Farmers of Ontario (UFO) premier who had appointed the commission, that Hydro was out of control. Yet examples also abound of the HEPC co-operating with the government and the public when devising its rural electrification policies. This suggests at least a modicum of political accountability. After all, a solely self-serving utility would hardly risk its financial stability, and hence reputation, by building expensive transmission lines into sparsely populated rural areas where the service would probably never earn sufficient revenues to offset costs. From very early in its existence, the HEPC demonstrated genuine commitment to serving the rural community. Not as obvious, perhaps, but still central to the story of rural electrification, is the role played in shaping that commitment by Hydro's urban clientele, its privately owned competitors, the provincial government, and the rural community itself. When the Commission's engineers first contemplated developing the rural market in 1911, they were primarily interested in the farming community. They soon realized, however, that any program of

7 Introduction

rural electrification could be economically viable only if the nonfarming rural population were also covered. As a result, the HEPC generally included in its rural operations those customers who were not residents of a city, town, or incorporated village. Nor can the Rural System be studied in isolation from the rest of the Hydro network. The rural distribution system, for reasons of financial and technological necessity, became closely tied to the utility's municipal systems, with several small but officially urban centres helping in the spread of rural electrification. Further complicating matters, Ontario's rural population remained relatively stable between 1931 and 1971. It grew by only 23,784, from 1,335,691 to 1,359,475, while the number of non-farm rural residents rose from 40 per cent to 73 per cent (995,840) of the province's total rural population in 1971.6 This dramatic shift, from a predominantly farming to a mainly suburban clientele, required the HEPC frequently to revise its rate and distribution policies to meet new circumstances. Yet for all the change, from an organizational point of view the rural network remained basically the same from the 19208 to the 19603. This continuity in turn greatly facilitates the tracing of the Rural System's development from an experimental to a fully developed enterprise. Rural electrification in southern Ontario followed, therefore, and was dependent on, the growth of the HEPC'S network of urban generating and distribution facilities. In order to place the rural program within the larger Hydro organization, some explanation of the broader network's evolution is necessary. The Commission began delivering power to eight municipalities in 1910 and within a year was distributing 13,164 horsepower to twenty towns and cities between London and Toronto.7 Ranging in size from New Hamburg (1,484) in Waterloo County to Toronto (381,833), these communities formed the nucleus of what would become the Niagara System. Hydro eventually set up twelve such systems, or administrative units, across Ontario. Each system was centred on one or more of the HEPC'S power sources; for example, the Niagara System was comprised of municipalities linked by transmission line to Niagara Falls. As generating facilities were added throughout the province, new systems were established to administer them. Given the technological limitations of the time - many parts of southern Ontario were too far removed from Niagara Falls to permit affordable service - this system approach offered the most economical means of matching customers' demand with available power supplies. Only the Rural System encompassed all of Old Ontario, because the HEPC,

8 Power at Cost

rather than municipalities, was directly responsible for rural electrification. So great was the demand for its services that the HEPC added new systems at a rate of more than one per year during its first decade in operation. Alongside the Niagara System, the Port Arthur System was established in 1910. Renamed the Thunder Bay System in 1918, its power was supplied by the Kaministiquia Power Co. The Severn System, fed by the Big Chute generating station on the Severn River, was added in 1911. Two years later, the HEPC turned its attention eastward. Having secured a supply of power from the Rapids Power Co. at Morrisburg, it set up the St. Lawrence System. Five more systems were next formed in quick succession. The Wasdells System, which distributed power generated at Wasdell's Falls on the Severn River, and the Ottawa System, which purchased energy from the Ottawa and Hull Power Manufacturing Co., were both established in 1914. In 1916, Eugenia Falls on the Beaver River in Grey County, and South Falls and Hanna Chute on the Muskoka River, were harnessed to supply respectively the Eugenia and the Muskoka systems. That same year, the HEPC purchased eighteen privately owned distribution systems between the Niagara and the St. Lawrence systems and combined them as the Central Ontario System - unique in that the HEPC not only delivered the power to the municipalities' boundaries but also looked after distribution within the communities. This broke with the usual practice of entrusting distribution to a locally controlled municipal utilities commission. The first amalgamation of several systems took place in 1916, when the generating and distribution facilities of the Severn, Wasdells, and Eugenia systems were interconnected and renamed the Combined Northern Systems. The amalgamations were designed to increase overall efficiency and to decrease operating and capital costs. If one system experienced a temporary drop in generating capacity because of low water levels or was faced with an unexpected surge in demand, it could allay shortages by drawing on the surplus capacity of a neighbouring system. The relatively inexpensive amalgamations were much cheaper than constructing in every system generating facilities capable of meeting every possible contingency.8 Meanwhile, the HEPC continued to expand into new areas. The Rideau and the Nipissing systems were created in 1918, bringing to eleven the number of systems in operation. Altogether they provided 207 municipal and industrial customers with 191,389 horsepower annually, almost a fifteenfold increase in just seven years. The HEPC'S original purpose was merely to distribute power purchased from private sources, in particular, the American-owned On-

9 Introduction

tario Power Co., located at Niagara Falls. But only four years after entering the distribution business, Hydro too was generating power. The reasons for the change in policy were twofold. First, the Commission's founder and original chairman, the imperious Sir Adam Beck, so disliked being dependent on foreign power magnates that he was determined to make the HEPC self-sufficient in energy. Second, Hydro's engineers feared that unless transmission costs were reduced by establishing generating facilities closer to the areas of demand, many Ontarians would never be able to afford public power. Fortunately, one of the Commission's first tasks had been a comprehensive survey of all potential waterpower sites in the province, so it knew precisely which districts could be supplied from local sources. Construction on the first plant to be built, a i,2oo-horsepower development on the Severn River at Wasdell's Falls, got under way in 1914. In the same year Hydro purchased an existing 5,600horsepower generating station at Big Chute, downstream from Wasdell's Falls. Only three years later, its construction crews broke ground for what would become the world's largest generating station - the 5oo,ooo-horsepower Queenston-Chippawa plant. By the time this facility was operational in 1922 it had cost $80 million, four times the original estimate, and Hydro's reputation for profligacy was confirmed. The Commission also began buying up privately owned power plants at a rapid pace,9 including in 1917 its principal supplier, the Ontario Power Co. By the end of 1922, Hydro was producing 1,855,900,415 kilowatt-hours of energy annually at nineteen hydroelectric facilities, while purchasing 437,307,185 kilowatthours from private sources. More system amalgamations followed. The Muskoka and the Combined Northern became the Georgian Bay System in 1924. In 1930, the Madawaska System, created the year before, joined with four others - the Central Ontario and Trent, the St. Lawrence, the Rideau, and the Ottawa - to form the Eastern Ontario System.10 Also in 1930, the Nipissing System was amalgamated with the Sudbury and Patricia districts to become the Northern Ontario System (NOS). The NOS was strictly an administrative union, for no physical interconnections were made among the three sections. All of Old Ontario's generating and distributing facilities were finally integrated into a single grid in 1944, when the Niagara, Georgian Bay, and Eastern Ontario systems merged as the Southern Ontario System (sos). The sos boasted capital investment of $287,174,008, a power load of 1,954,278 horsepower, and 775,984 residential, commercial, rural, and industrial customers. The HEPC'S achievements in northern Ontario paled by comparison - capital investment of

io Power at Cost

$60,501,237, a power load of 288,727 horsepower, and 20,353 customers of all classes. The growth in Hydro's generating capacity, north and south, had been equally spectacular. In 1944, forty-six sites were producing 8,025,732,762 kilowatt-hours of energy per annum, leaving 4,015,446,228 kilowatt-hours to be purchased from eighteen private suppliers in Ontario and Quebec.11 By 1958, when rural electrification in southern Ontario was virtually completed, Hydro was producing 25.6 billion kilowatt-hours annually at sixty-five hydroelectric and four thermal electric generating stations. It purchased an additional 5.9 billion kilowatthours. Of the total energy distributed, 8.6 per cent was sold in the Rural System, 51.6 per cent went to municipal customers, 28.8 per cent to industrial customers, and 11 per cent to other utilities. The total distribution system consisted of 1,757,189 domestic, commercial, industrial, and rural customers. Since it was out of this immense network of generating and distribution facilities that the Rural System emerged, policies relating to rural electrification could never be formulated in isolation from the utility's other activities. The HEPC, when allocating technical and financial resources, needed always to balance the often conflicting requirements of the rural and urban components of its business. Whereas the rural market for electricity, once fully developed, promised to be substantial, it would always represent only a small percentage of the utility's overall customer base, power load, and financial investment. But if the Rural System was destined to remain a smaller partner in the Hydro enterprise, it would not be altogether without influence; the political clout that the rural community continued to wield in the years before the Second World War would alone see to that. No political leader could afford to ignore entirely the repeated demands emanating from rural Ontario for some form of assistance in extending provincial transmission lines to farms and hamlets. Likewise, no Hydro official could fail to be swayed, at least slightly, by the utility's self-proclaimed and widely publicized mission of harnessing and delivering to Ontarians the waterpower that was their common legacy. Indeed, what satisfactory justification could possibly be given for denying rural areas their portion of the "people's power," while urban areas basked in the glow of life "made better electrically"? Even if a sense of fair play did not move the Commission to action, then surely concern for its reputation among North American utilities would. The critics of public ownership were many, and the HEPC was anxious that it not be seen as incapable

ii Introduction of serving less accessible power markets. While accommodating the needs of the Rural System might at times be inconvenient, failure to do so was not an acceptable alternative. Whether the HEPC'S customers resided in the city or in the country, the utility's promise to them was the same - it would sell them "power at cost." This was not only Hydro's most identifiable promotional slogan, it was also the most useful. Whether persuading potential customers to sign service contracts, justifying its rate increases, or explaining the virtues of public ownership to the unconverted, the Commission held high its principle of "power at cost" as a supposedly irrefutable explanation of why a particular course of action should or should not be taken. In truth, the rates Hydro charged its customers only approximated each individual's share of the actual cost of generating and distributing the power that individual consumed. Hydro could hardly have done otherwise, since it is extremely difficult to calculate precisely the price of any given kilowatt of hydroelectricity. Each year in its annual report, the HEPC did attempt to explain in lay terms the components of its rate structure. But few of its customers would have had either the opportunity or the inclination to wade through the accompanying statistical morass in order to discover that information. Simply put, "power at cost" was a brilliant public relations device; it was not intended to provide an accurate accounting of the HEPC'S finances. The slogan enabled the utility to claim, if not entirely accurately, that the benefits to be gained from a Hydro contract were directly commensurate with the costs. In short, one paid only for what one received. This lofty avowal — that all customers, regardless of where they lived in the province, were being treated equally - was bound to increase public confidence. "Power at cost" thus put a conveniently simple face on a highly complex matter. The average customer would have little if any knowledge of the numerous techniques by which the HEPC - or any other utility, for that matter - could redistribute costs among their various classes of users. For example, profitable sectors of the customer base might be assessed slightly higher rates, thereby making it possible to charge lower rates in less prosperous areas. Such crosssubsidization might be practised if a utility were intent on expanding into untapped markets or were doing business in districts where competition from another utility was especially stiff. Since electricity cannot be stored and must be used immediately on generation, utilities also resort to peak-load pricing in an attempt to squeeze the maximum revenue out of their excess generating capacity. During

12 Power at Cost

those off-peak times of the day or year when generating capacity regularly exceeds demand, power is offered for sale at reduced rates. Since the HEPC, like most utilities, attempted to earn sufficient revenues from the sale of peak-load power to meet its fixed costs, offpeak energy could be sold at rates well below cost. Still another device that distorted the notion of "power at cost" was the HEPC'S declining block rate. By decreasing the amount per kilowatt-hour that customers were charged as their use of energy increased, Hydro hoped to demonstrate that the advantages of electricity increased exponentially with consumption. In the case of rural electrification, the Commission was convinced that if farmers began by using the service to illuminate even one room in their homes, before long the declining block rate would demonstrate the financial advantages of completely outfitting the home and barn with electrical lights and appliances. These and other pricing techniques were used to positive effect by the HEPC, "power at cost" notwithstanding. When all was said and done, the Commission's message was that its rate structure was designed to recoup the costs of constructing, operating, repairing, and eventually replacing its network of generating and distribution facilities - nothing more, nothing less. In particular - and this, the HEPC boasted, was what set it apart from privately owned companies - the rates contained no provisions for shareholders' profits. Hence, within its broad objective of balancing revenues and expenses, the HEPC had ample leeway to redistribute costs among its various classes of consumers, provided no single group's rates became unduly burdensome. It mattered little that the concept of "power at cost" was based only remotely on fact. Regardless of what "power at cost" might mean to electrical engineers, to average Ontarians it implied that every cent of the provincial utility's expenses would be met through the combined and equitable sharing of those costs by all Hydro customers. That sounded like a perfect formula for stable fiscal management and long-term institutional solvency - two values enshrined in the conservatism of rural Ontario. Devising rates that fitted within the broad bounds of "power at cost" was just one, albeit a vital, facet of rural policy-making at the HEPC. Although hundreds of Hydro officials and provincial politicians eventually helped transform the Rural System - from a scattered handful of experimental farms into an internationally competitive, completely integrated distribution network serving a clientele numbering over half a million - a handful of individuals exerted by far

13 Introduction

the greatest influence. At least six of the eleven premiers who led Ontario between 1911 and 1958 altered the rural program in some significant way, as did most of the eight people who chaired the Commission. In addition, a small but commanding coterie of longserving Hydro bureaucrats kept rural projects consistently to the fore of the utility's agenda. Much of the initiative for rural electrification came from Queen's Park. Ernest C. Drury's Farmer-Labour government, elected in 1919, was the first to subsidize Hydro's rural program with provincial funds, a practice that each successive government continued until 1958. G. Howard Ferguson and the Conservatives, who ousted the neophyte "farmer" politicians in 1923, promptly adopted rural electrification as their own issue and increased financial support. When Ferguson departed provincial politics in 1930 to become Canadian high commissioner in London, his successor, George S. Henry, cooperated with the HEPC in implementing some of the most innovative load-building and rate-reduction campaigns up to that time. Unfortunately for Henry, his government's commitment to a politically popular rural program was not enough to prevent it from losing badly in 1934 to a resurgent Liberal party, led by Mitchell Hepburn. Hepburn threw himself into the HEPC'S affairs with abandon and promptly shattered whatever remained of the myth that Hydro was "above politics." Yet few complaints were heard from the Commission's rural clientele, for most hoped to benefit from the new premier's determination to lower rates regardless of the cost to the provincial treasury. Neither of Hepburn's Liberal successors, Gordon D. Conant (October 1942-May 1943) and Harry C. Nixon (May-August 1943), was premier long enough to leave a distinctive mark on the rural program, although Nixon had a reputation as one of the legislature's staunches! advocates of farm electrification. It was under Progressive Conservative George A. Drew (premier 1943-8) that circumstances at last were propitious for a full-scale construction program. Drew's goal was 85 per cent farm electrification in southern Ontario, and he was well on the way to achieving this objective when he entered federal politics in 1948. Under his Progressive Conservative successors, Thomas L. Kennedy (October 1948-May 1949) and Leslie M. Frost (May 1949-November 1961), the goal he had set was not only achieved but surpassed. Besides providing funds to Hydro, the government had always appointed the three members of the Commission. The commissioners - until 1943 two of them were generally cabinet ministers - were

14 Power at Cost

vital to keeping the lines of communication open between Queen's Park and Hydro headquarters, a few hundred yards south on University Avenue.12 One of the three was designated chairman, and he was answerable only to the provincial cabinet. Unquestionably the chairman was a political appointee, but this did not necessarily make him a political pawn. No one demonstrated this more clearly than Sir Adam Beck. A cigar-box manufacturer, and sometime mayor of London (1902-4) and MLA for the city (1902-19 and 1923-5), Beck ran the HEPC like a satrap from its creation in 1906 until his death in 1925. Only rarely did he trouble himself with matters of political accountability. So long as Beck lived, Hydro was in many respects a one-man organization; every decision of consequence, whether related to rural electrification or anything else, passed over his desk. Yet even Beck's most strident critics would have to concede that empire building was only part of his motivation. Convinced that electrically powered appliances and machinery could eliminate many of the hardships of rural life, Beck was determined to oversee this technical revolution. Despite the many technological obstacles that had to be overcome at the outset, Beck's commitment to rural electrification never wavered. As a result, when Charles A. Magrath replaced Beck at the helm of the HEPC in 1925, the Rural System was already an integral part of the provincial Hydro network. Of all Hydro's chairmen, none brought to the position a wider range of experience than Magrath. He had been a surveyor; mayor of Lethbridge, Alberta; manager of the Alberta Coal and Railway Co.; a member of the Northwest Territories assembly; MP for Medicine Hat; dominion fuel controller; and a member of the International Joint Commission.13 During his six years heading the HEPC (1925-31), Magrath continued on much the same course as Beck had set. New generating facilities were erected at a rapid pace, competing companies were purchased at every opportunity, and the rural program developed apace. John Robert Cooke, who succeeded Magrath in 1931, was the chairman most closely identified with rural interests. Conservative MLA for Hastings North from 1911, he had been first appointed a Hydro commissioner in 1923. At the time the Toronto-based Farmers' Sun, arguably the most perceptive voice of rural opinion in Ontario, had predicted that with his farming background Cooke would be inclined to add more of a rural than a city viewpoint to the Commission's deliberations.14 The paper was not mistaken. Until he was dismissed during a purge of the HEPC by Hepburn in 1934, Cooke never ceased working on new ways to make the rural service more affordable.

15 Introduction

Thomas H. Hogg, who became chairman as well as chief engineer in 1937, was the first Hydro employee to rise to the top job. After graduating from the University of Toronto, Hogg worked as an engineer for the Ontario Power Co. from 1909 to 1911. He joined the HEPC in 1913 as an assistant hydraulic engineer and was promoted to chief hydraulic engineer in 1927. From the perspective of rural electrification, Hogg's years at the HEPC were marked by extremes. He had implemented severe construction cutbacks during the Second World War but as chairman directed the most ambitious expansion program in the utility's history, the Five Year Plan. Two long-time Hydro employees who saw many chairmen and governments come and go, and who were largely responsible for guiding the rural program from its infancy through to its maturity, were Frederick Arthur Gaby and Richard Thomas Jeffrey. Gaby worked as an electrical engineer in Nova Scotia and Manitoba before joining the HEPC in 1907 as assistant chief engineer. Five years later he was elevated to chief engineer, a post he occupied until he too succumbed to Hepburn's wrath in 1934. Gaby more than anyone else was responsible for designing the massive power grid of which the rural network was a part. Of all the engineers and politicians involved in planning and building the Rural System over a fifty-year period, no one was more closely identified with rural electrification than Richard Thomas Jeffrey. A native of Toronto, Jeffrey spent four years as an engineer for the Toronto Electric Light Co. before moving to the HEPC in 1913. There he remained for the next thirty-eight years. Jeffrey began his career as the Niagara System's municipal engineer, but his duties expanded along with the utility. He thus became chief municipal engineer for the entire province, a task that included responsibility for the Rural System as well. Until his retirement in 1951, Jeffrey was intimately involved in virtually every important decision related to rural electrification. From the earliest discussions as to whether a rural program was even feasible to official completion of the Five Year Plan, Jeffrey was at the centre of events. In the Beck tradition, he was, in his own quiet, anonymous, bureaucratic way, one of the builders of modern Ontario. Each of these men was engaged in ground-breaking work, for no other utility anywhere was providing service to rural districts on a scale approaching that envisioned by the HEPC. In the absence of a model worth emulating, Hydro's planners resorted to measuring the rural program's progress against the impressive advances being made on the utility's own urban network. This proved a difficult

16 Power at Cost

standard to follow, and the rural program seemed always to be lagging several stages behind. Yet the imbalance between urban and rural programs did not prevent the Rural System from becoming the standard against which rural electrification programs in other provinces were judged. Whereas the HEPC began planning its rural operations in 1911, utilities and governments in most other provinces did not make rural electrification a priority until the end of the Second World War. Of the approximately 689,000 farms in the dominion in 1945, only 130,078 (19 per cent) were receiving energy from a central electric station, and 67,526 (51.9 per cent) of these were located in Ontario.15 Because each province approached rural electrification in a slightly different manner, and some were not precise about which customers had been included under the nebulous heading of "rural," detailed comparisons among the provinces are not possible. All faced obstacles similar to those the HEPC encountered - economic uncertainty, shortages of material, limited technology, high transmission costs, and the apathy of private utilities were just a few. Most provinces had shown an incipient interest in rural electrification before the outbreak of the Second World War, but their progress by 1945 had been unspectacular, to say the least. Certainly none matched the level of service achieved in Old Ontario, where almost 42 per cent of all farms were connected to a central electric station by that date. In Quebec, barely 30 per cent (38,314) of farms had central-station electric service when Adelard Godbout's Liberal government created the Quebec Hydro-Electric Commission in 1944. The publicly owned New Brunswick Electric Power Commission, formed in 1920, had been modelled after the HEPC. Unlike its Ontario counterpart, however, it devoted little attention to developing a rural clientele prior to 1945, when it served only 26 per cent (7,517) of the province's farms. In 1945, the lines of the Nova Scotia Power Commission (established in 1919) reached 33 per cent (8,989) of that province's farms. On Prince Edward Island, where thermal power was the principal source of energy, only 13 per cent (1,393) of farms were electrified by the end of the Second World War. British Columbia's power industry was controlled by dozens of small, often isolated producers until the British Columbia Power Commission was formed in 1945. In that year just 12 per cent (3,066) of the province's farms had a central electric station hook-up. The publicly owned provincial power commission in Manitoba was distributing electricity to almost half (25,208) of the provinces' farms by 1947, but Saskatchewan's Power Commission had fewer than two hundred customers two years later. The crown-owned Saskatchewan Power Corp. narrowed

17 Introduction

the gap soon thereafter by electrifying more farms (25,565) in the period 1951-6 than any other province. The pattern in Alberta, where the electrical industry was dominated by two private companies, was similar to that of Saskatchewan: although fewer than 2 per cent of Alberta's farms were electrified in 1940, over 19,000 farms received the service between 1949 and 1951. The HEPC'S policy-makers could not hope to receive much direction either from the largest rural power market of all, the United States. There, more than in Canada, the slow spread of rural electrification in the years before the Depression was largely attributable to the firm hold that privately owned utilities exercised over the electrical industry. Only 2.6 per cent of us farms had central-station electric service in 1924. This number had grown to 11 per cent by 1935, but the majority of these were located in the densely populated northeast. Significant headway was made only after Franklin Roosevelt set up the Rural Electrification Administration (REA) in 1936 to organize and finance construction of rural distribution systems. Despite the resulting growth in federal funding during the Depression and war years, it was not until immediately after the end of the Second World War that rural electrification made its greatest gains. By 1955, 91 per cent of us farms - more than 5 million rural customers in all - were purchasing electricity from central generating stations; approximately 45 per cent of these customers were served by private utilities. No single factor can explain the comparatively rapid progress of rural electrification in southern Ontario. It is unlikely that rural Ontarians were any more prescient than their counterparts elsewhere about the advantages to be gained from hydroelectricity. The success or failure of rural electrification programs everywhere rested, at least in part, on the public's general response to technical innovation, and in that respect the Family Herald and Weekly Star suggested that all provinces were uniformly hesitant. "Up to recently," it reported in 1945, there had not been "any concerted or heavy demand for electric service from those who were not previously served." Only after their hired help had marched off to war had many of Canada's farmers begun to realize how much the benefits of hydroelectricity outweighed the costs.l6 In all provinces, regardless of their previous records, governments prepared to launch aggressive rural electrification campaigns as the war drew to a dose. Several provinces had had previous programs stifled, by the economic hardships of the Depression and later by wartime shortages of materiel and power. No less a figure than Premier Mitchell Hepburn had his request for

i8 Power at Cost

a hook-up turned down by R.T. Jeffrey because construction materials for transmission lines were in such short supply in Ontario. But post-war planners realized that with the return of peace many rural residents who had moved to urban areas to take up wartime employment would be unwilling to return to a rural way of life that lacked the many electrical comforts to which they had become accustomed. It is equally improbable that politicians elsewhere in Canada were any less able than those in Ontario to make the connection between rural electrification and rural votes. Aspirants to provincial office who promised to deliver "the juice" to farms and hamlets might not be assured of electoral victory, but their chances were vastly improved over those who ignored the issue altogether. In Ontario, leaders had the added concern of Hydro's burgeoning debt, for which rural and urban taxpayers alike were guarantors. If the rural electorate was not to feel that it was being asked to shoulder unfairly a responsibility for which it received no obvious benefit, then rural areas too would have to be included in the public power scheme. Other provinces might not have assumed financial obligations for their electrical utilities on a scale commensurate with Ontario. Nevertheless, where utilities had received provincial funds or guarantees, the political advantages of including rural constituencies in the resulting benefits must have been obvious. Other factors that determined the spread and viability of rural power systems in Canada - and helped account for Ontario's early and commanding lead - included availability of reliable supplies of inexpensive power, size and location of the rural population, and types of agriculture practised. Nor can the slow progress outside Ontario be blamed solely on greedy utilities refusing to jeopardize profit margins by financing expensive rural extensions. Provinces where the power industry was controlled by private interests seldom had a record that was any better or worse than that of those with substantial government involvement. Of all the influences at work, the one that best explains Ontario's early lead was the province's rapid development after 1906 of a publicly owned infrastructure of generating and urban distribution facilities onto which the Rural System could be grafted. With this infrastructure in place, it became possible to introduce an aggressive marketing strategy based upon a wide array of consumption incentives. Without the infrastructure, such incentives would have been a prescription for financial disaster. Ontario's experience is therefore strikingly different, and the question of why Ontario became by far the largest supplier of rural power markets in Canada, both before and since the war, is of considerable

19 Introduction

historical significance. When Adam Beck led Ontario in 1906 into the complex and capital-intensive business of generating and distributing hydroelectricity, some industries and municipalities had already been using electricity successfully since the i88os. None, however, was operating on a scale even remotely approaching that of the network he envisaged. Electrical utilities everywhere in North America and Europe were at a rudimentary stage in their development, and all were struggling to solve many of the same technical problems. The HEPC participated actively in the widespread exchange of ideas and inventions that marked the early years of the electrical industry, but much of Hydro's growth stemmed from the ingenuity of its own engineers and planners. This was particularly true in rural electrification, where Ontario was in the vanguard. But neither Beck, nor anyone else, knew for certain in 1911 the shape that the Commission's rural program would ultimately take. The influence that the provincial government, the public, economic factors, private competitors, and changing technology would have on the growth of the Rural System had yet to be determined. Indeed, these questions would not be fully answered for almost fifty years. In the end, the greatest advances in rural electrification in Ontario, as in so many other places, were made immediately after the Second World War. Between 1911 and 1945, however, Ontario had no peer in Canada in the rural field and had little to learn from the United States. The policies and circumstances that gave Ontario this important edge form the subject of this book.

CHAPTER TWO

Laying the Foundations Service at actual cost without loss or profit HEPC, Annual Report, 1912

The HEPC'S rapid expansion among the towns and cities of Old Ontario was no guarantee of similar success in rural areas, so dissimilar were the two markets. On turning their attention to the rural market in 1911, the Commission's engineers struggled with an entirely new set of questions. Was it reasonable to apply the same standard of "power at cost" to city and country alike, and if so, how should rural rates be structured? Was hydroelectricity sufficiently adaptable to the type of agriculture practised in southern Ontario to make a contract with the HEPC an attractive investment for individual farmers? Indeed, could a rural power network ever be selfsupporting, or would it have to be closely tied to the municipal distribution system? Since no other North American utility was serving a comparable market, the HEPC had no ready answers to these questions. Consequently, the period before 1920 was characterized by a trial-and-error approach as the utility sought to lay the foundation on which a comprehensive Rural System could be built. The principle of a publicly owned system of hydroelectric generation and transmission in Ontario had first been endorsed at a convention of municipalities held at Berlin (now Kitchener) in June 1902. Resolutions adopted by the delegates, most of whom were businessmen and civic officials from towns and cities across southwestern Ontario, urged the Liberal government of Premier George W. Ross to undertake construction and operation of transmission lines as a public venture. The delegates had concluded that public ownership was the only way to ensure that their businesses and communities received a fair share of the electricity soon to be produced by the three privately owned companies constructing generating plants at Niagara Falls. When Ross rejected the convention's proposal on the

21 Laying the Foundations

grounds that the entire province could not be expected to accrue the debts of a publicly owned hydro system that would benefit only central and southwestern Ontario, advocates of public power shifted tactics. They proposed instead that if Queen's Park were not prepared to get involved in distributing hydroelectricity, interested municipalities should be allowed to provide the service for themselves. But in 1903 Ross would agree only to creation of the Ontario Power Commission to investigate the feasibility of a municipal co-operative scheme of hydroelectric distribution. The advocates of public ownership received a boost when James P. Whitney's Conservatives ousted the Liberals from office in the general election of January 1905. Whitney, who did not share Ross's aversion to the principles espoused by the public power movement, established the Hydro-Electric Commission of Inquiry later the same year. Chaired by Adam Beck, minister without portfolio, the commission began a thorough inventory of all waterpowers available for development in the province, calculated the capital costs of bringing them into production, and estimated the rates at which the power could be sold. In the mean time, with the assiduous Beck at its helm, the campaign for public power was transformed into a genuine grassroots movement spanning southern Ontario. When both commissions presented their recommendations to Whitney's government in the spring of 1906, Beck's group prevailed. Its submission advocated creation of a provincial hydroelectric commission with the authority to regulate the activities of privately owned power companies and to purchase energy from those same companies for resale to municipally run utilities over a distribution system constructed and owned by the province. Both of these functions - corporate regulator and electric-power distributor - were provided for in the legislation creating the Hydro-Electric Power Commission of Ontario (HEPC) on 7 May 1906. The public power movement had sought a reliable energy supply at affordable prices. Obtaining a supply of electricity did not at first present a problem, since the private producers at Niagara Falls proved capable of generating sufficient quantities to satisfy the HEPC'S needs until the power requirements of its industrial customers surged during the First World War. In any case, Beck had ensured that the Power Commission Act of 1906 permitted Hydro to expropriate the "lands, waters, water privileges, water powers, works, machinery and plant" of any individuals or corporations generating power in the province.1 Admittedly, any expropriation undertaken by the HEFC would require prior authorization by the provincial cabinet. Nevertheless, just knowing that Hydro had the

22 Power at Cost potential to dismember their operations would make producers reluctant to deny the HEPC'S distribution system the power it needed, even if this meant redirecting hydroelectricity away from their own established customers. As for price, Beck never tired of telling potential consumers that every power user, large or small, would pay the actual "cost" and nothing more. Until 1910, however, his Commission still had not decided which components should be included in cost or how to apportion cost among different categories or "classes" of customers. A Joint Rate Committee comprised of HEPC officials and engineers, together with representatives of the "various interested municipalities," tackled the problem in a series of meetings between September 1909 and January 1910. Out of their deliberations came a rate schedule that remained fundamentally unchanged for more than thirty years. This schedule also provided the model on which future rural rates would be based. The committee agreed that since Hydro should be perceived as selling a service rather than a commodity, the principal considerations in calculating cost must be capital investment and maximum demand, not total consumption. Therefore, a rate that blended two charges would be best. One element in the rate would consist of a monthly demand or service charge to cover each individual user's share of the HEPC'S overall costs for plant and equipment. This amount could be reduced by adding more customers to the system, thereby dividing overhead expenses among a greater number of users. The second element would reflect the amount of energy actually consumed. The committee was satisfied that this framework would enable each "class" of customer to be self-supporting, while ensuring that everyone paid "an equitable amount" for the service.2 Further studies were undertaken during 1911 as the Joint Rate Committee compared the wide variety of rate schedules in use by utilities throughout Canada and the United States. This second round of investigation confirmed the committee in its view that its own proposal offered the fairest solution to a complex problem. The committee particularly disapproved of the practice, widely followed in the United States, of entrusting state and federal commissions with the task of regulating the rates charged by privately and publicly owned utilities. Because these commissions were concerned primarily with preventing utilities from earning more than a "fair margin of profit" each year, they generally focused on how rates affected a power company's annual revenues, rather than on whether a particular method of billing was equitable. Worse still, the practice common among privately owned utilities of selling power in "block rates"

23 Laying the Foundations

enabled large industrial and commercial customers to negotiate far better terms for themselves than were available to individual domestic users. In the view of the Joint Rate Committee, these were major defects: to waver, even slightly, from Hydro's founding principle of "power at cost" would be to betray the public that had entrusted the Commission with so vital a resource. All customers must pay the same price, as uniformly prescribed by Hydro, for their particular class and power load.3 The HEPC not only accepted the committee's recommendations but insisted that every partner municipality adopt the new rate structure in its entirety. This, it turned out, was but the first of many assaults on municipal autonomy. Local traditions, prejudices, and competition had long helped determine how electrical costs were apportioned within a community. Now the provincial utility intended to tell municipal utilities commissions that these practices must stop. Hydro offered a simple, but not unreasonable explanation: "Unless a standard form of charge was used in all the Municipalities, there would be endless confusion and dissatisfaction." The legislative assembly concurred. Convinced that "the success of the Hydro-Electric System as a whole would necessarily depend on the success of the municipal units individually," it granted Hydro authority, in 1912, to exercise final approval over all rates charged by any municipal corporation that was "generating or receiving and distributing electrical power or energy." Even private power interests were now susceptible to Hydro's rate-setting clout; henceforth, any company or individual purchasing power from the HEPC for resale was required to have its rates approved by the Commission. The first "Standard Interpretation of Rates" was issued in 1913, and within two years this was being followed by every contracting municipality. Thus, from an early date Hydro dictated not only the rates paid by municipalities but those charged to individuals as well. In short order the provincial commission's authority over local energy matters had been extended farther than the original municipal partners had ever thought probable. Moreover, Beck had been able to arrange matters so that no proposed rate schedule went out to a municipality without receiving his personal approval.4 The 1912 legislation enhanced the HEPC'S regulatory powers in other ways also - "all," according to Hydro, "to the end that there might be no failure to furnish service at actual cost without loss or profit." In the future, municipal commissions were expected to adopt the standard accounting procedures prescribed by Hydro and to heed its advice over disposition of surplus earnings. In addition, in 1915 the legislature empowered the HEPC to perform all electrical

24 Power at Cost inspections, once again in the name of "uniformity." Inspectors who previously had been appointed by, and hence were accountable to, local commissions suddenly owed their allegiance to Hydro.5 Contracting municipalities offered little resistance to the HEPC'S raid on their financial and administrative prerogatives. Kenneth Dewar has suggested that this passivity was caused by Beck's "almost dictatorial control" over the municipalities' mouthpiece, the Ontario Municipal Electric Association (OMEA), although it needs to be stressed that the closeness of the ties between Hydro and the association are frequently overstated.6 Established in 1912, the OMEA was comprised of representatives from municipal utilities commissions that purchased power from the HEPC. Initially the OMEA'S interests were barely distinguishable from Hydro's, and the association was a major ally of the utility in its disputes with the government. By the 19303, however, rifts between the two organizations were fairly common. The OMEA often complained that it was not being consulted on important matters of policy, and rumours abounded that Hydro intended to supplant the local commissions altogether.7 While Dewar's suggestion of OMEA acquiescence in 1915 to a further reduction in the municipal commission's autonomy is probably accurate, towns and cities accepted the logic behind the Commission's "gradual accretion of powers." Within a few years only Hydro's staunchest critics denied that the local commissions had benefited by the movement toward financial centralization. Clearly, Hydro alone possessed sufficient resources to vie with private industry for highly skilled engineers, financial managers, and consultants. Furthermore, uniform operating procedures were essential if Hydro were not to founder under the strains of its own rapid and increasingly complex expansion. Had Ontario's public power visionaries ever sought vindication for their radical ideas, surely this was it. Only five years after the Commission served its first municipal customers in 1910, the best interests of the HEPC were widely perceived to be indistinguishable from those of the local partners. Although the municipalities seldom lamented their loss of authority, on at least a few occasions concerns were raised that a centralized system was not responsive enough to local needs. In 1924, the legislature heard allegations by the UFO that HEPC inspectors, by insisting on strict adherence to provincial guidelines, and not taking "local conditions" into consideration, were in fact hindering rural electrification. In the past, claimed spokespeople for the farmers' organization, municipally appointed inspectors had been less inclined to prohibit the use of slightly substandard electrical

25 Laying the Foundations

equipment. By using these materials, so the argument continued, many private power distributors had been able to reduce their costs sufficiently to enable them to extend hydroelectricity to farming communities that otherwise could not afford the service. Unfortunately, the UFO failed to elaborate as to how widespread this practice had become or how many rural communities had actually received service by this means. Some customers also complained that centralization had resulted in lower maintenance standards, particularly in areas where low customer density prevented Hydro from hiring permanent employees.8 Such criticisms were rare, however, largely because Hydro managed to centralize its municipal operations at a very early date. As matters developed, the same philosophy came to govern the Rural System as well. The HEPC did not initiate rural electrification in Ontario. Long before Hydro turned its attentions to the rural market, many imaginative and forward-looking farm and hamlet residents were already experimenting with a wide variety of wind, water, and battery-driven generators. On the whole, the performance and versatility of individually owned units left much to be desired. A more reliable alternative was available to only a limited number of "suburban" customers - those rural inhabitants who resided just outside municipalities with distribution systems of their own. Usually they could tap into the municipal system by agreeing to finance construction of the necessary connecting lines or by paying a consumption surcharge commonly set at the urban rate plus 10 per cent. Although it would be many years before electricity's adaptability to domestic and commercial situations was fully appreciated, the rural community quickly demonstrated awareness of the potential benefits. For instance, Dewar tells of a resolution passed by the Norwich village council in 1906 that identified "cheap and convenient" power as essential for introducing to the farm "many of the comforts and conveniences now available only in the towns and cities" and for alleviating rural depopulation in the process. Two years later, W.H. Day, a member of the Department of Physics at the Ontario Agricultural College, explained how farmers too had a vested interest in Ontario's public power scheme, even if the utility's major preoccupation was supplying urban centres with cheap power. The farmer depended on the town "almost as the town upon him," Day insisted, so if cheap power enabled towns to manufacture more cheaply the commodities needed by the agricultural community, then it was in the farmer's best interest "to aid them in their fight for power at the lowest possible cost."9

26 Power at Cost

Rural awareness increased significantly after 1910, once Beck personally began "switching on" the distribution systems of Hydro's municipal partners throughout southwestern Ontario. It was only natural that the folk of the neighbouring farms and hamlets should wonder, as they witnessed the spectacles in Berlin or Hamilton or London, just what changes and opportunities the hydroelectric revolution held in store for them. By 1912, over two dozen townships and unincorporated municipalities had asked the HEPC to estimate the cost of providing them with a level of service similar to that being given the towns and cities. The sudden show of interest among rural districts took both the Commission and the Whitney government by surprise - particularly the latter; a Conservative election pamphlet circulated in 1911 had treated as an afterthought the notion that rural communities could also belong to the provincial hydroelectric network.10 The rural petitions forced the fledgling public utility to address a potentially divisive question - should it be expected to serve a relatively distant and widely dispersed rural clientele before the viability of its urban connections had been proven? For Beck the answer was clear - Hydro must accept the challenge. Personal as well as political considerations forced his decision. An egotist of irrepressible energies, Beck never permitted his reach to interfere with his grasp. His fawning public had of late dubbed him a "human dynamo," and he was rapidly acquiring a reputation across the province as a doer of momentous deeds. Thus Beck's character alone would explain his rush to assume responsibility for rural as well as urban electrification. Equally instrumental, however, was Beck's determination that the nascent HEPC in no way be seen as incapable of satisfying the power needs of Old Ontario. The provincial utility had detractors aplenty, and Beck knew that it would be impolitic to reveal any chinks in the public ownership armour so early in the battle. Moving posthaste, he obtained in 1911 revisions to the Power Commission Act that clarified how rural residents could become HEPC customers. Whereas city, town, and village dwellers had to apply through their municipal councils, farmers and residents of unincorporated communities would make their desires known to the township council. The latter in turn would be responsible for arranging estimates, contracting with Hydro for a supply of power, and issuing debentures to finance the necessary equipment installations and line construction.11 Before reliable estimates could be provided, the HEPC needed to know the extent of the rural load and the design of the transmission

27 Laying the Foundations

line best suited to local conditions. The surest way of determining load was also time-consuming; this was to conduct an intensive canvass of the locality in question, meeting every potential power user personally. Computing the costs of transmission lines proved more difficult and remained a contentious issue within the Commission for several years to come. By 1912, Hydro engineers were trying to develop a "cheap, yet serviceable system of transmission and transformation for use in rural districts," but proper research and experimentation required time, more time in fact than the impatient Beck was prepared to allow. Construction costs obviously would be affected by the nature of the terrain over which the lines would run, but when preliminary estimates were submitted ranging from $512 to over $1,000 per mile of line, the chairman's reaction was predictable. Nervously scribbled memoranda were soon circulating throughout the engineering department; these warned that Beck, who was said to be "very much agitated" by the rural line estimates, was insisting that lines "be built for less than the figures which we have been using."12 Just how unrealistic Beck's demands were became clear once average construction costs rose from $1,200 per mile of line in 1914 to over $1,500 by 1921. As long as minimum standards for safety and reliability were maintained, expenses could hardly be pared further. The Commission experimented with underground transmission lines in the early 19203, a process it claimed would reduce construction costs by almost 40 per cent. But in practice this approach was generally reserved for crowded urban settings. That left labour costs as the only remaining variable of consequence. There as well, opportunities for introducing economies were limited, since much of the construction process required skilled workers.13 Hydro encouraged rural customers to complete as many of the unskilled tasks as possible, such as hauling and erecting poles. Although many farmers welcomed the high wages that a stint on a line crew provided, the HEPC persistently urged them to work for nothing and to provide visiting construction crews with free board. Chief engineer Gaby argued that such beneficence would eventually work to the customers' advantage. Since all costs related to service charges were a percentage of the capital invested in the lines and equipment, "the lower this capital... the lower the rate to the user." Gaby's rationale notwithstanding, the request for free labour and board evoked bitter protests in some quarters. The Farmers' Sun, the Toronto-based organ of the UFO and one of the HEPC'S most persistent and influential adversaries, ridiculed the notion that farmers should be pressed into working for Hydro without receiving fair

28 Power at Cost

compensation. It expressed mock surprise that farmers, "who loaf on the job from 5 a.m. to 9 p.m.," would not be "delighted to dig post holes instead of resting during the noon hour." As for free board, it asked whether "Lady Beck and the other good ladies of London" provided the same service for that city's Hydro employees.14 With still only a rudimentary understanding of construction costs and probable rural demand for the service, Hydro's engineers devised an appropriate rural rate schedule. Although this process was facilitated somewhat by the investigations of Hydro's Joint Rate Committee, which had designed a rate structure for the municipal system several years earlier, the first rural rates, as approved in November 1912, differed markedly from those applied in urban areas. Both groups paid a fixed monthly service charge, but only municipal customers were assessed a "variable" consumption charge. In a move that revealed Hydro's uncertainty about the existence of a widespread rural market for its service, the utility instructed that rural users were to pay a "flat" consumption rate that remained unchanged, regardless of the amount of power actually used. Among the explanations offered for this shift in policy was the HEPC'S belief that because the average rural customer was as yet unfamiliar with the various uses of electric power, it was "desirable to give him a rate that he [could] readily understand." Also, flat rates would alleviate the necessity of meter-reading, which promised to be expensive and time-consuming on sparsely populated rural concessions. And until more was known about the exact nature of the rural load, a flat rate should guarantee that sufficient revenues were generated to offset Hydro's expenses.I5 Growing public interest in the rural program made Hydro's initial hesitancy short-lived. Within the year the HEPC had become so confident of the rural market that it extended the offer of variable rates into the countryside. As of May 1913, rural users could choose either the flat rate or a meter rate based on a service charge of $2.00 per month and a consumption charge of 4 cents per kilowatt-hour. When few customers availed themselves of the opportunity to switch over, R.T. Jeffrey offered a reasonable explanation. Farmers, he wrote, considered the meter rate "unpredictable." They preferred instead to sign up for the lowest amount of power permissible under the flat rate, thereby always knowing precisely what their monthly bill would be.16 With its rate and construction guidelines thus determined, the Commission proceeded with the first rural extensions in 1912. Beck meanwhile was contemplating the possibility of merging the fledg-

29 Laying the Foundations ling rural program with his latest infatuation, radial railways. Radials, he believed, besides providing a convenient market for future power surpluses, would augment the overall rural load to such an extent that individuals' rates would be reduced by as much as $15 per horsepower. He predicted that radials, by providing a dean, efficient and affordable means of transporting city labourers to their homes in the country, would also help to abate the rural depopulation that many commentators considered the bane of Ontario. Hydroelectric railways, as H.V. Nelles observed, became, like Hydro itself, "something of a panacea for a host of social ills."17 Beck was not the first to associate electric railways with agricultural prosperity. In 1898 the Canadian Electrical Association had considered a proposal for transporting standardized farm wagons to market on radials, an idea Dewar has described as an "early version of piggyback transport." In 1908, W.H. Day, at the Ontario Agricultural College, had also linked radials with rural electrification. Unlike Beck, who years later admitted that "the radials themselves [would] not supply power to the farmers," Day envisioned "a vast network of ... electric railways ... overspreading the whole province" as the fulcrum of a rural distribution network. He believed that any farmer living within a mile or two of a radial would "be in a position to secure affordable power." Nor was he discouraged by the fact that existing technologies limited feasible hydroelectric distribution to "a narrow strip surrounding towns and villages or lying on either side of trolley lines." Prophesying the eventual construction of several thousand miles of radials, Day calculated that if each mile of line provided power to between twenty-five and one hundred farmers, before long a "considerable proportion" of the province's farms would be electrified. Despite the professor's gross exaggeration of farm density, his faith in radials was genuine. It was an enthusiasm shared by many rural inhabitants in the years preceding the First World War.18 The speedy decline of Beck's cherished radial project at war's end has been well documented elsewhere. Power shortages, the proliferation of highways and motor vehicles, and a provincial government intent on reducing the Hydro chairman's lavish expenditures all contributed to the scheme's reversal. Farmers, who in 1914 had strongly applauded Beck's pronouncements on the twin virtues of radial railways and rural electrification, were considerably less amenable in 1918. They too realized that automobiles would soon be serving their needs in ways that rail transit could not. J9 It has also been argued that rural support for electric railways evaporated because "public power had spread into rural areas apart from radials,

3o Power at Cost

thereby discrediting the logic that rural electrification and radials were inseparable."20 In fact, few rural transmission lines were erected before the end of the First World War. Exact numbers cannot be determined, but the HEPC'S rural network by 1919 consisted of less than 300 miles of lines and fewer than 700 farm customers, hardly proof that a new era had dawned.2I If rural extensions seemed merely to creep along compared to the rapid advance of the urban network, the slowness of the pace was not the result of lack of effort on the HEPC'S part. The Commission was, after all, in the unenviable position of attempting to market a service the potential of which even it did not fully comprehend. Most people agreed that hydroelectricity would eventually revolutionize home and workplace, but its adaptability to specific tasks and situations remained, if not totally unknown, largely untested.22 Hydro's engineers first needed to educate themselves before they could inform the public. To this end, in 1911 the Commission's first chief engineer, P.W. Sothman, toured several European countries, including England, Switzerland, Germany, and Austria, where electricity was already widely used. The information that Sothman gathered covered every significant aspect of hydroelectric distribution - rates, marketing, standardization of equipment, and rudimentary forms of research and development. He paid especial attention to electricity's farming applications, but with mixed results. He was encouraged that European farmers were using electricity so extensively to lighten their workload, but he concluded that very little of the European technology was readily adaptable to the Ontario farm environment. In Europe, labour costs were lower, power costs higher, and farms smaller, and on the whole a more intensive type of agriculture was practised. Obviously the conditions necessary for creating a feasible rural distribution network varied dramatically on opposite sides of the Atlantic. Consequently, when Sothman returned to Canada in the late summer of 1911, he inaugurated an ambitious experimental program to develop electrical equipment tailored to the specific needs of Ontario's farmers.23 The rural experimental program, which was only one section in Hydro's new Research Division, expanded steadily until wartime commitments forced its cutback in 1915. It was a pioneering effort, for, as Jeffrey became all too well aware, "in no other country was electric service for farm use given any serious consideration and no data was available for reference regarding the amount of power required to perform various farm operations." The experimental program was another facet of what Robert Belfield has identified as Hydro's shifting emphasis after 1911 "from transmission to load, or

31 Laying the Foundations

market, concerns." The HEPC, in the finest entrepreneurial tradition, resolved to develop an expansive rural market for its power where previously only a limited one existed; it sought nothing less than a "restructuring of rural work and life."24 Several European electrical designs, if not completely adaptable to Ontario's conditions, at least served as useful models for Hydro's own engineers. For example, the threshers and ensilage cutters that became so common in the province in the 1920S were both derived from European designs. What all this added up to was another phase in the continuing round of "technological transfer and adaptive development" that, as Belfield has shown, distinguished the growth of hydroelectric utilities in North America. More often, however, the Commission's engineers were forced to develop indigenous technologies suited to Ontario's needs. For instance, in 1913 Jeffrey ordered his staff to develop a grain grinder that operated on five horsepower or less. Making available grinders that were less expensive to purchase and operate than the standard ten-to-fifteenhorsepower models benefited both Hydro and its customers. Obviously a cheaper motor would be within the means of a greater number of farmers. But equally important, more efficient equipment enabled customers to maximize benefits per horsepower. This was essential, since, as Jeffrey pointed out, Hydro was still unable to supply large blocks of power at prices the average farmer could afford. 25 The HEPC also tried to impress on its rural clientele the value of achieving the highest annual "load factor" possible. Load factor measured average power usage during any given period as a percentage of consumption at the time of heaviest demand. Whether the subject was an individual consumer, or the utility itself, the objective was to reduce to an absolute minimum the variance between periods of highest and lowest demand for power. The Commission soon discovered that this principle was completely contrary to the work patterns traditionally followed on most Ontario farms. Ordinarily, most tasks could be handled by equipment requiring five horsepower or less. Only once or twice a year, when silos were filled, grain was threshed, or wood was sawn, did energy requirements increase to as much as twenty-five horsepower. The resulting load factor - only 20 per cent - represented extremely inefficient use of transmission facilities. In essence, both Hydro and the customer were paying year-round for a service that was used to optimum advantage only for a few days.26 The problem, according to the HEPC, arose from "old methods" of doing work. The average farmer had become accustomed to "getting along ... by hand or with a team of horses, and reserving all

32 Power at Cost

the heavy operations until such a time as he could hire a steam engine by the day to do the work in the shortest possible time."27 But before Hydro could fully develop the rural market, it needed to persuade the farming community to adopt work patterns that enhanced the load factor. The immediate result would be drastically reduced costs for installation and energy. Therefore, beginning in 1913 and continuing for several decades thereafter, the Commission conducted a campaign to persuade its farm customers that since they now had a reliable energy source at their fingertips, they could use smaller motors over longer periods of time. The HEPC combined its rural research and promotional efforts with two innovations. The first, Beck's famed "Power Circus," was launched in 1912. For the next two years, covered wagons loaded with virtually every electrical appliance then available for the home or barn toured the province, stopping at farms and agricultural fairs to demonstrate electrical-powered equipment at work. The units, which carried their own 215-kilowatt transformers, could tap into the nearest transmission line and tackle a wide range of farm chores. At the end of each demonstration, detailed calculations were presented to show the crowds who had gathered how much more costeffective hydroelectricity was than other forms of farm energy. 8 More advantageous from a technological perspective were the experimental farms that Hydro set up in Yarmouth Township (Elgin County) and Oxford Township (Oxford County). Seven privately owned farms were supplied with a two-horsepower service and equipped with electrical devices. Over the next several years, copious records were kept of each appliance's operating time, power consumption, and overall performance. New inventions were added as they became available. All the testing ultimately pointed to one discouraging conclusion: whereas it was possible to make extensive use of electric lighting on the farm, labour-saving power and heating applications remained limited. For instance, one of the experimental farms near Ingersoll was equipped with forty-six light sockets, yet the only electrical appliances in the home were an iron, a toaster, and a heater. The two-horsepower motor placed in the barn and outbuildings offered somewhat greater versatility. It could be used at three different locations to operate a three-unit milking machine, a grinder, cutting-box, fanning-mill, turnip-pulper, grindstone, saws, and a washing-machine.29 Despite the efforts of Hydro engineers to develop appliances for use in the potentially massive urban domestic market, the initial technological advances had clearly done more to alleviate the work-load in the barn than in the farm home.

33 Laying the Foundations

By 1915, the results of the farm experiments had dampened the HEPC'S earlier enthusiasm about the prospects for rural electrification. "The amount of business ... in the rural districts," it reported, "by reason of the fact that the farms are large in a good many sections, makes it necessary ... to proceed with caution." Given existing technologies, the farm load itself simply could not support the capital costs necessary to finance, at anything approaching acceptable rates, construction and operation of rural distribution systems. The Commission had thus arrived at the viewpoint that the only way of making farm electrification viable was to ensure that neighbouring hamlets, villages, and towns also became an integral part of the network. Only then would customer densities be high enough to raise power loads to profitable levels. Henceforth, a key criterion in gauging the soundness of proposed rural extensions was the likelihood of including an entire district in the scheme, and not just the farming community.30 Hydro also hoped to augment rural loads by linking up to the many small industries dotting the back concessions of most townships. Brick and tile yards, butter and cheese plants, beet sugar factories, quarries and gravel pits, and saw, chopping, and flour mills all required large quantities of energy. If the Commission could persuade the owners of these light industries that the provincial network offered a more reliable and economical source of power than they could produce themselves, or purchase from local suppliers, it would create a sturdy foundation on which to build its rural distribution system.31 The HEPC'S decision to integrate a non-farming clientele into its rural network eventually would ensure the financial viability of central-station-service farm electrification in many areas. Nevertheless, in-house research into new ways of increasing agricultural power loads remained a priority. As late as 1921, Hydro's engineers were endeavouring to apply hydroelectricity to field work - ploughing, harrowing, seeding, and harvesting - activities traditionally done with horses, and more recently by gasoline-powered tractors. The possibilities seemed limitless. There were over nine million acres of agricultural land under field crop cultivation in Ontario in 1921, and several times annually it was necessary to pull farm implements of some form or another across most of them. If hydroelectricity could somehow be harnessed to that tremendous work-load, the HEPC'S rural consumption worries would be over. Unfortunately, with the rapid improvement of gasoline-driven equipment that dream was not to be realized. The best the Commission had to offer was expensive and unwieldy portable units that lacked the versatility

34 Power at Cost

of tractors. These, moreover, were only affordable when shared by farmer syndicates.32 Thus, at a time when tractors were reducing a farmer's dependence on his neighbours, the Hydro alternative represented a step backward. If discovering new rural applications for hydroelectricity remained a priority for the HEPC, designing a rate schedule that accommodated the financial needs of the Commission and its customers was looked at as equally important. In 1916, a destructive practice by a growing number of rural customers necessitated the first significant revisions to the 1912 rate schedule. The flat consumption rates introduced that year had relied on the honour system: a farmer contracted and paid for a specific quantity of power and was expected to keep energy usage within the pre-arranged limits. But with increasing regularity, some farmers signed up for the minimum rate available and then added more equipment and ever greater loads to their services until their transformers burned out. Without automatic breakers to protect the system from serious damage, these overloads became an expensive annoyance. The HEPC therefore decreed that henceforth all rural consumption and demand would be closely regulated, much like the municipal systems. In the future, all rural contracts would be based on differential rates, and existing flat-rate customers were expected to transfer to the new format.33 Further modifications followed in June 1916, with the introduction of a three-tiered system of rural classifications. Class I (Lighting) enabled the customer to use up to one horsepower at a time; class II (Light Power), two horsepower; and class in (Heavy Power), five horsepower. The first half of the rate, the service charge, was based on customer density, not class. Service charges were $3.00 per month if density averaged three customers per mile; $2.50 per month for four customers; and $2.00 for five customers. The second half of the rate was a three-phase consumption charge based on class. For example, the first sixty kilowatt-hours of monthly use were at one rate; all remaining consumption that same month, up to the contracted amount, was at a second rate; and any energy used in excess of the contracted amount was paid for at the third rate. A 10per-cent discount for prompt payment completed the calculation.34 This revised rate structure remained fundamentally unaltered for the balance of the Rural System's formative period. It did change in appearance, however, for as the rural distribution network grew in size and complexity, several new customer classifications were added. So long as the principle of "power at cost" prevailed, if only theoretically, further partitioning of the rural rate structure was unavoidable (see Appendix c).

35 Laying the Foundations

Even the new rates reflecting actual usage failed to halt entirely the tendency to overload transformers; that irritation persisted until Hydro made breaker boxes mandatory.35 Far more ominous were the results of an engineering study conducted in 1918 which revealed that revenues from rural rates still failed to cover expenses, largely because of continuing difficulties in estimating construction costs. The Commission, faced with rapidly escalating costs everywhere in the organization, and especially at the site of its mammoth Queenston-Chippawa generating station, immediately took corrective action by raising its rural service charges. Overnight the costs doubled from $3.00 to $6.00 per month for farmers served by transmission lines on which the average density was three customers per mile, with slightly smaller increases on lines with higher densities. Obviously the move did little to instil confidence in the HEPC, for if it was prepared to double rates at will, prospective customers would think twice before committing themselves to the obligatory twenty-year rural contract. As for those who had already signed contracts, the extra $36.00 per year in service charges represented the loss of funds they might otherwise have used to purchase electrical energy and equipment. The rate hike simply enhanced the difficulty of attracting the minimum three farm customers per mile necessary for a new extension yet failed to ameliorate appreciably the rural network's financial woes. As a result, barely a year after the new rate schedule was implemented, the viability of the fledgling Rural System was again being questioned.36 For the first time the HEPC considered openly whether rural electrification and "power at cost" were indeed compatible goals. Perhaps some type of special concession was necessary if hydroelectricity was to become as common in the countryside as in urban areas. Entirely on its own initiative, Hydro instructed the rate committee to determine how a government grant covering one-third of all construction costs for transmission lines would affect the rural network's financial standing. When the committee submitted its findings on 26 March 1919, it denied that the proposed subsidy would "completely remedy our difficulties and put the systems on a paying basis." Rather, financial soundness could be achieved only by attracting more consumers, raising rates, or reducing annual charges. The rate committee evidently was not in the mood for innovative ideas. "Power at cost" appeared, for the time being at least, as firmly enthroned as ever.37 The idea of special privileges for rural customers might have faded entirely but for Beck s interference. Later in the year, during an address to the Canadian National Exhibition Director's Luncheon, he outlined another proposal for assisting farmers desiring an elec-

36 Power at Cost trical hook-up. Beck recommended that the HEPC be authorized to set aside a small rental of fifty cents per horsepower, to be distributed as grants among townships trying to establish rural distribution systems. Although he failed to describe fully how these monies would be applied, he did succeed in keeping the notion of a rural subsidy alive. Beck was now convinced that rural electrification must receive some form of financial assistance not accorded the municipal partners.38 He was equally certain that in order for his cherished Hydro to be universally regarded a success, rural transmission lines needed to become a common sight on the province's back concessions. Few who appreciated his indomitable nature doubted that both changes would eventually be made. The attention paid to the question of a subsidy in 1919 was almost purely academic. Most construction on rural extensions had ceased by 1916, as wartime industries gobbled up excess labour, materials, and power. After the Armistice, unsettled domestic conditions forced further delay in resumption of activities until 1920. Even then, progress was slow. A severe power shortage postponed new rural extensions interminably, a special irritant to those farmers who had wired their properties several years earlier in anticipation of an immediate hook-up. The cruel irony was that rural electrification had originally been regarded as a convenient means of reducing the HEPC'S power surplus. At the end of the war, with its rate and distribution policies worked out, the Commission was finally prepared to embark on an ambitious program of rural expansion. Yet until more power became available, its efforts would have to be confined to preparing estimates and "general propaganda work."39 Despite repeated setbacks, Beck continued tirelessly to promote Hydro's rural services, even though he had little electricity to sell. He delighted in telling audiences, such as the OMEA in February 1917, of driving "through Oxford and Elgin counties, from Woodstock to St. Thomas, and never being out of sight of Hydro lights and power supplied to the farmers." Other Commission personnel were expected to do likewise. Hydro's annual reports became useful promotional vehicles, providing detailed descriptions of the progress of individual rural extensions throughout the province. Another favourite tactic was to release statistics purportedly showing how much Hydro's customers had saved in energy costs by switching over from their previous suppliers. The aggregate savings to domestic and commercial users alone, Hydro claimed, had amounted to almost $14 million by 1918. Privately, however, at least one wellinformed Commission employee admitted that since consumption patterns were influenced by so many immeasurable variables, these

37 Laying the Foundations

estimates were optimistic guesses at best. A.H. McBride, an assistant engineer, commented that "to be of any value such a figure should be based only on consumers who were or would have become users without the influence of Hydro propaganda."40 It is unlikely that this candid confession would have upset many rural residents; few had previous suppliers with whom to compare the provincial commission. Almost any service Hydro offered, if it was at all affordable, represented an improvement over their present situation. Rural electrification had not been one of the HEPC'S early priorities, but that does not explain the rural program's rather inauspicious beginnings. Certainly the Commission's foremost concern in the period before the Great War was to establish its urban distribution network. It needed to devise rate schedules that apportioned costs fairly among the various classes of customers and impose uniform operating procedures on contracting municipalities. Only when a curious rural population began to demand equal treatment did the Commission make a genuine attempt to respond. Fortunately, many of the results from its earlier work on urban rates and administrative policies were transferrable to the nascent rural program. The HEPC was certain that electricity had an invaluable function to perform on the farm and throughout rural districts generally; the confusion arose over specifics. How was the "juice" to be delivered to the farm? Once there, what were its particular applications? Electrical technology, rather than forging ahead and urging a sceptical public to catch up, had actually failed to keep pace with popular perceptions. Hydro therefore launched its own program of experimentation and "technology transfer," even attempting to alter traditional farming work patterns. But the process revealed that wide-scale rural electrification promised to be far more expensive, and hence slower, than most had imagined. Added to these difficulties were a series of obstacles over which the rural planners had no control, most notably wartime materials priorities and a serious power shortage. Under the circumstances, the dream of a provincewide network of rural transmission lines did well to survive at all. The fact that it did owed much to the personal intervention of Adam Beck. The experiences of these formative years forced the HEPC to consider whether rural electrification and "power at cost" really were compatible aims. Although Jeffrey's rate committee insisted in 1919 that they were, it will be seen that others harboured a different opinion. Hydro also discovered that rural electrification could not succeed if limited to farm service alone. Haphazard extensions might

38 Power at Cost

prove feasible in certain "suburban" districts, but on the whole only the most prosperous and advantageously situated farmers would be able to afford provincial electricity unless the Rural System were augmented by the power loads of neighbouring municipalities. Yet as Hydro rapidly discovered, building this necessary foundation of hamlets, villages, and towns was problematic for the rural program in itself.

CHAPTER THREE

Rural Power Districts and the Municipal Connection A chance of coming into the Hydro scheme Toronto Evening Telegram, 15 May 1916

After the armistice of November 1918, the HEPC prepared to revive the program of rural extensions cut short by the war. The fresh start was also marked by a significant change in approach. Hitherto, serving the farming community had been considered a separate goal. Hydro had simply announced the minimum number of farm contracts necessary in any given area and the price of the electricity; if farm density were high, and the distance to an existing transmission line short, the cost of service might be low enough to enable local farmers to justify the expenditure. The Commission's brief experience had shown, however, that a revised approach was needed if Hydro were to reach a majority of Ontario's farming population. Unless rural loads were increased, and rates lowered proportionately, central-station electric service appeared destined to remain the exclusive preserve of a small agrarian elite. The solution, the Commission now believed, lay in linking together the total power requirements - agrarian as well as municipal - of entire rural districts. In fact, the HEPC had already made substantial inroads into the municipal market; by 1919, 132 centres with populations of at least 250 were included among its customers. Elsewhere, whether energy was generated by the municipality itself, or purchased from a local miller or manufacturer with excess power to sell, the same complaints were frequently repeated: decrepit steam-fired generators broke down regularly and failed to keep pace with a community's growing power needs; erratic stream flows resulted in seasonal shortages; and rates seemed nothing short of extortionate. Under such conditions, many communities found irresistible the Commission's offer of limitless hydroelectricity. Unfortunately, even "at cost" power could be a tremendously expensive proposition for many small or remote municipalities. Rodney, for example, situated

4o Power at Cost

between St Thomas ($24 per horsepower) and Chatham ($29 per horsepower) in the heart of Hydro's "cheap power" core, paid $63 per horsepower in 1919 because its small population of 656 could support only a load of 41.8 horsepower. Clearly, by relying on municipal participation to make rural electrification viable, the HEPC risked creating as many new problems as it solved.1 Any municipality contemplating joining the provincial network simply had to make its intentions known to the HEPC. Hydro engineers would then visit the community, inspect any existing generating and distribution facilities, and determine the probable load. Thereafter, estimates were submitted to the local council outlining the cost of constructing a transmission line to the municipal boundary, the delivered price of the power, and, if necessary, the cost of either building or upgrading the community's distribution system. If the council found the estimates acceptable, it entered into a provisional contract with the Commission. Next, a by-law outlining the conditions of the agreement was submitted to the ratepayers for ratification. If an affirmative vote resulted, the municipality issued thirty-year debentures to cover construction and equipment expenses, whereupon work could begin on a tie line to the nearest point of the Hydro network.2 It was, in theory, a straightforward and expeditious process, and most municipalities managed to follow it without serious difficulty. Usually, for the week or two preceding a by-law vote, debate on the street and in the local press intensified as everyone suddenly had opinions about the virtues of public versus private ownership in general, and municipal versus provincial control of power utilities in particular. The experiences of two communities, Kemptville and Orillia, warrant closer observation. They demonstrate many of the procedures that had to be followed in becoming a contracting municipality, and they reveal how easily obstacles could be placed in Hydro's path, its extensive authority notwithstanding. Kemptville, thirty miles south of Ottawa, expressed interest in a HEPC hook-up as early as March 1912. The instigator was none other than the Conservative member of the provincial legislature for Grenville, George Howard Ferguson. Once Ferguson became premier in 1923, he would be indirectly responsible for every aspect of the HEPC'S growing range of activities. At this relatively early stage in his career, however, he was concerned primarily that eastern Ontario receive its fair share of benefits from the provincial commission. Not surprisingly, he thought his own hometown a logical place to begin. When Beck intimated to him that Hydro's lines might reach

41 Rural Power Districts

the Kemptville area within a year, Ferguson embarked on a personal crusade to heighten local interest in the scheme. He began by arranging for the HEPC to stage one of its popular "Power Circus" demonstrations at the Prescott fair. In November 1913, he persuaded Beck to send an engineer to Kemptville to "ascertain the possibilities of a supply of Hydro-Electric Power."3 Both the request and Beck's acquiescence in it were highly irregular. Although the Power Commission Act did not specifically prohibit Hydro from engaging in unsolicited appraisals, it was generally understood that the Commission would act only on an official request by a municipal council. The engineer's report advised the town against purchasing the local generating plant, substation, and transmission lines from the Kemptville Milling Co. Not only were the facilities notoriously unreliable, but an auxiliary plant would need to be built as well. The resulting expense was more than a community the size of Kemptville could realistically bear. Instead, the report recommended that the ratepayers pass an enabling by-law at the forthcoming January elections empowering their council to contract with the HEPC for service. The town would then need only to purchase the distribution system, while Hydro negotiated with the milling company for the necessary power. Fred Gaby felt confident that the milling company would co-operate, particularly if the Commission threatened to supply Kemptville with electricity by building a twenty-five-mile transmission line from Prescott, which formed part of Hydro's St. Lawrence System.4 Ferguson was now more determined than ever that the deal go through. In a letter to Gaby he explained that wherever he went in eastern Ontario he was "interrogated about Hydro power," and everyone seemed "anxious to take power from the Commission." Nevertheless, price was everyone's principal concern, and since Kemptville was no exception Ferguson asked Gaby to keep the estimates as low as possible. Ferguson next fixed his sights on the town's officials, attempting to reassure them that passage of an enabling by-law would merely give "Council... authority to take up the question" and carried with it no financial obligations whatsoever. "Nothing can suffer by the passage of such a by-law," Ferguson insisted, "but much good may come of it." Only after Hydro presented its estimates, and the town's ratepayers voted on them in a second by-law, would a binding contract be made.5 Kemptville dutifully endorsed the by-law in January by a convincing margin of 178 to 18. Shortly thereafter Ferguson's dream began to fade. Despite his urgings that the Hydro negotiations "be expedited in every way possible," the Kemptville Milling Co. proved

42 Power at Cost

a hard bargainer. It refused to entertain any offer by the town to purchase the distribution system that did not also include the generating station. Yet Hydro's engineering survey had shown that such a proposition was beyond Kemptville's limited means. Some municipalities, when placed in similar circumstances, responded by building a duplicate transmission system of their own, but this option was impracticable for Kemptville. Side by side with the milling company's poles and lines stood those of Bell Telephone. Since the town's remaining roadsides were covered by dense, overhanging trees, there simply was no room for a third set of unsightly lines.6 Hydro's part of the transaction was also complicated. In order to ensure that the power shortages that plagued the community in the past did not recur, Hydro insisted that any agreement on power purchase was contingent on the milling firm's increasing the capacity of its generating plant. Once again, the company refused. It suspected, rightly as it turned out, that Hydro had been bluffing when it threatened to bring in power from the St. Lawrence System. Given Kemptville's low power load, the town, if forced to finance singlehanded a line connecting it with Prescott, would see its rates rise to a prohibitive level. Thus, for the next seven years, an uneasy stalemate between the two protagonists left Kemptville's residents to wonder when next the milling company's decrepit power system would break down, leaving them sitting in the dark. In the interim two things happened. First, demand for its services in neighbouring communities resulted in Hydro's transmission system gradually working its way nearer Kemptville. Second, local council suddenly discovered that the milling company had never been legally entitled to distribute power in Kemptville. Now in an unassailable position, the town promptly ordered the outfit to remove its lines and then erected a system of its own. Finally, on 28 November 1921, Kemptville received energy for the first time from the provincial network, via Merrickville, only a dozen miles away. 7 The Kemptville episode revealed much about the HEPC'S attitude toward expanding into predominately rural municipalities. By not coercing Kemptville Milling into compliance with threats of expropriation, Hydro demonstrated that there were obvious limits beyond which it would not go when attempting to secure new contracts. The town's power requirements alone were insufficient to warrant the aggravation, expense, and possibly adverse publicity of expropriation proceedings. Furthermore, future extensions by Hydro in the area were not contingent on controlling the Kemptville market. As there were no other viable competitors in the immediate vicinity, the Commission could afford to bide its time until conditions were propitious for expansion.

43 Rural Power Districts

Orillia presented quite a different set of circumstances. There, the municipality itself ran a profitable and efficient hydroelectric system. Such an operation, if placed under HEPC control, could act as a readymade base for any number of rural extensions into the surrounding countryside. Unfortunately for Hydro, Orillia saw matters in a completely different light. Located on Lake Simcoe's northern shore, it had begun generating and distributing its own hydroelectricity in 1898. By April 1916, its investment in plant and equipment totalled $406,000. In addition, it planned to increase the capacity of its 1,700horsepower generating station at Swift Rapids on the Severn River to 6,000 horsepower. To allay any shortages in the interim, the town also bought 500 horsepower annually from the HEPC.8 Hydro had been attempting since 1914 to purchase the Swift Rapids facility from the Orillia Water, Light and Power Commission. Its own station on the Severn, at Big Chute, could barely meet present needs, and future expansion on the Wasdells System depended on securing additional generating capacity. But Orillia showed little inclination to negotiate a transfer, especially after it learned that Hydro had attempted to steal two of its most lucrative service contracts.9 In an attempt to break the deadlock, T.C. James, Hydro's district engineer on the Wasdells System, found a compromise which the Orillia commission agreed to place before the ratepayers in May 1916. Orillia would sell its Swift Rapids plant to Hydro for $226,000 but retain control of the distribution system. For its part, Hydro would sell to Orillia, "at cost," up to 6,000 horsepower of energy per year, at the starting price of $11.15 per horsepower. It would also be responsible for any changes to the Swift Rapids plant.I0 This offer looked attractive. The town's heavy debt load was already of some concern, and construction on the Swift Rapids expansion would add another $80,000 to $100,000. But some local residents questioned whether the financial savings would be adequate compensation for the loss of autonomy. It was noted, for instance, that Hydro provided no guarantee of how long it would continue to honour the low rate of $11.15 Per horsepower. Consequently, if for any reason power consumption among other communities on the Wasdells System declined, Orillia could expect to pay higher rates in order to cover the deficits. As the chairman of the Water, Light and Power Commission pointed out, in thirty years' time, when the final instalment of the $226,000 purchase price was collected, Orillia might discover that it had given up a tangible asset in return for a temporary rate reduction. He preferred that the town continue "paddling [its] own canoe" rather than succumb to Hydro's rhetoric about each partner municipality being an "owner" of the provincial system.11

44 Power at Cost The Orillia Packet admitted that community pride in owning a successful utility should not be dismissed lightly; nevertheless, it considered Hydro's proposal "as good a bargain as Orillia could hope to make" and urged acceptance. After all, the HEPC must be able to produce power at Swift Rapids as cheaply as Orillia had done. Nor did the loss of autonomy present a problem, for surely Hydro realized that municipalities would not "submit to centralization and bureaucratic methods," even though such an approach made for "uniformity and efficiency." An "autocratic attitude" on the part of Hydro "would be certain in rime to result in a combination which would bring about its overthrow, or at least in a change of policy."12 The by-law campaign was a subject of interest in areas well beyond the reach of the Orillia commission's power lines. In Toronto, two of Hydro's staunchest advocates also supported the proposal. The Globe could not understand why Orillia would intentionally burden itself with so much extra debt, simply to construct a generating plant with a capacity three times greater than the town's existing needs. It would be much less expensive to join with the ten or twelve other municipalities on the Wasdells System in absorbing all the power that the Swift Rapids plant could produce. The Telegram was more candid. Orillia controlled a power source that Hydro needed; if the town failed to co-operate, expropriation proceedings would be sure to follow, and justifiably so. From the Telegram's point of view, the HEPC had already demonstrated its beneficence by "giving Orillia a chance of coming into the Hydro scheme."13 The high point of the debate occurred on 17 May 1916, when Beck and Gaby addressed a capacity crowd at the Orillia armoury. Although he wisely avoided any direct references to expropriation, Beck left little doubt that Hydro would interpret a negative vote as a signal to interfere in the town's affairs. Certainly such intervention could be justified from a purely legalistic standpoint. The Power Commission Act authorized Hydro to "regulate and determine the rates to be charged [by] any municipal corporation, company or person" receiving power from the HEPC. Because the Orillia commission had a 5oo-horsepower contract with Hydro, it too fell under the act's purview.14 More ominous, Beck told his audience that Hydro suspected that some form of price discrimination was taking place in Orillia, since domestic lighting rates seemed higher there than in the neighbouring centres of Midland, Collingwood, and Barrie, which used the more expensive HEPC energy. The message was clear: Hydro would not hesitate to wield its regulatory authority if Orillia were found

45 Rural Power Districts

to be subsidizing commercial customers at the expense of domestic users. In a more conciliatory vein, Beck noted how wasteful it would be if both Orillia and the HEPC built expensive additions to their Severn River plants. Finally, in response to those who earlier had questioned how long Hydro was prepared to provide Orillia with low-cost power, Beck guaranteed the startup rate of $11.15 Per horsepower - among the lowest in Ontario - for the first five years of the contract. According to Gaby's calculations, the best rate that Orillia could achieve by continuing on its own was $17.60 per horsepower. *5 The presentation won Hydro few converts. Even Gaby's lastminute lobbying of two ratepayers' associations - using the argument that a favourable vote would save Orillia over $500,000 in thirty years - failed to help matters. On 22 May 1916, Orillia voted 517 to 79 against selling its Swift Rapids generating plant to the HEPC. The companion question, which asked whether the town should purchase its power from Hydro, was also answered negatively, by 495 to 82.l6 The Packet pointed to two factors to explain this result - local pride in the Orillia utility's accomplishments and general misunderstanding of a complex issue that had been debated to death. Given the choice between a satisfactory status quo and a new undertaking about which viewpoints varied dramatically, ratepayers had opted for the former. The Packet admitted that the decision made some sense, particularly since "what Sir Adam Beck and the Hydro Electric Commission [had] done for Ontario" was "perhaps not so well realized in Orillia as ... in towns which have had experience of private ownership. H17 Even the Globe and the Telegram accepted the fact that their advice had not been heeded. Next time, they said, the HEPC would have to present a more attractive offer. In the mean time, the Toronto dailies conceded that Orillia's strong commitment to municipal ownership was not entirely misplaced. The Water, Light and Power Commission had, after all, reduced rates three times within the previous eighteen months. It was a fine record for what the Globe called "the best lighted town in the Province" - 17,000 of Orillia's 21,000 lamps were installed in private homes, a record that Hydro would find difficult to match.18 Orillia promptly tendered the Swift Rapids expansion project. Hydro responded not with expropriation or some other form of regulatory interference but with a renewed attempt at conciliation. Eventually each party agreed to make its surplus power available to the other at only $8.00 per horsepower. Hydro also purchased the Orillia transmission line linking Swift Rapids and Big Chute, in re-

46 Power at Cost

turn for access to certain other lines controlled by the town. 19 Thus, although Orillia technically remained an independent player in the power game, its new commitments cast it further under the HEPC'S shadow. As for Hydro, its new working relationship with Orillia suggested that the town might yet be persuaded to join the provincial network, although in fact it was 1954 before that event came to pass. For the immediate future, any efforts by Hydro to promote farm electrification in the vicinity would need to be conducted in cooperation with the Orillia organization, a prospect the HEPC probably did not relish. The public power campaigns in most communities, Kemptville and Orillia included, were conducted on an "all or nothing" basis: either the municipality signed an HEPC contract, thereby making every resident a potential Hydro customer, or it spurned the offer, in which case everyone was denied the provincial service. Yet the Power Commission Act did provide an alternative means whereby individuals of non-partner municipalities could purchase energy from the HEPC. Those persons wishing a Hydro connection simply notified their local council, which forwarded a formal application to the HEPC. Hydro engineers then conducted the usual studies to determine power loads and construction costs. Once estimates were completed, council had one month in which to discuss them with the applicants. If the latter still wished to proceed, council passed a by-law - it was not necessary to consult the ratepayers - and signed an HEPC contract for the amount of electricity required. All construction and equipment costs were financed by twenty-year municipal debentures, which were repaid out of individual users' monthly bills. The contract was sufficiently open that additional customers, and ideally the municipality itself, could sign on at some future date.20 This provision appealed mostly to manufacturers who used enough power to justify the expense of building the provincial transmission system right to their doorsteps. It also allowed Hydro to slip its services into unsuspecting communities that might hitherto have shown little enthusiasm for the HEPC'S services; once the Commission had established a toehold there, it could more easily entice other individuals and businesses to come aboard. Much the same opportunity existed for any enterprising farmers living near a Hydro municipality or transmission line. Provincial legislation passed in 1911 and 1917 enabled farmers, or any resident of an unincorporated rural municipality, to ask the township council to arrange for individual service estimates from the HEPC. If the petitioners considered the terms acceptable, council signed the con-

47 Rural Power Districts

tract and issued twenty-year debentures, just as in urban municipalities, promising to reimburse Hydro monthly for all energy consumed by its residents. Even if a township refused to co-operate and two such instances will be related - it remained possible to obtain provincial power provided the applicant would assume the entire cost of the extension. Unfortunately for most rural residents, unless they lived next door to an HEPC transmission line or substation, that option remained a financial impossibility. Under these conditions, Hydro's original plan for an orderly and comprehensive network of rural transmission lines soon deteriorated into a hotchpotch of piecemeal extensions, which rarely reached beyond the most prosperous and advantageously situated districts. In a retrospective on rural electrification published in 1921, Hydro described thus the undesirable pattern of distribution that had evolved by the end of the First World War: "Service to rural consumers was confined to the ... more thickly settled roads running out of, and adjoining Hydro municipalities and power distribution centres, and it became apparent that this plan of supplying rural service was not satisfactory in that it did not permit of economically and impartially serving the general farming community throughout the Province."21 Fundamental changes clearly were in order, and in 1919 Jeffrey's Rural Rate Committee was instructed to suggest revisions to the Rural System's administrative framework. First and foremost, the committee observed that Hydro had erred by trying to centre its rural program on township boundaries which did not reflect "the character of the country served, the kind of farms to be supplied with power, and the distance of the customers from the distribution centres." Unless a framework were devised that more closely mirrored rural conditions, the existing system, if it developed at all, would eventually become impossibly complex. The committee recommended as an alternative creation of Rural Power Districts (RPDS). 22

As envisioned by the rate committee, an RPD might encompass one or more entire townships, or parts of several. The objective was to tie together areas which, because of geography, population density, consumer demand, and existing electrical facilities, presented a logical and cohesive unit. For reasons of administrative efficiency, the districts should be limited in size to approximately one hundred square miles. Many of the procedures for negotiating a Hydro contract would remain the same as in pre-RPD days. Interested residents would still petition their township council to ask the HEPC for estimates. But whereas previously only applicants' costs had been

48 Power at Cost

calculated, now a detailed survey of the entire district would be made to determine the most economical means of supplying every potential consumer in the vicinity. A Hydro engineer, after obtaining a list of farms and their assessed values from the township clerk, would determine which proprietors were most likely to be interested in signing a contract and call on them personally. From these preliminary investigations, estimates would be prepared of the cost of serving 100 per cent, 75 per cent, 50 per cent, and 25 per cent of the areas's residents. As in urban centres, rates would be based on two factors: the expense of delivering power to the RPD boundary - an amount to be shared equally by each member - and the cost of distributing the power among individual customers within the RPD. 2 3

Jeffrey's committee recommended that Hydro operate the districts itself, largely for reasons of accounting expediency. Otherwise, if an RPD encompassed sections of several townships, it would be extremely difficult to determine what percentage of the capital costs should be attributed to each township. A simpler solution was to ascribe all costs to separate RPDS and make the HEPC responsible for their administration. The committee also thought that Hydro should reserve the right to "arbitrarily fix the boundaries of each rural system." Jeffrey doubted that this method would prove contentious, since the Commission had long been deciding on its own the location of high- and low-tension distribution centres and had not encountered any local resistance of note.24 The committee tested its proposals by conducting surveys in four sparsely populated farming areas. In each case its conclusions were the same: before much of rural Ontario could take advantage of publicly owned power, rates would "have to be fixed ... on the basis of Districts and not Townships." The surveys also indicated that an average class n (Light Power) service would cost between $120 and $150 per year. Although this estimate raised some concerns that farmers might still dismiss hydroelectricity as too expensive, the committee concluded that given current costs of labour and material it would be "impossible to supply service at a lower figure."25 After Hydro gave the RPDS its stamp of approval in August 1919, the rate committee finalized details of the new scheme. It emphasized above all else the importance of considering every potential as well as confirmed power user when laying out an RPD. Jeffrey's group also decided that because Hydro intended to administer the RPDS itself - essentially acting as the townships' trustee - it should be responsible for financing all new lines, primary as well as secondary. As of September 1919, the Commission had spent $265,000

49 Rural Power Districts

on primary lines for the rural distribution system. Since the townships' share was small by comparison - only $65,000 to cover the cost of the secondary lines - Hydro decided to assume that expense as well. The committee believed that the enhanced control over the rural program provided by the transfer would be well worth the additional outlay. The HEPC also resolved to appoint its own district managers, since, as the committee lamented, it was "practically impossible to obtain competent men to operate township systems."26 Under the new dispensation, every rural customer was obligated to sign a twenty-year contract with the township - later a source of considerable discontent. Any contract made prior to establishment of the RPDS would be revised to conform with the new provisions, filed at the appropriate county registry office, and treated as a lien on the customer's property. The townships would sign blanket guarantees with the HEPC, agreeing to assume full responsibility for the Commission's expenditures and to collect any unpaid power bills. Although the practice would not be encouraged, any individuals living within an RPD who believed that they could build their own transmission lines less expensively than Hydro would be free to try, provided that they paid the entire cost. They would then purchase provincial power without joining the RPD. Hydro, however, would reserve the right to purchase these lines "at a fair value" whenever it felt the time opportune to include them in an RPD. When that moment arrived, the owners would have to sign HEPC contracts, join the local RPD, and buy their power at the going rate.27 Finally, Jeffrey's committee also recommended expanding the number of rural rate classifications from three to eight, to reflect more accurately the rural community's diverse power requirements. The three-tiered classification implemented in 1916 was no longer considered precise enough to provide an "equitable distribution of the cost."28 The committee's numerous proposals (including the eight-tiered classification - see Appendix c) became law on 4 June 1920. Although they represented a major restructuring of Hydro's rural operations, they failed to elicit much comment in either the legislature or the press. The HEPC had already set a precedent of bypassing the municipalities and serving domestic customers directly when it had created the Central Ontario System in 1916. Nor were provincial funds at greater risk than previously: the townships still guaranteed all annual operating expenses, in addition to establishing thirty-year sinking funds to cover the capital cost of Hydro's local works. Even the clause allowing the HEPC to place individual's overdue accounts on the township tax rolls - a power the Gregory Commission regarded as "extraordinary" in its 1924 report - passed largely unno-

5O Power at Cost

ticed. In short, when Lieutenant-Colonel Dougall Carmichael, a minister without portfolio and the Drury government's representative on the HEPC, told the House that the measures were "designed to make it easier for farmers and rural municipalities generally to get power," most members were happy to take him at his word. The widespread acquiescence may also have resulted from Carmichael's candid admission that the changes were unlikely to initiate any immediate expansion of the rural network. Until the present power shortage was relieved and industrial and urban needs were provided for, he doubted whether Hydro could do more than continue making preliminary rural surveys.29 The Farmers' Sun, often harshly critical of the HEPC, for once applauded the government's efforts, particularly its decision to retain "power at cost" as the guiding principle behind rural extensions. "This new system," it explained, "is to be self-supporting, as the system has been to date, without which provision it could not be the success it has been."30 The paper generally judged Hydro by a rigorous set of standards, so its willingness to portray the rural operation as a "success" in 1920 is somewhat mystifying. Within months, however, the Farmers' Sun, the HEPC, and the government itself all did an about-face on the vital issue of the financial selfsufficiency of the rural network. By empowering the HEPC to distribute energy directly to residents of RPDS, the Ontario government sanctioned yet another incursion into municipal jurisdiction. Hydro's authority to regulate the rates charged by private and municipal utilities was already firmly established. Nor had its decision to supplant local commissions in the Central Ontario System, and manage distribution there itself, created a furore. Both precedents help to explain why few objections were raised when Hydro extended its control over rural operations as well. In any case, few townships had as yet invested much time or money in rural transmission systems, and many were probably glad to be relieved of the burden. Despite the HEPC'S enhanced role, a strong element of local autonomy remained. Unless township authorities agreed to the necessary guarantees, Hydro would not erect the lines and the entire process would be subverted. Thus one intransigent township council conceivably could disrupt expansion plans in several RPDS. The Power Commission Act said only that a "corporation ... may enter into a contract with the Commission"; there could be no compulsion. As early as January 1913, members of the Freeport Farmers' Club in Waterloo Township warned Beck of the difficulties that that clause

51 Rural Power Districts

might one day create unless the wording were changed to read "shall or must enter into a contract," but their pleas were ignored.31 Several years later, when Hydro encountered obdurate councils in Lobo and Cornwall townships, those warnings were borne out. Several farmers in Lobo Township (Middlesex County) had completed wiring their homes for electricity when they petitioned their council in July 1922, to sign a contract with the HEPC. To their dismay, council refused, on the grounds that the contract would make the entire township liable for a benefit enjoyed by a few ratepayers. After a series of meetings between the two sides had failed to resolve the conflict, council recommended holding a plebiscite so that the entire electorate could rule on the question. Hydro officials quickly squelched the idea, explaining that a plebiscite would not be legally binding on subsequent councils. Council alone was authorized under the Power Commission Act to make agreements with Hydro, so it had nothing to gain by shirking its responsibilities.32 The HEPC believed that if more Lobo ratepayers appreciated fully the implications of a Hydro contract, they might persuade council to reverse itself. Dougall Carmichael encouraged John Giles Lethbridge, MLA for the Lobo area and an ardent promoter of rural electrification, to explain to his constituents that Hydro did not intend to confine the service to those currently able to sign contracts. Others could join later and still receive similar terms. Carmichael emphasized that despite a legal obligation to do so, no Hydro municipality, urban or rural, had ever been required to "make good the deficit incurred in the supply of power and energy" resulting from insufficient revenues. The strategy worked. Faced by an increasingly vocal opposition, council finally agreed to submit to the electorate a standard Hydro enabling by-law. This the ratepayers endorsed by the healthy margin of 524 to 217 on i January 1923. The HEPC had overcome the first, and as it turned out the only, obstacle to expansion of its rural program into Lobo Township. Elsewhere, success proved more elusive.33 When the council of Cornwall Township (Stormont County) rejected a similar request in 1926, there was an altogether different sequence of events. To begin with, several farmers joined together with the residents of St Andrews, a hamlet north of the town of Cornwall, and requested an HEPC service estimate. The twenty-one petitioners who found the terms acceptable next asked township council to make the necessary arrangements with Hydro. At this stage, as in Lobo, council refused on the grounds that everyone in the township should not be liable for the power contracts of a select

52 Power at Cost

few. Instead, it opened negotiations with two privately owned companies already active in Cornwall and eventually concluded an agreement with the St. Lawrence Power Co. The provincial government was then asked to pass an order-in-council - normally a routine procedure - to validate council's by-law authorizing St. Lawrence Power to erect transmission lines along the township's roads.34 The HE PC was anxious to counter this unexpected turn of events. Gaby complained to Charles A. Magrath, who had succeeded Beck as chairman the year before, that Hydro had devoted "considerable time and expense" recruiting sufficient numbers of hamlet and rural customers to justify constructing the six-mile line to St Andrews, and now a private company seemed destined to reap the benefits. Although he lacked hard evidence to substantiate his claim, Gaby believed that council had been influenced by the township clerk, a defeated Liberal candidate in the previous provincial election who was seeking revenge by attacking the HEPC. Gaby went on to warn that if the decision to support the private corporation were upheld, the township's farming community would be dealt a serious blow. Both of the private electrical companies operating in Cornwall had thus far concentrated their activities on its most densely populated areas and largely neglected the farming districts. Since that was a common practice among privately owned distributors, Gaby refused to believe that granting the St Andrews franchise to St. Lawrence Power would produce a different result. Hydro's own presence in the township was almost nonexistent - a single line serving a paper mill. Therefore, since St Andrews was the only centre of consequence in the township not tied to private interests, it assumed a significance, in the chief engineer's eyes at least, generally reserved for much larger communities. If Hydro lost this opportunity to gain a toehold in Cornwall, not only would it be left with the least lucrative sections, but serving them would require long and costly extensions from its lines in neighbouring townships.35 Surprisingly, the HEPC prevaricated. Before the government would grant the requested order-in-council it wanted a recommendation from Hydro, which was empowered to control the placement of transmission lines along public roadways. Although the Commission was initially reluctant to agree, mounting discontent among residents impatient for hydroelectricity of any kind, public or private, soon made further delay injudicious. John C. Milligan, Stormont's member in the legislative assembly, pressed fellow Conservative John R. Cooke, the Ferguson government's representative on the HEPC, to push through the order-in-council immediately. Fearing that there was a movement afoot "to stir up some feelings

53 Rural Power Districts

against the Govt. and Hydro," Milligan complained that "some of those most interested" were pressing "pretty hard." He doubted that persistent delay would in any way aid the HEPC'S cause: "The people here are not educated along Hydro lines and do not fully understand it, on the contrary they have been under a constant influence of private control."36 The Commission finally relented in August, but not before having its pound of flesh. In return for sanctioning the order-in-council, Hydro made St. Lawrence Power agree never to sell energy "at less favorable rates than the Commission contemplated doing to St. Andrews." Also, the company promised that in the event a future township council decided to support the provincial system, Hydro could buy the line at its depreciated value.37 In a brief postscript to the affair, the HEPC took its revenge the following month when the company sought cabinet approval to string its lines along roads in Osnabruck Township, immediately west of Cornwall Township. Although Osnabruck was willing, Hydro refused to bend. It had transmission lines of its own in Osnabruck, and private intruders would only jeopardize plans "to get power supplied on an economic basis."38 Hydro was not about to put at risk in Osnabruck the very position that it had fought for, and failed to win, in Cornwall. Despite the HEPC'S extensive statutory authority, its rural program could easily be thwarted by local interests. The weight of public sentiment, which worked to Hydro's advantage in Lobo, had the opposite effect in Cornwall Township, where entrenched private interests prevailed. Similarly, when municipalities such as Orillia were satisfied with their existing facilities, Hydro's promotional campaigns fell on deaf ears. Even where the provincial system was welcomed, considerations of economic expediency remained foremost. As Kemptville discovered, Hydro did not believe that its own best interests included giving service to communities unable to bear the expense. Clearly, Hydro could not earn widespread acceptance merely by presenting itself as the "people's power" and offering "service at cost." Unless individuals and local politicians believed that signing an HEPC contract entitled them to otherwise unavailable advantages, interest in the scheme faltered. It obviously was easier for Hydro to win acceptance in districts lacking alternative sources of central-station energy, which in 1920 included most of Ontario's farming community. Yet even if there was no competition, the nature of the rural power market, characterized by long transmission distances and low power loads, re-

54 Power at Cost

mained a problem in itself. This was a lesson that the HEPC learned soon after it first ventured into the rural arena in 1911. Its assiduous attention thereafter to rate structures and distribution patterns culminating in the inauguration of RPDS and the eight-class rate schedule in 1920 - removed any trace of doubt about its strong commitment to rural Ontario. Every effort was made to ensure that the rural program would be as self-supporting as its urban counterpart. But was it realistic to apply the same criterion of "power at cost" to both, when each represented quite a different set of problems? Could a province-wide program of rural electrification ever be financially self-sufficient, or would slavish adherence to a founding principle stifle the nascent program? In short, could Hydro admit that even under public ownership certain groups of customers required special privileges? Ironically, a group of dissatisfied Hydro municipalities, and not farmers, was the first to debate these questions publicly. Before it was finished, the HEPC would undergo an ideological transformation.

CHAPTER FOUR

The Uniform Rate and Rural Bonuses The most benevolent legislation ever enacted John R. Cooke in the Farmers' Sun, 12 April 1924

By the end of the Great War, certain municipalities in the HEPC'S distribution system had become disenchanted because provincial power had failed to improve significantly their economic fortunes. Of course Hydro provided them with a reasonably reliable source of energy at rates generally lower than those otherwise available. But the HEPC'S propaganda, combined with lingering frustration at their inability to compete with the larger communities comprising the "Hydro-rich" core at the western end of Lake Ontario, had led them to expect more. Many smaller towns and villages regarded hydroelectricity as the key to a new beginning. It was generally acknowledged that any community intent on attracting new businesses, as well as holding on to existing ones, needed to offer a limitless power supply at competitive rates. This belief was only partially true, however. As Hydro's lines spread throughout southwestern Ontario, the service lost its uniqueness, and availability of hydroelectricity became simply one of many factors that attracted investors to a community. Merely possessing the service was no longer deemed sufficient; its cost, relative to energy prices in neighbouring centres, was what really mattered. Although cities like Toronto, Hamilton, and London, with their expansive economic hinterlands, would remain models for many rural towns and villages, these smaller places increasingly faced a harsh reality - unless they were granted concessions on the cost of power, they would never be able to compete with their large urban cousins. The Lake Huron port of Goderich (Huron County) exemplified the problem. Ever since Goderich was established in the 18205, local promoters had searched in vain for the key to their community's lasting prosperity. But improved harbour facilities, the opening of

56 Power at Cost

the adjacent salt mines, and the arrival of two railway lines had each in turn failed to spark the long-awaited economic boom. Thus, the town's HEPC hook-up, completed in 1914, was merely the latest in a long line of panaceas. At first the power cost only $37 per horsepower, a price that Goderich believed would enhance its competitiveness in the province-wide contest to attract new businesses. More comforting still, Beck himself had promised that the town's rates would never exceed that amount. But disillusionment soon set in, for by 1918 Goderich was paying $43 per horsepower for a service fraught with interruptions. Suddenly, as the local Signal explained, the town considered itself merely "an appendage of a power system ... controlled chiefly in the interest of the large cities and the places near the source of supply at Niagara."1 The district's dissatisfaction with Hydro surfaced at a meeting of the Centre Huron Liberal Association in May 1918, when a resolution was passed advocating "a revision of the charges for power" to eliminate any discrimination against "the industrial interests of those portions of the Province situated ... at a distance from the source of power at Niagara." The Goderich Board of Trade in turn decided that this plea could best be answered by introduction of a provincewide uniform, or flat rate. The concept was controversial, but hardly novel; the uniform rate, or slightly amended versions thereof, had been proposed in various localities as an alternative to "power at cost" since 1906. The idea had also received a thorough hearing once before in Goderich itself; during the 1911 provincial election campaign it had been presented as a way to prevent local commercial interests from relocating to communities boasting cheaper energy prices. Then, as later, Beck had adamantly opposed the uniform rate. Indeed, he had warned that it would shatter Hydro's competitiveness and ultimately lead to the failure of the public power movement.2 Beck, as will be seen, would not always oppose the principle of one group of customers subsidizing rates paid by another. For the time being, however, the task of arguing that a uniform rate presented no threat to the HEPC was left to the Goderich Board of Trade's Hydro Committee, which had been formed in 1918. Based on the Niagara System, where in 1917 Hydro sold 135,000 horsepower for $2,637,606, the committee calculated that $19.53 represented the uniform rate. The argument could not be simpler; sell power to every contracting municipality at the uniform rate (it was revised to $18.50 in 1919), and Hydro would earn sufficient revenues to meet all of its financial obligations. Ninety-six municipalities with a total population of approximately 351,000 were paying more than

57 The Uniform Rate and Rural Bonuses

the recommended average of $19.53. BY contrast, only a handful of others, most notably Toronto, Niagara Falls, Dundas, Hamilton, St Catharines, and Welland, representing almost 700,000 consumers, paid between $11.00 and $14.50 per horsepower. Goderich's Hydro Committee believed that the time had come for public ownership to demonstrate its responsiveness to an unforeseen, but nonetheless unjust situation. A slight rate increase, levied against a handful of "privileged" municipalities, would open a whole new world of opportunity to the "disadvantaged" partners trapped in the HEPC'S power hinterland.3 Buoyed by professions of support from neighbouring communities, the Goderich Hydro Committee prepared to carry its message further afield. On 22 August 1919, forty delegates from fourteen western Ontario municipalities met in London and formed the Ontario Hydro Power Uniform Rate Association (OHPURA). Beck, who also attended the meeting, warned the new association of the reception it could expect from the HEPC: "If there could be such a thing as a flat rate for hydro, I would be the first one to boost for it with all my energy." He hastened to add, though, that the uniform rate was doomed because its implementation required that all 134 Hydro municipalities consent to revision of their contracts, an unlikely development under current conditions.4 In fact, the OHPURA'S influence remained largely confined to southwestern Ontario. Eastern Ontario, which was rapidly losing patience over Hydro's preoccupation with the area west of Oshawa, created a protest vehicle of its own. The Eastern Ontario Municipal Power Union, also formed in 1919, believed that the key to the east's prosperity lay in its undeveloped waterpowers. Unless hydroelectricity were generated locally, the east would remain forever dependent on the leavings of western Ontario's power market. From that perspective, the uniform rate was an issue of only peripheral concern. Concentrating its campaign in familiar territory did not save the OHPURA from several serious rebuffs. Back in March 1919, the uniform raters had been disappointed when the OMEA'S executive committee had refused to discuss the proposal, much less endorse it. More disheartening was rejection of the uniform rate by the Ontario Associated Boards of Trade in November 1919 and by the Western Ontario Associated Boards of Trade two months later. If the OHPURA had kindred spirits anywhere, surely it was within these two organizations; yet the verdicts had been unequivocal. A majority of the members of both associations had identified the uniform rate for what it was, an idealistic "quick fix" whose proponents should wake

58 Power at Cost

up to the hard facts of hydroelectric distribution: municipal power costs "must necessarily vary according to the distance power is to be transmitted, and the quantity of power used by each municipality." Besides, the inviolability of the municipalities' contracts must be respected.5 Despite these early setbacks, the OHPURA could find reason for optimism, particularly after May 1920, when E.C. Drury's FarmerLabour government appointed a legislative committee to investigate the uniform rate's feasibilty. Chaired by John G. Lethbridge (UFO, Middlesex West), a farmer openly sympathetic to the OHPURA, the committee seemed likely to give the proposal the fairest hearing possible. Although Drury earlier had met with a delegation from the OHPURA and heard its views at first hand, others also had been pressuring him to reconsider how the HEPC allocated its costs. These concerned parties wanted, if not a uniform rate, at least some movement toward a "better and more equitable system of charging." The petition sent by Downie Township Council in Perth County was fairly representative. It told of how much local residents needed and would support the provincial power network but lamented that "the prices quoted are such as to put it beyond the reach of the average user." Given the "present scarcity of farm help, and the need of farm products," the councillors urged the government "to lower the said prices or assist the municipality in securing the same for the ratepayers." Unfortunately, the petitioners from Downie neglected to specify what form this assistance should take, saying only that change was imperative.6 While the Lethbridge Committee deliberated, the real battle raged in the press. The Farmers' Sun, as unofficial leader of the pro-flat rate forces, managed to integrate agrarian sentiments into a hitherto predominantly small-town campaign. Its arguments stemmed from one startling fact - in 1919, fewer than \ per cent of the province's farms enjoyed central-station electric service. Surely here was all the evidence necessary to prove that the HEPC, for all its repeated tinkering with rate schedules and distribution strategies, had done little to offset the dual problems of long transmission distances and low customer loads that characterized most rural extensions.7 The farmers' Sun believed not only that a uniform rate offered the surest way around these obstacles but that its use in publicly owned enterprises had many commonly accepted precedents. For example, the same amount of postage was required to send a letter across the country or across the street. Likewise, Toronto's streetcar fares were as much "to ride from Bay Street to Yonge Street, as from the Don

59 The Uniform Rate and Rural Bonuses

to the Humber River." Even within the Hydro network itself, obvious contradictions could be found if one compared rates on the basis of transmission distances alone. Toronto, for instance, paid only $14.50 per horsepower, whereas centres nearer Niagara Falls, such as Weston and Princeton, paid significantly more, $30.00 and $65.96 per horsepower respectively. What the paper conveniently neglected to mention, of course, was that in the determination of power costs, more than just the distance that the electricity was transmitted had to be taken into account; consumer densities and load needed to be included in the equation as well. Nevertheless, the Sun and its many like-minded contemporaries throughout southwestern Ontario never hesitated to arrive at the same ominous conclusion: "If the discriminating rates being assessed the smaller municipalities continued ... a decline in hydro usage and a consequent general rate increase in the system would force the abandonment of the entire public power scheme."8 Opponents of the uniform rate were equally forthright. Central to their campaign was a pamphlet circulated by the OMEA warning the public that the flat rate was not only impracticable "but would be a distinct encroachment on, and violation of, the rights of the Municipalities." Its author was T.J. Hannigan, the OMEA'S secretarytreasurer from 1914 to 1940. Hannigan, a tobacco grower and Guelph alderman, would be instrumental in promoting the association's views on Hydro's rural program throughout the 19203 and 19303. He had been actively opposing the uniform rate ever since Goderich's Hydro Committee first raised it almost two years earlier. Hannigan thought it fallacious to suggest that a postal service with recurring deficits represented a suitable model for hydroelectric distribution - after all, mail travelled both ways, power but one. Furthermore, postage rates for parcels, far from being uniform, took into consideration weight as well as distance. Finally, a uniform rate, besides "destroying vested interests secured by municipal credit," would be impossible to regulate. If all individuals or communities, regardless of location or level of power consumption, became eligible to receive the provincial "juice" at the same price, distribution costs would escalate uncontrollably and eventually force up the uniform rate as well. Once that happened, the only beneficiaries would be private companies vying for the HEPC'S business. Therefore, rather than adopting a proposal considered "radical" even by its advocates, Hannigan urged retention of "power at cost," under which "even those Municipalities ... paying the highest rate" were "getting power and light at a price not dreamed of a few years ago." Allow the free

60 Power at Cost

market and Hydro's attractive rate schedules to operate unimpeded, Hannigan maintained, and everyone eventually would enjoy lower energy costs.9 The Globe shared the OMEA'S cautious outlook and stressed that Hydro's finances were so delicately balanced that even the slightest movement toward a uniform rate would bring "public ownership crashing down into bankruptcy." In all fairness to Hydro's partner municipalities, the existing method of charging must be retained. If, however, Drury were resolute that some form of action be taken, the Globe recommended what it considered a sensible alternative: "Let him frankly bonus pole lines where there are so few consumers that the lines cannot be provided on business principles. That would be more straightforward and equitable than to wrest the control of the Hydro-electric system from the municipalities."10 The HE PC itself, while offering no immediate comment on the bonusing proposal, made clear its disdain for the flat rate. In a letter to the HydroElectric Railway Association of Ontario, Gaby pointed out, without being specific, that there were obvious limits beyond which Hydro simply could not distribute power on a commercially viable basis. This was a fact that uniform raters resolutely ignored. If the flat rate were introduced, Gaby warned, the entire Hydro system would be "revolutionized"; municipal ownership would succumb to provincial ownership, and Hydro would become just another government department.11 In the report that it tabled on 30 November 1920, the Lethbridge Committee unambiguously dismissed the uniform rate as "neither practicable nor advisable." The committee agreed with the OHPURA that changes were needed "to lessen the burden of providing the small urban centres and rural districts with Hydro-Electric Service" but suggested instead imposition of a $2-per-horsepower rental on all hydroelectricity generated in the province. Based on the approximately one million horsepower produced in Ontario by private and public interests, revenues of almost $2 million annually could thereby be made available "to assist and to encourage agricultural districts" where the price of power was "unduly high" to use "electric light and power in the home and upon the farm." Municipalities paying above $30 per horsepower would be exempted from the $2 tax and eligible for a special rate-subsidy equal to 50 per cent of their costs in excess of $30 per horsepower. The committee also recommended that as much as 50 per cent of the power rental be used to finance up to 80 per cent of the construction costs of rural transmission lines, wherever there was an average of at least three customers per mile of line. This latter proposal seemed particularly

61 The Uniform Rate and Rural Bonuses

promising, since $1 million was enough "to meet the annual charge upon the cost of construction for 12,000 miles of rural lines."12 If it signalled the end of the OHPURA, the Lethbridge Report also marked the official beginning of debate on a more fundamental question - whether Hydro should deviate from its rigid adherence to "power at cost." Many of the arguments used earlier concerning the uniform rate were again cited as evidence for or against the $2 tax, but this time the issue cut to the core of the public power philosophy. The OMEA was among the first to react. It passed a resolution at its annual meeting in February 1921 supporting the principle of provincial aid for rural electrification, but not to the extent proposed by the Lethbridge Committee. The OMEA, without suggesting an alternative figure, predicted that the $2 tax would actually be closer to $10 per horsepower for the remaining municipalities, once customers with long-term, fixed-rate contracts were exempted. The delegate from Tara in Bruce County - where Hydro rates had recently jumped to $87 per horsepower from $37 - insisted that support for the measure had not been so unanimous as the OMEA suggested. He had left the meeting in disgust over the association's eagerness to protect "long term contracts at Flat Rate with Big Power Users." By contrast, when "the Little Fellows" wanted similar treatment, this was "termed a most vicious principle calculated to wreck the Hydro Enterprise."13 Those who joined the OMEA in opposing the Lethbridge proposals were agreed that any benefits that the farming community might reap from the $2 tax would be minor compared to the disadvantages it would cause elsewhere. Most critics of the tax feared that it would destroy the competitiveness of many municipalities engaged in the continent-wide rivalry to attract new businesses. The Hamilton Chamber of Commerce was especially vocal. It suggested that if Ontario's industries were deprived of the slight edge that low energy rates gave them over their competitors in the northern United States, farmers also would suffer, since they depended on industrial workers for their markets. The rationale was clear: "Cheap electric power in a man's home or on the farm" would be of little avail if the industrial restrictions were "such as to deprive the industrial worker of his job and, therefore, the farmer of his market."14 J.W. Lyon, president of the Hydro-Electric Radial Railway Association, regarded the tax as "class legislation" and fiercely resented the attempt to assist rural districts "at the expense of the municipalities who put up the money and took the risk." The Toronto Telegram concurred. By all means, it said, extend the "blessings" of hydroelectricity into rural Ontario, but do it "without scrapping contracts or plundering

62 Power at Cost the Hydro municipalities." The Telegram thought it best that free market forces prevail and that farmers obtain power in the same fashion as everyone else, that is, "at their own risk and at their own expense." Jeffrey, meanwhile, added an unofficial HEPC response to the litany of complaints. Characteristically terse, he said only that the committee's proposed tax was a "misinterpretation [of] Beck's original suggestion that there should be some nominal charge in such connection."15 Urban opposition to the Lethbridge proposals, if widespread, was not unanimous. One high-profile supporter of the committee was P.W. Ellis, a wholesale jeweller and pioneer of the public power movement, who also was chairing the Toronto Hydro-Electric Commission in 1921. The fact that a $2-per-horsepower tax would cost Toronto's approximately 82,000 power consumers an additional $96,000 annually bothered him little. That amount, divided among so many individual bills, would be barely detectable, and Ellis was confident, perhaps naively so, that Toronto's manufacturers were willing to "hold up both hands" to assist farmers in securing all the benefits that urban residents enjoyed.16 It was the Farmers' Sun that was again the most outspoken. Over and over it insisted that the proposed Lethbridge tax had "a large element of justice behind it," particularly since small municipalities and farming communities would finally be accorded the special consideration they deserved. Elsewhere on the paper's editorial pages others argued that if, as the HEPC claimed, the transition from coal to hydroelectricity had reduced manufacturers' energy costs by $20 per horsepower, then a rental of one-tenth that amount could hardly be considered an "unjust and impartial imposition." Drury, as he had done over uniform rates, straddled the fence. Having raised the hopes of the rural community by appointing the Lethbridge Committee, he now found that its recommendations presented a ticklish political problem. To accept the report outright would be to ignore the convincing criticisms being raised by its urban critics; conversely, to reject the proposals was to risk alienating his vital rural constituency. Lacking a safe route through the morass, Drury attempted to divert the attention of the pro-Lethbridge crowd toward the rest of his government's legislative platform. Consequently, in the January 1921 Speech from the Throne, where such pressing rural concerns as credit and education were made a top priority, the Lethbridge recommendations were passed over with a vague promise "to facilitate the extension of Hydro-Electric service to rural Ontario and at less cost than at present."17

63 The Uniform Rate and Rural Bonuses

This was too inconclusive for Beck, who soon afterward sent the premier a copy of a formletter the HEPC had recently begun sending out to any rural municipalities that requested service estimates. The letter explained the impossibility of providing reliable quotations until the government decided what form the rural assistance currently under discussion would take. In the interim, it concluded, the HEPC was "loathe [sic] to expend the money of the Province in making further surveys and preparing estimates." This was a blatant attempt by Beck to force Drury's hand, for the letter Hydro was circulating would hardly endear the government to a rural electorate convinced that it already had waited far too long for its rightful share of provincial hydroelectricity. Meanwhile, Beck had found his own answer to the government's political dilemma, which he announced in March 1921. If the government would authorize an annual withdrawal by Hydro from provincial coffers of $250,000 to be placed toward one-third of the construction costs of rural transmission lines, Hydro would make the rural electrification problem disappear.l8 Beck had advocated a similar form of financial assistance in the past, but in 1921 the timing was propitious. A provincial grant offered concessions to both sides - rural residents would receive the assistance they needed, yet the financing would not come from the pockets of Hydro's urban customers alone. J.R. Cooke, the Lethbridge Committee's secretary, found Beck's idea "pleasing," although the amount of relief proposed fell far short of the So-percent bonus originally recommended. Using Beck's estimate that the one-third grant would enable between 500 and 700 miles of transmission lines to be built annually, Cooke calculated that it would take almost seventy years to provide the $35 million and the 35,000 miles of line thought necessary to achieve an acceptable level of service. The Toronto World promptly castigated Cooke for placing unreasonable demands on Hydro. In its view, practically any policy expedient was preferable to the $2 tax. Accordingly, it was willing to see a provincial subsidy in excess of the quarter-million dollars proposed, if this were found to be necessary.19 Naturally, the Hydro chairman's brazen interference incensed the Farmers' Sun. Emblazoned across the front page of its 5 March 1921 edition was the headline "Does Beck Dictate the Power Policy of the Government?" In one afternoon, the paper claimed, Beck had negated several months of lobbying and agitation by the pro-Lethbridge forces. "Why," it wailed, "is Beck always consulted, always referred to, always allowed the last word? Does the Government regard him as its master? Are they committed to autocracy? Are we

64 Power at Cost to infer that Beck can swing the Big Stick and our Government trembles?" Hydro commissioner Dougall Carmichael (UFO, Grey Centre) was also criticized harshly for not doing more "to present the rural phase of the question." Unless the government soon got "more co-operation" from the HEPC, the Sun advised, a housecleaning would be in order and men appointed who understood "the rural viewpoint." Prompt action was required to salvage the Lethbridge recommendations. The Sun contended that even a $i-perhorsepower tax would be preferable to none at all; what mattered was that the general principle be retained and acted on immediately.20 Recognizing that all hope for concessions could easily be "throttled by interests unfriendly to the Farmers and the Farmers' Movement," the paper entreated UFO clubs across the province to begin immediately to pressure their local MLAS into supporting the Lethbridge recommendations. Within days of this call, UFO directors from every provincial riding assembled in Toronto, but a meeting with Drury and Carmichael proved fruitless. The premier insisted that there were many "difficulties" inherent in the Lethbridge Report but offered no hint as to how, or even if, his government planned to deal with them.21 Increasingly it appeared that Beck's bonus would win the day. A prescient Howard Ferguson told a constituent late in March 1921 that Drury's refusal "to take responsibility for putting a one dollar tax on the power users" meant that his government could probably be forced into providing a "special grant of a substantial sum" to be used for rural extensions. A few days later, the Globe strongly endorsed financing rural electrification from government revenues but stipulated that "the grants should be recognized frankly as bonuses" and restricted to districts "which otherwise would be unable to obtain Hydro power at any price." Sensing that its cause was lost, the Farmers' Sun tried to postpone a final decision. The paper warned that the government would be "courting disaster" if it "put into effect a bonusing system." Rather than adopting a "half-baked measure" that would "in no way solve the problem," the Farmers' Sun recommended further consideration of the matter.22 Earlier in the dispute, the Farmers' Sun had boasted that it was "probably in closer touch with the crystallized thoughts of the Province as a whole, than any individual member of the Legislature or even member of the Cabinet." Drury obviously thought differently, for on 30 April 1921 his government introduced Bill 262, An Act to Make More Equal Provision for the Cost of Hydro-Electric Power in Ontario. The legislation established precisely that which the Farmers'

65 The Uniform Rate and Rural Bonuses

Sun vigorously opposed, a Hydro-Electric Power Extension Fund. The fund, comprised of revenues from the province's waterpower rentals, and any additional sums the legislature chose to vote it, would be used to finance up to 50 per cent of the annual construction and maintenance charges on HEPC lines erected within RPDS. Drury was convinced that the bonus would solve the rural distribution problems that Jeffrey's engineering staff and rate committee had long struggled to overcome. The benefits would be extensive. He anticipated dozens of small towns and villages throughout the power hinterland becoming the nucleus of their own distribution networks. As the lines reached into neighbouring farming districts, gradually augmenting the RPD'S total load, every customer would benefit from the resulting lower rates. Farmers would finally be able to enjoy conveniences hitherto monopolized by urban dwellers, while rural municipalities would be placed on "something like an equal footing with the larger centres."23 Reactions to Bill 262 were many and varied. Both the Globe and the Toronto Daily Star applauded the measure, although the latter felt that the bonus should be retroactive to assist farmers struggling to pay for HEPC lines already constructed. The Star confidently predicted that, this shortcoming aside, the bonus, by saving every farmer between $200 and $250, would soon "produce applications for as many miles of line as the Hydro can construct in any one year." The Toronto Telegram, by contrast, found the 50-per-cent bonus excessive and inequitable. It criticized the government for making every provincial taxpayer, including countless thousands in isolated areas who would never benefit from an HEPC hook-up, responsible for "giving a privileged few farmers a service below cost." For its part, an exasperated Farmers' Sun dismissed the bonus system as "a sop to rural Ontario" and complained that the aid it provided was much less than that recommended by the Lethbridge Committee. Furthermore, the legislation in no way compelled Hydro to recommend that the government issue the bonus. The self-styled voice of rural Ontario, fearing the worst, remained sceptical of Beck's motives. "Can the man who has worked against rural extensions for a dozen years," it asked, "become a friend of farmers over night?"24 The attack on the Hydro chairman was unfair. Beck had never purposely hindered the progress of rural extensions and in fact had done quite the opposite. Yet he was responsible for the well-being of the entire Hydro organization and not just one small department, a situation that made it easy for his critics to portray him as catering to urban needs and neglecting rural and agrarian interests. In reality he was a believer in rural electrification, albeit on his own financial

66 Power at Cost

terms. To demonstrate his wholehearted support of the new bonuses, commonly referred to as grants-in-aid, Beck commenced stumping the countryside only days after the legislation passed on 30 April and encouraged farmers and township officials to take advantage of the new-found savings. He certainly was under no pressure to drum up business; Hydro's staff had interviewed an estimated 23,000 prospective rural customers during 1920, so there already existed a large backlog of applicants. In an address to London-area farmers on 9 May, Beck denied that cities that had joined the Hydro network in earlier years and benefited from lower construction costs were now obliged to support newcomers by paying a horsepower tax. He challenged in particular "all this harping in the Farmers' Sun about nothing being done to give the farmers power." He had dealt with farmers for twenty years and believed that they had "too much respect for themselves to want to be spoonfed at someone else's expense."25 His Commission had worked out the solution to an enduring problem, and the government had seen fit to implement it. In Beck's uncompromising opinion, the debate was over. Many details remained to be settled over the next few months. The first and most important decision concerned the actual size of the province's contribution. After comparing the implications, financial as well as political, of paying 33.3 per cent and 40 per cent of construction costs for all primary transmission lines, the government and Hydro agreed in early June 1921 that a 5o-per-cent grant was manageable. The issue of retroactivity raised by the Daily Star was also settled when the government agreed to extend the ^o-percent provision to all rural lines built prior to i June 1921, the date the bonusing legislation took effect.26 Jeffrey's Rural Rate Committee also considered granting each customer 150 feet of free secondary line as an added incentive. But this idea was soon abandoned as potentially divisive, since some farmers would need less than 150 feet of connecting line and others substantially more. Further deliberations were also required to determine how the grant should be apportioned when the same transmission line served urban as well as rural customers or in the event rural lines originally constructed by private interests subsequently passed under HEPC control. In the midst of all the uncertainties, Beck made one point abundantly clear: grants-in-aid applied to initial capital investment only and marked the full extent of governmental participation in Hydro's rural system. Sole responsibility for financing the operation, maintenance, and administration of any bonused lines remained localized, with the individual RPDS. More-

67 The Uniform Rate and Rural Bonuses

over, each district was expected to establish funds for renewals, obsolescence, and contingencies capable of covering the entire cost of its lines and equipment.27 In early October 1921, Hydro began erecting the first group of bonused lines - 175 miles of transmission lines costing $220,000 to deliver 2,348 horsepower to 1,065 new customers. Although slightly over half of the consumers lived in Saltfleet Township (Wentworth County), the rest were spread over eleven townships between Windsor and Ottawa. The HEPC simultaneously embarked on one of its most ambitious canvassing campaigns to date. Fifteen engineers traversed the province, each conducting up to twenty meetings monthly. In the first four months alone, they closed almost 2,400 rural contracts in thirty-eight townships. It was an encouraging beginning, and the engineers reported that even these results would be surpassed the following summer, once farmers understood fully the benefits of the scheme.28 Neither the engineering staff's enthusiasm, nor Beck's insistence that further debate on the Lethbridge proposals was pointless, dissuaded the Farmers' Sun from pouring forth a barrage of criticism throughout 1922. Its campaign showed that the wounds suffered during the uniform rate campaign continued to fester. Also, Hydro's own actions in this period were provocative. The Commission had begun vigorously promoting the grants-in-aid before it had adequate material or human resources to build the required lines. By signing new customers to a service contract, and then failing to build the lines immediately, Hydro needlessly raised and then deflated the expectations of a large segment of the rural community. After so much delay, many rural inhabitants naturally became sceptical about Hydro's ability, or even willingness, to deliver on its promises. Whenever negotiations over a power contract bogged down, or construction crews fell behind schedule, people automatically expected the worst. Given the slow progress of rural electrification, any announcement of improved Hydro service in urban areas was seen by the Farmers' Sun as confirmation of a conspiracy to develop Ontario's cities at the farmers' expense. In 1922, when the city of Toronto installed new high-wattage street lights downtown, the paper's response was predictable - it complained of the "thousand candle-power lights for Toronto's Great White Way," while on the farm "the coal oil lamp or the tallow dip" prevailed. Consequently, when a severe sleet storm in April 1922 downed power lines across southwestern Ontario, leaving many urban centres without electricity for several days, the Sun could barely contain its glee. It took particular pleasure in

68 Power at Cost

mocking reports by urban newspapers of the "Stygian darkness [where] just the weird rays of candles and coal-oil lamps cast their flickering light throughout the city." Similar descriptions, it told a readership that hardly needed the reminder, "can be applied to the country all the time."29 The lagging pace of rural extensions was also presented as irrefutable proof of the necessity of appointing a minister of power. The idea that Hydro should be more closely tied to the provincial cabinet was another holdover from the Lethbridge recommendations and continued to resurface intermittently over the next few decades. Regardless of "the wheezy wails of the Grit organ ... and the outbursts of the 'Yellowgram'," the Farmers' Sun insisted that "Power is no more sacred than is Agriculture or Education or Mines or Timber" and that these had not become "political footballs" under responsible ministers. Indeed, given Beck's repeated reliance on the OMEA to "enforce his demands," Hydro was "more in politics under the present system than it would be under a responsible Minister of the Crown." Failing creation of a ministry, argued the Sun, the government should at least ensure that agricultural interests received stronger representation on the HEPC. Dougall Carmichael happened to be a farmer, but his primary function on the Commission was as the government's representative. If the party in power changed, he would certainly be replaced. Therefore it was imperative to appoint a "capable farmer" who understood agrarian power requirements but was immune to party political upheaval. The Sun feared that so long as "city men" dominated the Commission, rural electrification would continue at its present slow pace.30 If the Sun mellowed at all, it was over its interpretation of the uniform rate. In March 1922, it still endorsed complete equalization of rates as the only way to redress rural Ontario's "raw deal" over energy pricing. By August, however, the paper conceded that an "absolute uniformity of rates all over the Province" was perhaps unrealistic. It now was prepared to accept as an alternative "some plan of fixing rates by zones." This procedure, even when adopted by large urban centres like Toronto, had never been judged "inconsistent with the principle of 'service at cost'." Consequently, the Sun believed that this method should not be prohibited in rural areas either. Whatever the course ultimately adopted, the paper remained adamant that practically any measure was preferable to a grant-inaid.31 The Sun was also anxious not to appear as the sole opposition voice. Beck repeatedly denied the existence of "any friction between country folk and the Hydro," except in what he regarded as the

69 The Uniform Rate and Rural Bonuses

reactionary and quite unrepresentative columns of the Sun. Hence the paper derived considerable satisfaction in reporting the disparaging viewpoints of its rural colleagues. Hydro's "iniquitous policy of rate-fixing," which the Wingham Times found so offensive, was condemned by the Blyth Standard for "bleeding white the country sections of the province to the benefit of the larger centres." The Goderich Signal, much as it had done during the heyday of the flatrate campaign, continued to rail against Hydro for building up a few large centres to the detriment of virtually every other community. A more positive scenario was put forward by the Alliston Herald, which predicted that one day the inequities would result in revolutionary reappraisal of Hydro's distribution and costing procedures. Eventually, as growing numbers of manufacturers cancelled their HEPC contracts in favour of more affordable alternatives, a higher proportion of the network's costs would be diverted onto domestic "lighting" customers. Only then, according to the Herald, would people awaken to "the gross inequalities of the Hydro administration in dealing with the small towns and country hamlets."32 The Farmers' Sun had other allies as well. Several rural MLAS continued to promote the uniform rate in the legislature, and the UFO, at its December 1922 convention, remained firmly committed to the $2 horsepower tax. Clearly Drury had failed to placate much of his party's rank and file with the grants-in-aid compromise. Concerns over rural depopulation, and the social and economic pitfalls awaiting unsuspecting countryfolk who wandered into large cities, had always been a central concern of the UFO. Now more than ever before the organization identified Hydro's "power at cost" philosophy as a "gross injustice" to the smaller municipalities and farming community and a major contributor to the rural exodus. As a result, the convention advocated several sweeping reforms. It backed especially the Farmers' Sun in urging creation of a power ministry to control and operate all generating stations and transmission lines in Ontario. The message was unequivocal: not until the province's waterpower resources were entrusted to a body truly responsive to the wishes of the public - unlike Adam Beck's HEPC - would rural Ontario's power needs be fulfilled.33 Although the Farmers' Sun and its supporters acted as if the grantsin-aid were still negotiable, the HEPC was adamant that the bonus decision was final and represented precisely the boost long needed by the rural electrification program. The immediate results appeared to substantiate the claim. Between i June 1921 and 31 October 1923 (Hydro's fiscal year-end), the Commission approved 753 miles of

70 Power at Cost

rural primary extensions, whereas only 305.5 miles had been completed in the preceding ten years. During the same period, expenditures on the Rural System reached $1,607,113, more than triple the amount of pre-bonus days. The government grants, including retroactive payments, totalled $622,264, a significant burden lifted from the shoulders of rural power users. Altogether, the number of rural customers, farm and hamlet, grew from 8,769 to 14,010.34 The primary-line bonus had not been in existence a year when the OMEA proposed extending it to include secondary transmission lines as well. At its annual meeting in March 1922, the association endorsed the 1921 bonusing legislation but agreed that, since it did not "give as much assistance as seems desirable under present conditions," a secondary bonus was also in order.35 Dougall Carmichael instructed Hydro to determine how much extra the proposal would cost the government, but he clearly was not enthralled by the prospects. As it would be some time before the full cost of the primary bonus was known, he feared that the added responsibility might prove "too burdensome on the finances of the Province." As a farmer, Carmichael naturally agreed with the intent of the measure, but he also urged the OMEA to understand that "governments, at the present time, must be very careful of their expenditures."36 T.J. Hannigan, the OMEA'S extremely forceful spokesperson on this as on so many other issues, was adamant. He acknowledged the importance of restraint but insisted that the added bonuses were "an investment in Ontario's prosperity which would pay extremely large dividends in making conditions in the rural sections much better." Nor did Hannigan attempt to disguise his impatience with the Hydro commissioners' hesitancy to support the OMEA on this matter. He went so far as to argue that because a secondary-line bonus would be an "advantage to Ontario," responsibility for studying the matter rested with Queen's Park, not the HEPC.37 The OMEA carried its campaign into 1923 when it publicized its resolutions and lobbied government officials. Occasionally an opposition member was moved to raise the issue in the legislature and to castigate the Farmer-Labour alliance for deserting its rural constituency. Major A.C. Lewis (Cons., Toronto Northwest) even suggested that the money being spent on the Gregory Commission's investigation into HEPC financial practices "could have been well spent in building and sustaining secondary lines."38 In any event, Drury still had not acted on the matter when G. Howard Ferguson's Conservatives bumped his party from office on election day, 25 June 1923. Ferguson, whose involvement with the HEPC and rural electrification extended back to 1912, was finally in a position to examine

71 The Uniform Rate and Rural Bonuses

and probe the public commission at will. Suddenly everything, including the primary-line bonus, was subject to re-evaluation. Thus, one of the first tasks for J.R. Cooke, Ferguson's newly appointed Hydro commissioner and replacement for Carmichael, was to study the financial repercussions of doubling the primary-line bonus to 100 per cent. What he found looked encouraging; judging from the pace of rural extensions since 1921, the additional drain on provincial coffers would be approximately $180,000 annually. Cooke believed that any program that enabled farmers to secure hydroelectric service for $5 or $6 per month, and cost the public no more than $300,000 a year, represented "a wonderfully attractive policy for any Government to put in force."39 Cooke's initial enthusiasm notwithstanding, the bill he tabled in the legislative assembly in late March 1924 was a surprising repudiation of the proposed loo-per-cent primary-line grant-in-aid. Instead, it reinstated the original proposal to bonus secondary lines, transformers, and any other equipment necessary for linking a customer's buildings with the primary line at the road. After comparing the respective costs, the Ferguson government had made the most politic choice. The average price per mile of secondary line was only $800, compared to $1,200 for a mile of primary line. The government could therefore pay half the cost of each and receive a bill for only $1,000. Introducing the loo-per-cent primary bonus would have cost the government an additional $200 for every mile of line completed and would have left it open to subsequent entreaties for a bonus on secondary lines. According to Ferguson, the bill meant that the province would henceforth be paying between 75 and 80 per cent of Hydro's costs for rural electrification. As a result, most farmers using "an average amount" of electricity for power and lighting purposes would pay approximately $8 per month.40 The debate in the legislature was, according to the Farmers' Sun, "rather unique." Without any substantive issues separating them on this legislation, the Conservatives and the UFO merely squabbled over which party deserved credit for the initial bonusing provisions passed three years earlier. The only opponent of note to the bill was J.G. Lethbridge, who continued to abide by the now rather threadbare recommendations of his committee's 1920 report. He contended that so long as the bonus was drawn from the province's Consolidated Revenue Fund, many taxpayers who would never be able to benefit from electricity because of geographic location were being forced to support those who could.41 The high point of the debate came when Cooke acknowledged that the HEPC'S founding principle was but a shibboleth. Declaring that there was "no such thing as 'power at cost'," he explained that

72 Power at Cost

Hydro's tax exemptions and low water rentals reduced the true cost of hydroelectricity to urban consumers by between two and three million dollars annually. This saving alone, Cooke maintained, justified the rural construction grants. While not wishing to intimate that the HEPC had made a practice of bonusing, Cooke did "want to place before the House forcibly that in the past manufacturers, urban dwellers, and customers of Hydro generally have been the beneficiaries of some of the most benevolent legislation ever enacted in regard to a public utility ... in the civilized world."42 The 1924 bill, which became law on 15 April, inaugurated the third phase of Hydro's rural electrification program. Before 1915, emphasis had been on the farming community alone. Thereafter the focus had shifted to include the power loads of neighbouring municipalities as well. Now the HEPC, in concert with the Drury and Ferguson governments, had accepted the fact that a province-wide network of rural transmission lines would remain a pipe-dream so long as the principle of "power at cost" prevailed. By passing half of the construction costs of rural primary and secondary lines onto the province's taxpayers, Hydro and Queen's Park had for the first time abandoned that hitherto sacred principle. Hydro nevertheless continued to portray itself at home and abroad as a utility dedicated to selling energy at cost. For years to come, its critics would repeatedly point to the government bonuses as proof that public ownership was not nearly as efficient as Hydro's propagandists claimed. But the Commission had a stock answer ready: all customers, urban as well as rural, paid their respective share of the network's costs; the fact that the provincial government chose to reduce the portion attributable to rural users was purely incidental. The issue of uniform rates, meanwhile, was far from dead. It would reappear intermittently over the ensuing two decades, at times with a fervour equalling that of the period 1919-21. But a more immediate concern was whether the grants-in-aid would at last produce the boom in rural electrification that Hydro had been trying to stimulate for fifteen years. It was unclear at first how liberally the Commission might interpret the bonusing legislation. Would it disperse the grants willingly among private distributors better positioned than itself to serve particular rural districts? Or would Hydro hoard the funds, using them to consolidate its own hold on Ontario's rural power market? Now more than ever the HEPC was well placed to regulate its competitors. The bonuses, together with Hydro's already impressive arsenal of legislated powers, represented a forceful combination. Given its many advantages, the provincial commission

73 The Uniform Rate and Rural Bonuses

certainly could afford to be beneficent toward entrepreneurs who were vying for their own small share of the rural electrical market. Whether or not Hydro would actually respond thus remained to be seen.

CHAPTER FIVE

Consolidating the Rural Network A hard proposition to understand Wingham Times, cited in the Farmers' Sun, 11 April 1922

More than a decade after the HEPC had first investigated in 1911 the possibility of including farm and hamlet customers in its distribution system, southern Ontario's rural power market remained largely undeveloped. Nor had the HEPC made clear the extent to which it intended to share this market with privately owned power companies. Since its competitors for the rural clientele were neither many nor mighty, Hydro had been able to concentrate on designing its own rural program without worrying about losing valuable ground to aggressive rivals. Yet the dearth of truly threatening competition did not produce complacency in the Commission. Rather, Hydro's efforts to consolidate its rural program during the later half of the 19203 revealed that it was prepared to countenance little opposition, even though its eventual dominance of the rural power market already seemed assured. The bonusing legislation of 1921 and 1924 had strengthened the HEPC'S hand in rural electrification. The grants-in-aid were applicable only in RPDS, which of course Hydro controlled. In addition, a recommendation from the provincial commission was required before the government would issue the funds. No provision whatever had been made for assisting non-HEPC interests, whether private or municipal, involved in rural electrification schemes. William H. Casselman, UFO member for Dundas, brought this omission to the legislature's attention in 1921 during the debate over Bill 262, but to no avail. In his opinion, farmers who built their own lines and purchased power from a private company should also qualify for the bonus, but Dougall Carmichael dismissed the suggestion out of hand. The government's intent, the minister explained, was to provide assistance to co-operatives or municipal distribution systems where power was supplied at cost. Any enterprises perceived as operating for gain were definitely excluded.1

75 Consolidating the Rural Network

When a group of Halton County farmers applied for the 50-percent construction bonus in 1922, Hydro and the government were forced to reconsider this matter of eligibility. The line in question ran 4.5 miles between the villages of Palermo and Bronte and tied into Bronte's distribution system, which purchased energy from the privately owned Cataract Power Co. The farmers contended that their line qualified for the grant because it had been built solely for service, not profit. Drury himself believed that in such instances the legislation should be interpreted liberally. Accordingly, he advised Carmichael that "if a clear line of demarcation could be drawn between lines operated for profit and lines operated for service only, the part of wisdom, if we have for our object the use of electricity throughout the rural districts, would be to allow Government aid on such lines so built." But R.T. Jeffrey, the consummate bureaucrat, thought otherwise: the regulations clearly outlined the procedures to be followed. Before a farmers' co-operative built a transmission line, it had to sign a contract with the local township, which in turn had to secure the necessary power supply from the HEPC. The cooperative also had to agree to levy rates sufficient to cover the various charges prescribed by the Power Commission Act. Only then, once the co-operative was essentially an adjunct of the provincial system, could a grant be approved. In the Halton case the petitioners refused to comply with these conditions, and the bonus was denied.2 The grants-in-aid also gave Hydro a new weapon to use against recalcitrant independent distributors, as exemplified by events in Ancaster Township. Located in Wentworth County, this township had been purchasing and distributing HEPC power since 1919 in the same manner as many urban municipalities. Early in 1924 it asked that the 50-per-cent grant be applied to its rural lines. The request was denied when Ancaster refused to form itself into an RPD and use Hydro's rate schedule. A second application followed two years later, but this time Hydro ordered the township first to join the neighbouring Dundas RPD. The HEPC believed that its demands were reasonable, since amalgamation would permit a general lowering of rates, a more ambitious program of extensions, and the hiring of experienced personnel. Perhaps most satisfying of all, the merger would compel Ancaster to abide by Hydro's rate schedule. Technically, because it was a purchaser of HEPC power, Ancaster's rates were already subject to Hydro's approval, but the township had long made a practice of charging whatever it pleased. In the past, Hydro had turned a blind eye, apparently not thinking the situation serious enough to risk public confrontation. Now that the grant-in-aid was involved, Jeffrey seized the opportunity for revenge. "It is quite evident," he told his superiors, "that Ancaster

76 Power at Cost

Township Council wish to obtain the benefits of the Government bonus, while they are not prepared to carry out conditions intended in the Act passed." The Commission agreed and sent an unmistakeable message to all independent distributors seeking assistance: play by Hydro's rules or be refused bonuses. In the short run, however, Ancaster refused to co-operate and did not join an RPD until the 19305.3 In the mean time, the legislature had been forced to reconsider whether limiting the bonuses to HEPC-sponsored lines might not ultimately retard the objective of widespread rural electrification. Shortly after the primary-line legislation passed in 1921, John M. Deagle, whose small power company at Cataract had been supplying farmers since 1899, applied for and was denied a grant to cover 50 per cent of the cost of his most recent rural extension. There was no denying the viability of his proposition; Hydro itself had recently considered serving the area, but its best offer was construction at one-third higher cost and power rates twice as high as Deagle's. For whichever reason - blind faith in the efficacy of the legislation, or simple jealousy - the HEPC refused to recommend Deagle's lines for the bonus.4 Determined to receive a fair hearing, Deagle spent two weeks roaming the corridors of Queen's Park in March 1922, lobbying for an amendment to extend the 5o-per-cent bonus to private power companies. While there he encountered M.W. Beach, who had arrived on a similar mission. Beach owned a 5oo-horsepower development at Iroquois, nine miles downstream from Prescott on the St Lawrence River. He already had some experience with rural electrification and considered the local farming community a convenient outlet for his surplus power. All he wanted was a fair chance to compete with the HEPC for the rural market. Just when both men were despairing of ever being heard, W.H. Casselman agreed to champion their cause.5 When Casselman put his case to the legislature on 22 March, his principal contention was that extending the bonus to private companies would be particularly beneficial to "remote" areas, such as eastern Ontario, which many considered beyond the range of the "extravagant" HEPC. He compared two quotations recently received by several Williamsburgh Township farmers in his home county of Dundas. Even with the bonus, Hydro demanded 8.5 cents per kilowatt-hour, a service charge of $57 annually, and a twenty-year contract. The Beach Co. promised, if allowed the bonus, to supply energy at 6 cents per kilowatt-hour, with a $30 service charge and a five-year contract. These were striking figures, but Drury was unmoved. Although province-wide rural

77 Consolidating the Rural Network

electrification remained one of his party's foremost objectives, it would not be "fair to render assistance to private ownership if there was any danger to the operation of public ownership."6 Ferguson, still in opposition, scoffed at this. Since there could be no act of "greater moment" to agriculture "than getting Hydro to it," he maintained, it did not matter what "agency" received the grant, provided the farmer benefited. When Frank C. Biggs, minister for public works and highways, joined the debate, he observed that Hydro's shortcomings extended beyond eastern Ontario. His own home was "at the hub," within five miles of Hydro's main lines near the town of Dundas, yet he still paid $79.26 yearly in service charges, even though he was one of twenty-eight customers on a 2.5-mile line. The problem, therefore, went beyond mere accessibility. "Ever since we have had Hydro power," Biggs complained, "the power has been gobbled up and used by the cities, and the farmers have not had a fair deal." Soon after Biggs spoke, debate halted when the amendment was ruled out of order on a technicality. But the matter was clearly too controversial to be ignored for long.7 In the brief interlude before the legislature took up the issue again, Drury and Carmichael asked for and received a number of submissions from interested parties. Not surprising, one of the first to be heard from was Hydro's old adversary, the Orillia Water, Light and Power Commission. This body considered itself a special case; like Hydro, it operated on a cost basis and funnelled any surplus revenues back into the system in the form of rate reductions. Many applicants were eager to join its already "considerable" rural network, but Orillia needed the 5o-per-cent construction bonus to ensure the viability of certain proposed extensions. The Orillia commission had to date been completely self-supporting - unlike Hydro, it never extracted guarantees from the townships it served - yet still managed to construct rural lines "on more generous terms" than the HEPC found "necessary to exact." Like Deagle and Beach, Orillia wished only to share equally in the generous assistance the government made available to the provincial system.8 But Hydro could not be swayed, either by Orillia's enviable track record or by the arguments forwarded in the submissions generally. The HEPC continued to advise against extending grants-in-aid to any companies or individuals not purchasing energy directly from it. Exceptions might be made, but only for distributors operating in districts the Commission was unlikely to serve. Unless dispersals were strictly regulated, the argument went, private interests would end up being "subsidized out of the public funds to enter into competition with Hydro power." There simply was no way of ensuring

78 Power at Cost

that private interests did not use the grants to increase profits, rather than reduce the power bills of consumers.9 Hydro was supported in its stand by G.H. Kilmer, a Toronto lawyer and Carmichael confidant. Kilmer maintained that no bonusing revision proposed thus far was "forceful enough in restricting the benefits to rural Municipalities." John M. Godfrey, another Toronto lawyer and friend of Carmichael's, argued that the whole problem had been grossly exaggerated. He reminded the minister that the combined generating capacity of every independent producer engaged in rural electrification represented "merely a flea bite in the general power situation" and posed no threat to Hydro. The plants owned by entrepreneurs like Deagle and Beach rendered a "valuable service in their own restricted local community" and should therefore be encouraged. The real threat, as Godfrey saw it, lay not in extending grants to private distributors but in limiting them to rural users. By so doing, the government exposed itself to charges of promoting "objectionable class legislation."10 The legislation that Carmichael introduced on 30 May 1922 reflected the contrasting advice. It had been widely speculated that the government intended to make farmers' co-operatives eligible for the bonus, if the only source of power in their district were a private distributor. The bill that was tabled proved much more limiting. It confined eligibility to municipalities that generated their own power and built transmission lines into predominantly rural areas. Ferguson, who doubted that the changes could remedy existing discrepancies, promptly submitted an amendment to allow all rural hydroelectric consumers, regardless of power source, to collect a rebate worth 50 per cent of their distribution costs. Rather than advocating a reduced role for the HEPC, Ferguson believed that the government would be entirely justified in empowering Hydro to supervise operations of any company receiving the bonus. More rural residents would benefit, and the risk of public funds ending up as corporate profits would be eliminated. This proposal offered a possible way out, but Beck, resolutely defending Hydro's ability to "take care of all wants," rejected the scheme in principle.11 Nor did Carmichael's bill assuage Casselman, who again broke party ranks to lash out at proposals that failed to address the real issue. In his view, both Hydro and the government were fostering regional inequalities and ignoring agrarian grievances. "The farmer is doing just as much for the state as any citizen of Toronto," an indignant Casselman roared, "and he should be given power conveniences on a par with the urban users!"12

79 Consolidating the Rural Network

When Drury's turn came to speak, he merely reiterated his fear of public monies filtering down to private companies and thereby fortifying Hydro's competitors. But the premier also wished aloud that the Ferguson amendment could be "held over for better consideration" or until "we see how our bonuses to rural lines work out," although by this point in the proceedings it was not altogether clear as to which bonus he referred. Carmichael's contributions were equally ambiguous. When Thomas A. Marshall (Lib., Lincoln) asked whether municipalities that purchased energy from private companies qualified for the grants, Carmichael professed: "I see nothing to hinder them." What Carmichael failed to note was that, even with the changes under consideration, responsibility for recommending payment of grants would remain with the HEPC. Indeed, the legislation was so worded that only those applicants whose interests in no way conflicted with Hydro's could expect a favourable response.13 The bill that finally passed the legislature on 9 June stipulated only that the 5o-per-cent bonus "may be paid" to townships or urban municipalities distributing power within an RPD. As before, Hydro was under no compulsion whatever to recommend that grants be dispersed. Thus applicants remained susceptible to any number of arbitrary requirements that the provincial commission might choose to impose. Casselman detected the flaw immediately. "Judging the H.E.P.C. on its record," he wrote in the Farmers' Sun, "is it likely to recommend power from any source other than itself?" Even if Hydro were so inclined, he thought it "absurd" to imagine that a municipal council would undertake to distribute hydroelectricity to the rural areas of townships. In his view, the entire episode was another example of a "bone without meat being handed the farmers of Ontario."^ Once again the Orillia Water, Light and Power Commission provided the test case. In 1923, it submitted a second bonus application only to discover the truth of Casselman's predictions. Hydro insisted that in order to be favourably recommended, the Orillia commission must show willingness to handle its rural extensions "in exactly the same manner as those of the [provincial] Commission." That meant providing a certified statement of each rural line's capital cost, signing every customer to a twenty-year contract, adopting Hydro's standard rural rate classifications, and opening all accounts and records to an HEPC audit. The Orillia commission would also be required to serve the adjacent Hydro-controlled RPD whenever "a proper request to do so was made." As might be expected, Orillia

8o Power at Cost

refused these conditions. Its rural clientele was accustomed to fiveyear contracts and power charges only 10 per cent above the flat rate that town customers paid. To abide by Hydro's demands would have risked creating more dissension locally than the bonus was worth. The Orillia commission would have needed to be in poor financial condition indeed before it would have agreed to so blatant and unwarranted an assault on its closely guarded autonomy.I5 In 1923 the same treatment was meted out to eight farmers who had built two short transmission lines in Hallowell and Hillier townships (Prince Edward County). In recommending rejection of their application for a bonus, chief engineer Gaby reminded Commission members that no provision had been made for paying the bonus to individuals constructing private lines. Nor did this case warrant an exception: "I believe that the building of short sections of rural line close to urban municipalities should be discouraged, as this usually results in the cream of the possible rural business being obtained and this effectively bars out the thinner parts of the rural sections from obtaining service under advantageous conditions." In short, encouraging private initiative today might hinder Hydro's competitiveness tomorrow. Nonetheless, the HEPC made the Prince Edward farmers a counter-offer: they could have a bonus if in return they would sell Hydro the two lines for "a fair price," sign twenty-year contracts with the townships involved, and adopt the standard rate schedule. Needless to say, the farmers rejected this proposal as quickly as Orillia had the one made to it.l6 Similar heavy-handed treatment was accorded a thirty-member rural syndicate near Campbellford, twenty-seven miles east of Peterborough. The syndicate built its own transmission lines in 1921 and signed a power-supply contract with the Campbellford Electric Power and Water Commission. It applied for the 5o-per-cent grant twice, in 1928 and 1933, but was turned down both times. The HEPC reasoned that because no provision had been made for depreciation or maintenance funds, and the rates charged were insufficient to retire the construction costs as speedily as Hydro generally preferred, the "whole venture was financially unsound." Even more significant, as J.R. Cooke later admitted, Hydro had recently contracted with Seymour Township to distribute hydroelectricity to the area surrounding the territory served by the syndicate, and any "privately owned lines constructed in this district would hinder the development of the Campbellford RPD." Consequently, unless the syndicate agreed to sell its lines to the provincial system, and administer its operations accordingly, there would be no grant. Herbert

8i Consolidating the Rural Network

Tinney, the group's spokesperson, was justifiably outraged. He criticized Cooke for "leading the government to monopolize electricity" and wondered why Ontario's laws should help only those farmers under HEPC control.17 Where private interests were not perceived as an immediate threat, Hydro could be tolerant. In January 1927, J.E. Daley, proprietor of a small hydroelectric development on the Maganatawan River, asked that the 5o-per-cent bonus be applied to transmission lines he proposed building to the farmers of Chapman and Croft townships, in the Parry Sound District. This time Gaby suggested that the application "be given favorable consideration." For once, a show of magnanimity would not work to Hydro's detriment. "There is little likelihood," Gaby explained to Cooke, "of the Commission attempting any development in the Maganatawan district for some years, and propositions similar to that of Daley appear to be the only means whereby the provincial bonus can be applied in districts such as this."18 The HEPC'S most persistent adversary over the grants-in-aid was J.M. Deagle's old ally, M.W. Beach. The Beach Electric Co. began generating hydroelectricity at Iroquois in 1909. Three years later it unsuccessfully challenged Hydro for the right to serve the town of Prescott, and the confrontation left relations between the two utilities permanently strained. The HEPC considered ridding itself of the Iroquois irritant by buying Beach out, but when negotiations to purchase the generating plant failed in 1917 Beach resumed cultivating the surrounding rural market, gaining a good many converts in the process.19 According to one of Dougall Carmichael's eastern correspondents, "a strong feeling" had arisen in Dundas County over high rates, and so many who desired hydroelectricity "think they can get it much cheaper from the Beach Company."20 When Beach applied for the 5o-per-cent bonus in 1922, his rural holdings consisted of $20,000 worth of lines serving approximately forty customers - hardly a threatening presence. But this was not how Hydro's secretary, W. W. Pope, saw things. Accusing Beach of charging rates well below cost, Pope considered the company "detrimental to the Commission in its endeavor to get service to rural communities in this portion of the Province." Consequently no bonus was forthcoming. Beach next dragged MLA Aaron Sweet (Cons., Dundas) into the controversy. Sweet complained to Cooke in August 1923 that the HEPC seemed intent on hoarding the construction grants, despite having itself failed to satisfy the demands of a rural population clamouring for

82 Power at Cost

hydroelectricity. The only way to settle the dispute, he argued, was for Cooke personally to examine the Iroquois operation and once again attempt to negotiate a fair purchase price.21 Meanwhile, Beach had flooded Hydro headquarters with letters from customers testifying to the many virtues of his hydroelectric system. The tributes were profuse: the company's rural service was "the cheapest and best ... to be found in Ontario" and was more important to its beneficiaries than cars or telephones. Beach also vigorously denied the charge that low rates rendered his business unsound. In fact, once he received the 5O-per-cent bonus, not only would his standard charge of six cents per kilowatt-hour be feasible, but it could be halved for anyone consuming in excess of 50 kilowatthours per month.22 Beach's theory of how to build a distribution system was the reverse of Hydro's. He believed that in order for electric power to be widely accepted and used in the rural community, farmers must first perceive it to be affordable. "The rates," he claimed, "must be so attractive to the farmer that he can feel he can use it without skimping. We find our largest consumers are the happiest we have." Existing customers would undoubtedly pay more for the service rather than give it up, but "it would be difficult to get new customers at a higher rate." Naturally the HE PC appreciated the importance of offering the lowest rates possible. But whereas Beach stressed affordability, Hydro frequently emphasized necessity; if farmers believed that hydroelectricity was essential to their work, they could more easily justify the large expense involved. Philosophical differences aside, Beach now was faced by the hard fact that his company had reached the limits of feasible expansion. Unless the government contributed toward his construction costs, further rural extensions could be financed only by the rather short-sighted expedient of raising rates.23 In the event, Sweet's intervention failed to help Beach. Instead, relations between the two sides continued to deteriorate because of what Beach referred to mysteriously as "certain other disputes." Meanwhile, Hydro remained committed to ensuring that no public monies ended up in the bank accounts of "private concerns." In any case, Beach's enterprise presented a special problem. Because the company served the municipality of Winchester, where it also owned a furniture-manufacturing plant, there would be no way to prevent a bonus from benefiting urban and industrial as well as rural customers. In 1922, Ferguson had advocated authorizing Hydro to supervise the ways in which corporate recipients used the grants, but now in power he remained conspicuously silent on the matter.

83 Consolidating the Rural Network

Nor had Hydro altered its opinion: Pope simply, and sensibly, admitted that "such supervision does not appear to be practical."24 Hydro could have obstructed Beach's progress indefinitely, but Cooke fully realized how firmly entrenched the company was in parts of Dundas and Grenville counties. He was equally wary of the public relations fiasco that might ensue if word got out that the powerful provincial commission was flexing its muscles at the expense of some struggling entrepreneur. Yet the possibility of giving Beach a bonus seems never to have been seriously considered as a way out. Instead, in February 1926, Cooke quietly resumed negotiations to purchase the company. A settlement was four years in the making, during which time Beach continued to expand his rural operations. In the end Hydro purchased the Beach distribution system for $155,000, while the company continued to control and operate the generating station. Ironically, the deal included a promise by the HEPC to purchase 500 horsepower from Beach each year, to enable Hydro to use the very lines that it had long believed would be better served if removed from private hands.25 Nonetheless, Hydro had avoided setting an important precedent by allowing an ambitious private entrepreneur to obtain a provincial bonus. After 1921 the grants-in-aid provided Hydro's rural customers with a rate advantage not shared by those purchasing energy from independent power distributors. That benefit aside, many continued to harbour concerns about the way in which rates were determined. Although the Commission's engineers had invested vast amounts of time and effort devising rate schedules that were intended simultaneously to protect the province's investment and to induce customers to maximize energy consumption, difficulties continued to arise. No doubt the majority of Hydro's rural customers paid their bills regularly and without bitter complaint, happy to be among the fortunate few receiving the service. There were, however, some noteworthy exceptions. Many were residents of small villages and hamlets who had discovered that the HEPC, contrary to its promotional claims, had not been calculating their individual bills on the basis of actual "cost." The others who were discontented consisted primarily of farmers who thought that the rate schedule, far from reflecting their individual financial obligation to the distribution system, discriminated against them. The frustration articulated by the Wingham Times in April 1922 was typical: "We have always understood that Hydro is sold at cost, but there is such a wide difference in what the different consumers pay that it is a hard proposition to understand. Theory, as to what

84 Power at Cost

it costs, may satisfy Hydro engineers, but it does not satisfy the man who has to pay 35 per cent, more for the same amount of power used by another consumer in the same municipality." Much of the confusion stemmed from Hydro's conservative estimating procedures, which led its engineers to approach very cautiously the matter of who should receive service, and at what price. By insisting on a minimum number of customers before embarking on new extensions, Hydro could assure potential rural subscribers that the introductory estimates represented the maximum amount they were ever likely to pay for the service. But in some RPDS, quite unknown to the majority of applicants, the Commission took an extra precaution. Regardless of whether there was an average of three, five, or even ten customers per mile of line, an "arbitrary rate" was imposed for the first few years the service was taken. Hydro reasoned that since the most densely settled areas were often the first to sign on, and costs must be averaged over the entire RPD, it was wise to set the introductory rate a little higher than was necessary to meet initial expenses. When more costly extensions were made into the district's remoter sections, rate increases and all the adverse publicity they entailed could then be avoided.26 For this system to work, the "arbitrary rate" had to be set on the basis of a sound prediction of an RPD'S future power requirements. This was a tall order. Throughout the 19205, hydroelectricity remained a novelty in many rural areas, and most of its applications to farm work had yet to be developed. Hydro's engineers therefore had few precedents on which to base their predictions of probable consumption and load patterns. Also, if unanticipated price hikes were to be avoided, the "arbitrary rate" needed to be applied consistently. But as Hydro was later to reveal in its very public battle with a private interest in Bruce County - described in the next chapter - its willingness to juggle estimates was directly proportionate to its eagerness to control power distribution in any particular district. John R. Cooke was a three-year veteran of the Commission in 1926 when he demonstrated the type of influence that could be brought to bear on the estimating process. When a number of his constituents in Rawdon Township (Hastings County) petitioned the HEPC for a supply of power, he asked Jeffrey to "encourage" their request "in every way possible." There was no doubt in Cooke's mind that Hydro enjoyed considerable latitude when calculating estimates and that this should be used to optimum advantage: "I would like if you would quote rates that while they would be safe, yet would not be rates that would leave a large surplus, as I think

85 Consolidating the Rural Network

the service would grow more quickly under conditions just about based upon cost."27 At times it seemed as if the HEPC had discarded all pretence of adhering to "power at cost," at least for rural extensions. Cooke's own view was that the principle was inherently flawed because it was "absolutely impossible" to predetermine cost. He believed that Hydro's sole recourse was to stand by its minimum density requirements. Should the rates prove higher than necessary, resulting profits could later be credited back to customers. But this approach failed to address the opposite, and far more serious, problem: estimates that produced not too much, but too little revenue. In 1918, for example, the village of Beeton in Simcoe County contracted with the HEPC on the basis of a $45-per-horsepower estimate. In the first year alone it incurred a deficit of almost $4,000, and its rates were promptly raised to $85 per horsepower. Similarly, the village of Chatsworth, seven miles south of Owen Sound, suddenly discovered in 1921 that after only three years of service it owed the Commission over $1,500. Pried for an explanation, Hydro confessed that when the power was first delivered "it was impossible to determine actual cost conditions."28 Unexpected price increases had become so common on the Eugenia System by 1922 that the partner municipalities formed the Eugenia Hydro-Electric Association to publicize their plight. Three years later their suspicions were vindicated when the Gregory Commission tabled its report on the HEPC'S financial practices. It found that in twenty-two of the system's twenty-three municipalities, rates exceeded original estimates by between i per cent and 187 per cent. Nor was the problem confined to the Eugenia System alone. The commission considered Hydro's estimating procedures to be generally irresponsible and concerned only with "securing authority to proceed with the work rather than to give to the Government or the municipalities a clear idea of the probable cost."29 Discontent also grew in the 19205 over Hydro's insistence that all properties larger than fifty acres should automatically be designated as farms if they were situated within an RPD. The effect of this was that in order to get Hydro service the property owner had to sign, at the very least, a class 3 (Light Farm) contract. Although this classification provided for up to three horsepower of load, monthly charges often seemed excessive to anyone wishing electricity for lighting purposes only. In 1922 the Farmers' Sun told of a group of farmers who insisted on signing the less expensive class 2 contract normally reserved for hamlet residents; a class 2 could easily meet their lighting requirements, without the added expense of the un-

86 Power at Cost wanted three-horsepower option. The HEPC refused them outright. They could have a class 3 contract, or none at all. Although they eventually complied, the Sun considered it a gross injustice that farmers, with investments of fifteen or twenty thousand dollars, should be forced to go without power because of a completely arbitrary requirement, "while every bathroom and cellar-way in the city" was "amply lighted." Farmers' wives, the paper lamented, suffered the most from this discrimination. They were forced to toil away without the many labour-saving devices a class 2 contract afforded, because farmers could not "put in the costly equipment demanded by the czars of the commission."3° The potentially large amount of money separating the two classifications compounded the problem. One Oshawa-area farmer complained of being billed $22.42 for using 378 kilowatt-hours of energy over a two-month period, whereas his neighbour with a hamlet contract used 400 kilowatt-hours and paid only $11.37. Another farmer was upset by the "glaring discrimination" that enabled the nearby country store at Thamesford (Middlesex County) to receive Hydro service for $36 per year, while he paid $96. He pleaded with the government to understand the dilemma facing many farmers who worked less than fifty acres. Their operations generally were too small to warrant the expense of outfitting their farms with the electrical equipment necessary to take full advantage of a class 3 contract, yet class 3 service was too expensive for lighting purposes alone. But Hydro's engineers resolutely defended the status quo, even when questioned about its fairness by commissioner Cooke. Because hamlets were "relatively congested" areas compared to most rural districts, they offered many of the opportunities for economical distribution, and hence the lower rates, usually associated with urban centres. Yet even where it clearly cost no more to serve a farm home than a hamlet residence, the Commission insisted on rigid adherence to the rules.31 One customer in this position was J.W. Embury, part of whose farm was situated in the village of Foxboro (Hastings County). Even though he actually resided within the village, he was still forced to pay the class 3 service charge of $2.95 per month, compared to his neighbour's hamlet rate of $1.20. The HEPC refused to entertain his appeals; Embury's property exceeded the fifty-acre minimum and therefore automatically qualifed as a "farm." Writing in Hydro's defence, Gaby insisted that anything less than total fidelity to the regulations would prompt a flood of similar requests from other farmers seeking exemptions. Failing discovery of a more satisfactory solution, and Gaby doubted that one existed, the Commission must continue to follow its "standard interpretations."32

87 Consolidating the Rural Network The HEPC'S reluctance to relax its method of classification was partially offset by change of another sort. In the fall of 1924, Jeffrey's Rural Rate Committee investigated the growing number of complaints from farmers who felt that they were paying too high a proportion of rural transmission costs, relative to hamlet contributions. The committee's findings substantiated that viewpoint. First, because costs were averaged among all power users within an RFD, electricity frequently was cheaper in hamlets and police villages than in the partner municipality that linked the district to the provincial transmission system. Second, under the hamlet rate structure, customers had only to use 10 kilowatt-hours of energy per month before the second level of less expensive charges took effect. By comparison, most municipal customers were required to take 60 kilowatthours at the first rate, while class 3 farmers were obligated to take 42 kilowatt-hours. The committee's conclusion was unanimous: hamlet rates were lower than necessary to attract that type of business, and they retarded RPD development by alienating potential farm customers.33 In the view of the Jeffrey committee, the moment was opportune to make the system fairer. With the recent inclusion of secondary lines in the government's construction bonus, many RPDS had become eligible for rate reductions. Tactful juggling of the two bonuses would allow Hydro to increase the hamlets' financial obligations without triggering an unpopular rate increase. The committee's plan, which the HEPC soon implemented, allowed farmers to receive the full benefit of the new secondary bonus, while simultaneously increasing the proportion of primary-line costs paid by hamlet customers. In effect, any financial assistance that hamlet users received from the secondary bonus was used to offset their additional primary-line commitments. The engineering staff gambled - successfully, as it turned out - that never having received the secondary bonus, hamlet customers would not miss it. The only other change, which also passed largely unnoticed, raised to thirty from ten the number of kilowatt-hours that hamlet users had to buy at the first energy rate.3^ The reapportionment of farm and hamlet costs was but one facet of the HEPC'S continuing re-evaluation of its rate schedule in the mid-igaos. As Jeffrey explained to the Commission in late 1925, technological advances since the existing rates had been decided on had resulted in use of hydroelectricity for purposes "beyond the bounds originally contemplated." Furthermore, since the trend toward rapid technological change had apparently only just begun, any subsequent rate schedules must be sufficiently flexible "to fulfil the requirements of all special conditions." The same schedules,

88 Power at Cost

however, must also be amenable to very precise and gradual revision, since radical and abrupt changes always stirred criticism. Jeffrey's message was plain: technological change waited for no one, not even the HEPC. Accordingly, if Hydro were to stay in the vanguard of a rapidly changing Ontario, it had to keep abreast of the manifold needs of the diverse communities it was expected to serve.35 When Howard Ferguson's Conservatives won power from Drury's lack-lustre Farmer-Labour coalition in the provincial election of June 1923, they were determined to identify the forces behind rural Ontario's growing unease. The agrarian community had been desperately trying to secure its footing since the armistice of 1918 had brought wartime prosperity to a crushing halt and ushered in half a decade of precipitously declining crop and herd values. Gross agricultural revenues, just one indicator of rural distress, plummeted 36.3 per cent between 1919 and 1922.36 Accordingly, after only three months in office, Ferguson appointed a nine-man legislative committee under MLA Dr David Jamieson (Cons., Grey South) and gave it a vague mandate to study "all matters concerning the social, educational and economic conditions surrounding the agricultural, livestock and dairying industries of the Province." The new premier promised that the committee's findings would be used to improve the lot of rural producers and urban consumers alike and to overcome "the unfortunate feeling of separation which exists among our people today." Cooke, only recently appointed a Hydro commissioner, reminded the committee to look into rural power distribution also.37 He need not have bothered, for many of those who appeared before the committee would make it abundantly clear that rural electrification stood at the top of their agenda, if not the committee's. The inquiry's fifty-four-stop tour took nine months. In the course of its extensive and frequently heated proceedings, submissions were received covering every imaginable aspect of rural life. But according to the first of the committee's two published reports, rural electrification received "more attentive consideration ... than any other under enquiry."38 Northern Ontario proved the exception. Until agriculture there enjoyed more of the basic appurtenances, such as roads and market facilities, widely available in the south, cheap power remained a relatively low priority. By contrast, in one southern Ontario community after another farmers repeated the same litany of complaints, accusations, and suggestions. Most believed that if only hydroelectricity were made more accessible and affordable, many of their industry's problems would be alleviated.

89 Consolidating the Rural Network

They appreciated the government's bonusing legislation, but few who spoke at the hearings believed that they had been much affected by it - electricity was still too expensive. One Brant County farmer represented many when he suggested that no farm "could earn from its use what it would cost." Another told the committee that of the $80 he paid to the HEPC the previous year, $63 went toward fixed service charges. Although he would hate to be without the service, this "was much more than a farmer could pay and expect to get value." Others expressed willingness to spend as much as $100 per year for power but resented being locked into a twenty-year contract. A "flat rate," or even rates approximating those available in urban areas, were two other frequently repeated proposals. Time and again rural audiences vociferously endorsed the scrapping of urban "cost" contracts as a preliminary step toward implementing a more uniform, province-wide method of charging.39 Farm women, who arguably benefited most from rural electrification, described how electric appliances were far more advantageous in farm-houses than in urban residences. As one farm wife told the committee, "You can have no conception of what bitterness of feeling is developed in the mind of the countrywoman when her sister from the city comes out and begins to dilate on the comforts enjoyed in city homes." Electric irons, washing machines, and vacuum cleaners were a godsend anywhere, but on the farm, where women assisted with the outside chores in addition to raising a family and performing a multitude of domestic tasks, they quickly became indispensable. Particularly annoying was the growing reluctance among domestic labourers to leave the cities, where housewives enjoyed the full benefits of electricity, to take up positions on farms. According to a woman from Blanshard Township (Perth County), unless conditions were improved the farm home would disappear, because mothers were "advising their daughters not to marry farmers." She thought the prospects grim for any city woman who married a farmer and then tried to exist without her accustomed electrical conveniences. Allan B. Shantz, a Waterloo Township farmer, added a decidedly male perspective in welcoming wholeheartedly any initiatives that might lessen the farmwife's work-load. He personally had never bothered to compare the respective costs of burning wood and using hydroelectricity because the advantages of the latter were obvious: "In pre-Hydro days, when sometimes the women had to split wood, the meals were occasionally late. With Hydro this was not the case."*0 Suggestions abounded as to how to make rural electrification more affordable. Barring introduction of an equal rate, some farmers

go Power at Cost

thought that the next best solution would be for the government to deliver power at a uniform price to the boundary of every rural municipality or RPD. Local co-operatives would set the final price, build and finance transmission lines, and distribute the "juice" within the RPD. Others felt that the HEPC should sell to the farmers at wholesale prices the electrical equipment they needed to wire their premises. Many advocated a program of rural credits to assist farmers in financing their electrical hook-ups. Still others were prepared to reduce rural dependence on the provincial commission altogether, either by abolishing import duties on individual lighting plants or by introducing government grants for individuals planning to build small hydroelectric plants in districts where Hydro's rates were prohibitive.41 Hydro was regularly censured during the hearings for refusing to assist private companies trying to serve rural markets. Another cause for complaint was the HEPC'S insistence that every requirement of the Rural Hydro-Electric Distribution Act be obeyed in slavish detail before municipalities were allowed to sell power to neighbouring farming districts. Municipal partners, by contrast, could supply each other at will. Discriminatory procedures such as these led one group of farmers attending the committee's meeting in Prince Edward County to counsel open defiance of the HEPC. The year before, the group had built its own 2.5-mile transmission line and negotiated a power supply with the village of Wellington, instead of abiding by Hydro's instructions to join an RPD and sign twenty-year contracts. It hoped that by publicizing its case, what it had done "in defiance of prohibition" others would one day "be permitted to do with permission." Thus, while participants exhibited emotions ranging from despair to defiance, the overriding theme remained the necessity of additional government assistance if electricity were to become as common in the country as in the city. The 5o-per-cent grants-in-aid notwithstanding, the average farmer simply could not afford the $300 or $400 necessary to wire his farm.42 Shortly after its final public meeting, the committee asked the HEPC to comment on its findings. In a ten-page letter to Jamieson, Gaby vigorously defended Hydro against every criticism levelled by the rural community. Jamieson was obviously impressed. Amazingly, the section of his committee's report dealing with rural electrical service was drawn almost exclusively from Gaby's response which was cited verbatim. Above all, Gaby (and by extension Jamieson) attempted to refute the charge that Hydro was "not desirous of supplying power to rural users, there being more attractive demand in the urban centres." Over the preceding two years, it was

gi

Consolidating the Rural Network

pointed out, only fifteen municipalities had been added to the HEPC'S several systems, whereas eighty-seven township contracts had been signed. In the same period, Hydro's representatives had attended 458 meetings to explain the rural operation to prospective customers.43 Gaby also defended the Commission's preference for large generating facilities at a time when many rural areas could still be served satisfactorily by smaller, local plants. Only large-scale developments, he maintained, could accommodate future growth in power demand yet produce energy at the lowest possible cost per horsepower. Certain other criticisms, such as the undesirability of the twentyyear contracts and the method of handling right-of-way settlements, he sidestepped as matters prescribed by legislation and thus beyond Hydro's discretion. Gaby was equally curt over service charges, which increasingly were regarded as the major deterrent to rural electrification. He dismissed outright the suggestion that the annual charge for a class 3 service should be lowered by almost 20 per cent to only $40. Instead, he chose publicly to perpetuate the charade that all rural services, without exception, must be based on a strict and unwavering adherence to the traditional "power at cost" formula. Jamieson's group agreed.44 The remainder of the committee's report surveyed the entire gamut of rural concerns and had as its main recommendation creation of a Canadian National Export Marketing Commission. But as time would show, the committee was better at diagnosing illnesses than at prescribing cures. The Farmers' Sun likened the recommendations to "giving a tin whistle to a child doubled up with the colic." Certainly the paper's harsh judgment applied to the committee's statements on rural electrification. The Farmer's Sun agreed with the committee that "nothing would have a greater tendency to make rural life more attractive and profitable than more general distribution of electric light and power on the farm." Nonetheless, the paper was also quick to point out that the committee's efforts added up to nothing more than a feeble admonition to the government to "pursue as vigorous a policy as possible in seeking to effect a more general use of electric light and power in the rural districts of the Province." This was hardly a blueprint for aggressive and imaginative action.45 The failure of the Jamieson inquiry to suggest an alternative approach to rural power distribution suggested that the HEPC had little to fear from Ferguson's Conservatives. It now seemed unlikely that the new government would overturn its predecessor's cautious and

92 Power at Cost gradualist approach. Instead, the Commission remained very much in control of the rural program. Even so, Hydro officials concluded in 1926, five years into the grant-in-aid program, that the time was ripe for their own reappraisal of what was needed in the rural field. By October 1926, 2,277 miles of rural primary transmission lines either had been completed or were under construction - an average of almost 400 miles per year since 1921. On that basis, Gaby thought 700 miles of new extensions per year, at a cost of approximately $1.5 million, to be attainable. Even at that pace, barely 20 per cent of Old Ontario would have Hydro service by 1930, since most observers agreed that 23,300 miles of line would be required to reach the saturation point. Gaby's calculation caused some, including Cooke, to wonder whether further government assistance might not accelerate the process. With this in mind, Cooke ordered an investigation into the effects of raising grants-in-aid to 80 per cent, despite protests from the provincial treasurer, William H. Price, that even at 50 per cent the bonuses were costing more than the government could realistically afford. Price objected particularly to the practice of building lines "almost automatically" on request, which left the government with "practically no control" in any given year over how much money would be spent.46 The treasurer could soon breathe easier again. Consideration of the 8o-per-cent bonus ended when it was shown that the added expense would far surpass any possible political dividend. Whereas the 5o-per-cent grant-in-aid saved the average class 3 customer $18.13 annually in service charges, an extra 3o-per-cent bonus would produce only $10.89 m added savings. Also discouraging from a political perspective, benefits would be negligible to hamlet consumers, who outnumbered farm customers by almost two to one. The extra costs to the government, by contrast, would be substantial; based on 1926 returns, a further $483,000 in grants would be required. If applied retroactively, the amount would grow to more than $1,475,000. Under the circumstances even Cooke, the government's staunchest advocate of rural electrification, admitted to Ferguson that the savings to rural power users would be too small to justify so heavy a drain on provincial coffers.47 If the pace of rural extensions had been less than spectacular, Hydro and the government could at least take solace in the program's overall financial stability. Two separate events in 1926 and 1927 indicated just how important this was. In June 1926, the Commission agreed to a sweeping cancellation of all inactive rural contracts. Some farmers and hamlet residents who signed with Hydro subsequently

93 Consolidating the Rural Network were unable, whether by miscalculation or by misfortune, to afford either the monthly charges or the appliances necessary to use the service. Hydro had occasionally revoked individual contracts in the past, but only if the local distribution system were solvent. Cancellations were not granted if that meant saddling remaining customers with extra costs. Instead, Hydro continued to bill individuals for service charges, even if they never used a kilowatt of energy. If no payments were made, the monthly charges simply accumulated until the HEPC instructed township authorities to add the arrears to the offender's tax bill.*8 By 1926, however, many RPDS could clearly afford to relieve "inactive" clients of their obligations. Hydro therefore decided, since many of the offenders were "of the poorer class," to cut them loose before the situation turned into a public relations problem. Townships were advised to cancel any contracts where service had never been received, provided that they were "not now required to carry the line extension constructed to serve them." Similarly, all Hydro bills added to tax rolls were to be removed. Altogether, 437 rural contracts across the province were revoked.49 The second show of confidence focused on the substantial surpluses that many RPDS had accrued by 1927. After the bonuses were introduced in 1921, the HEPC periodically authorized rebates to rural customers whose RPDS had accumulated surplus revenues. Although rates were theoretically based on "cost," the Commission, as has been noted, often considered it "sound practice" to provide for a small surplus. Thus, if greater use were made of the system than originally anticipated, the surplus increased proportionately. As a result, the 105 RPDS had amassed an aggregate surplus of over $412,000 by the end of 1926, even though many had been operating for less than five years. In Gaby's estimation, the flush bank accounts proved at last the "practicability and equity" of the rural rate schedule. After securing Ferguson's consent, the Commission reimbursed sixty-two eligible RPDS a total of $236,892.5° No doubt many of the approximately 10,000 customers who cashed in on the windfall came away with their confidence in the HEPC renewed. For those not so fortunate, the opposite reaction was likely. Yet Hydro had made the only plausible choice; a general rate reduction would merely have increased the difficulties of those RPDS already plagued by revenue shortfalls. Meanwhile, the Commission emphasized repeatedly that the rebates, which averaged between $20 and $25 per customer but in some instances equalled an entire year's service, resulted from several years of business. If

94 Power at Cost

the consumers, it was thought, believed that such generous returns stemmed from just twelve months of activity, demands for a rate decrease would surely follow.51 The only consumers automatically excluded from receiving the refunds were short-term "power" customers who, according to Hydro's accountant, W.G. Pierdon, had "not assumed the responsibility attendant to a twenty year contract." The rationale was less than honest, especially since Pierdon himself acknowledged that these were the same customers who frequently "contributed a very considerable proportion of the total revenue and presumably of the accumulated surplus." One manufacturer, H.H. Hallatt of the Ontario Denison Tile Co., made no secret of his firm's displeasure over the ruling. "Why is it necessary," he complained, "for these fellows to pile up such tremendous surpluses on each individual line the first few years?" Hallatt felt that his firm, and others like it which enabled many transmission lines to become paying propositions, ended up as "the goat."52 But Hydro ignored the objections; a few critics could be suffered in silence after the Commission had gained, if momentarily, 10,000 supporters. As the 19203 and Hydro's first decade of intensive rural electrification drew to a close, the Commission confronted one of its most intractable issues to date. Although Jeffrey had warned Carmichael back in 1922 that such a situation might arise, matters did not come to a head until 1928. The problem involved farmers who built and paid for their own transmission lines and then circumvented the HEPC by purchasing power directly from a nearby municipality. Because the farmers were situated close to the "source" community, they generally received their power for little more than urban users were paying. 53 So long as Hydro had no interests of its own in an area where this was happening, few objections were raised; the difficulty arose only when plans were made to establish an RPD in the vicinity. Since the "suburban" farm customers often represented the most lucrative part of the township's rural power market, the HEPC insisted that they be among the first to transfer their allegiance, and sacrifice their low rates, to the provincial system. If the original purpose of the RPDS - to make rural electrification more affordable by dividing costs equally among all users, regardless of location - was to be fulfilled, these fortunate few must help to offset the disadvantages of the rest. One by one the suburban lines were subsumed by the HEPC as RPDS sprang up across southern Ontario. Obviously not everyone welcomed the change, but as Frank C. Biggs (UFO, Wentworth

95 Consolidating the Rural Network

North) told the legislature in March 1925, Hydro had "to create a dividing line" when it established RPDS, "which in turn severed some of these earlier connections." What Biggs failed to mention was that changed "connections" meant substantial rate increases for those "suburban" users whose power bills were suddenly calculated according to Hydro's system of rural customer classifications. Exceptions were rare. In 1925 the Commission allowed four farmers in the Picton RPD to continue taking power from the village of Wellington (Prince Edward County) at municipal prices. Even then, all four agreed that Hydro could unilaterally terminate the arrangement at any time.54 Many of those forced to switch over to RPDS were outraged at what they felt to be Hydro's excessive and arbitrary authority. None offered a more convincing condemnation of the practice than Professor Charles B. Sissons, the distinguished Victoria College classicist. Sissons, who resented the title "gentleman farmer," spent summers at his farm in Clarke Township (Durham County). He and five neighbours along the Orono-Newcastle road took their electricity from one of the Seymour Power Co.'s transmission lines that the HEPC had purchased in 1912. In what had seemed a satisfactory arrangement for all concerned, the six were billed directly by Clarke Township and allowed to pay the same rates as were paid in the village of Newcastle. This informal agreement had been in place for fifteen years, and never had the township required a contract. Then on 18 December 1927, the ultimatum came: unless each of the six users signed a twenty-year HEPC contract and joined the RPD currently being created around them, their service would be discontinued. 55 Sissons found this unconscionable, particularly since Hydro would be incurring no new expense to serve them. He regarded the entire proceeding a gross contravention of the "commonly held" principle that the "socialization" of essential public services "should in no wise interfere with the contractual or other rights of individuals." Not surprising, when his neighbours asked him to conduct their defence, Sissons readily accepted. It was, he wrote thirty-seven years later, a necessary if "unpleasant public duty ... to do my part to check the arbitrary attitude of the Ontario Hydro Commission, a legacy, no doubt, from the methods of Sir Adam Beck."56 Sissons's group was appalled that, in addition to the twenty-year contract, their monthly service charges would leap from $0.33 to $3.40 overnight. Without receiving any additional services, they were being forced to pay ten times more than the villagers of Newcastle. Here, Sissons wrote, was "class legislation" being adopted

96 Power at Cost by a Conservative government "which had never tired of cudgelling its predecessor, the United Farmers, for that very sin." Both the reeve and the deputy reeve of Clarke Township admitted that they had been duped by the HEPC. When they agreed to the arrangement, they were unaware that existing users also would be subjected to the higher RPD rates. Rather, they believed the sole purpose of the change was to enable new customers to receive hydroelectric service. What distressed Sissons most was the fact that his farmer associates had no choice but to accede to Hydro's demands. They already had far too much at stake to do otherwise, for as he wrote in the Globe, "a farmer who has gone to the expense of wiring his buildings and of installing a water system depending on an electric pump is not in a position to scrap his system without serious loss and inconvenience."57 The small delegation that Sissons led to HEPC headquarters on University Avenue in Toronto early in 1928 was granted a polite, but unsympathetic reception. In his memoirs, Sissons recalled his private interview with a "flushed and stubborn" J.R. Cooke: "I told him their contract was not a contract, that their terms were discriminatory ... I pleaded for a change of policy. His reply was, 'Mr. Sissons, if we do it for you, we must do it for all.' My answer was, 'If it is just, why not do it for all?' He said, 'It is government policy, and we can't do anything.' 'Well,' I said, 'you must take the consequences'."5& Totally frustrated by the Commission's obstinacy, Sissons promptly sent a letter to the Globe that proposed reforms to the Power Commission Act.59 He contended that if distinctions between urban and rural users were inevitable, they "should not be applied so as to discriminate in an arbitrary way between users from the same lines"; instead, cost "should be interpreted on the basis of citizenship and not of occupation." Moreover, whenever the government took over a "public service" reputed for efficiency and reasonable rates, it should acknowledge its responsibility to continue that service "at somewhat similar rates." This was crucial when the customers - like his neighbours - had already invested large sums to install the equipment necessary to take the service. Furthermore, the twenty-year rural contract should be replaced by the annual contract signed by urban consumers. And last, the government should reconsider the propriety of a system that denied individuals the right to appeal a Hydro decision to an independent board or judicial body.60 The Globe gave Sissons's views prominent coverage and added editorial support of its own. Based on the "power at cost" principle alone, the paper thought the automatic rate hike completely unjus-

97 Consolidating the Rural Network tified, since on the Orono-Newcastle line, and perhaps many others, it was no more expensive to serve rural consumers than villagers. Surely a fairer approach would be to reduce power costs by extending the service to a larger number of users, "before asking the old patrons to become parties to its upkeep if it is found desirable to create a new district." Despite all the abuse it took - Sissons claimed that it was "the first time in twenty years or more that the Globe had offered a word of criticism of Hydro policies" - the HE PC remained resolute. Cooke was the most adamant of all and repeatedly dismissed Sissons's ideas as a formula for destroying the entire public power network. In the end the protesters acceded to Hydro's demands.61 Gaby's handling of a similar situation in Peel County the following year reaffirmed that Sissons's protest had made little impact on the HEPC'S attitudes. Five rural power users, living just beyond Brampton's northern boundary, disputed Hydro's orders to relinquish their municipal power connection and low rates and join the new RPD. Here, as in Clarke Township, Gaby refused to negotiate. He admitted that similar problems had arisen in the suburban areas of "almost all cities and towns in the Province," but to acquiesce, even once, would set a dangerous precedent. Instead of lamenting the imminent rate increase, the Peel County petitioners and anyone else in a similar position should be grateful for having enjoyed cheap energy for as long as they had. It was, and would remain, HEPC policy to charge all rural consumers, regardless of their proximity to a city or town, identical rates for similar classes of service. "Any other arrangement," Gaby insisted, "would be discrimination."62 Under the impetus of the grants-in-aid, rural extensions proceeded at a moderate yet promising pace throughout the 19205. When bonuses were introduced in 1921, the HEPC'S rural network consisted of 305 miles of primary lines, valued at $517,912, to serve 8,769 suburban, hamlet, and farm customers. Somewhat surprising, Jeffrey predicted as early as February 1924 that Hydro had already reached the limits of rapid growth. Since 1921 its efforts had been focused on "the cream of the rural business" - densely populated RPDS in the vicinity of Niagara, London, Windsor, and Waterloo and Jeffrey believed that most future extensions would be on a piecemeal basis into much less lucrative areas. Consequently, he expected annual growth rates to decline during the ensuing decade.63 For once the veteran engineer's foresight failed him: after 1924, construction records were broken almost annually, and it took

98 Power at Cost the Depression to reverse the trend. Thus, by November 1930, 7,150 miles of primary lines had been approved for construction in southern Ontario at a total cost of $15,731,836. In 1930 alone, almost 1,900 miles of new lines were built. Of the 46,525 customers served in southern Ontario, 25,176 were classified as "hamlet," and 21,349 as "farm." Certainly the results fell well short of the 10,000 miles per year forecast by the Lethbridge Committee, but that figure was now regarded as wildly speculative. At no time, either in 1921 or in 1930, or ever for that matter, could Hydro contemplate a construction program of such magnitude.64 The reasons were obvious. First, it would be many years before the backlog of applications grew large enough to warrant construction of even 3,000 miles annually. Second, when apportioning its resources Hydro always maintained a clear perspective on the rural network's significance to the overall organization. Although the HEPC never denied the importance of electricity for enhancing agricultural profitability, and improving rural living conditions in general, it also realized that "the aggregate load distributed to the rural dwellers is, and must always be, but a relatively small proportion of the total energy distributed by the Commission." For example, in 1930 the aggregate peak load on the Rural System was 26,782 horsepower, or just 2.1 per cent of the 1,263,512-horsepower peak load of the entire Hydro network. The grants-in-aid, as Hydro often pointed out to individuals seeking additional assistance, were of "no advantage to the power system as a whole because the demand for power, apart altogether from the small amount distributed to the rural districts, is such as readily to absorb all the available supply."65 Hydro seemed reasonably satisfied with its rural electrification efforts as the 19203 drew to a close, but these efforts were still strongly criticized in some quarters. In 1928, speakers at the annual meeting of the United Farm Women of Ontario blamed persistently high rates for the fact that fewer than 5 per cent of the province's farmers were sharing in the labour-saving advantages of hydroelectricity. In their estimation, the HEPC had barely begun its task. Two months later, the Farmers' Sun challenged Hydro to specify what percentage of the rural population it ultimately intended to serve. The paper demanded to know if the Commission considered it "practicable to string wire up and down every concession and to transmit on these to everybody electricity transformed or stepped down as is done in Seaforth or Toronto?" And how much would provincial hydroelectricity cost if it were made available to every farmer in the "older settlements." If the price were prohibitive - and the paper suspected that it would be - then only farmers adjacent

99 Consolidating the Rural Network to main transmission lines could ever hope to benefit. By the same token, if it were shown that Hydro could not "transmit electricity generally to the farmers," then obviously the government's grantsin-aid were "a wholly unjustifiable expenditure of the public moneys." In the view of the Sun, a dire situation required a drastic remedy: if Hydro was unable to satisfy the energy needs of rural Ontario, then perhaps the time had come to return the initiative to private enterprise.66 Building on the advantages that the bonuses on primary and secondary lines provided, the HEPC in the 19203 commenced its quest to monopolize the rural power market. This ambition was never enunciated publicly, but the Commission's actions left little doubt as to its intentions. Certainly if Hydro's paramount concern had been to ensure that rural residents everywhere had ready access to a supply of central-station electrical energy, it would not have denied independent distributors like Deagle and Beach, or a successful municipal system such as Orillia's, the public funding they sought. Nor would it have been so inflexible regarding rates, or in interpreting the RPD legislation. Such actions did more than raise doubts about the HEPC'S commitment to rural electrification; they actually postponed interminably for many people the arrival of the much-needed service. A prudent approach to extensions may have enabled the Rural System to attain a degree of financial stability very early on, insofar as it had been able to grant consumer rebates and to revoke its inactive contracts. But this mattered little to the hundreds of thousands of rural residents who lacked hydroelectricity. They wanted to experience benefits that their urban cousins had long taken for granted, and many cared not whether the service was provided by a public or a privately owned enterprise. However, so long as Hydro continued to fear all competition, both real and imagined, and its political masters at Queen's Park complacently did the commissioners' bidding, many of these people could anticipate a lengthy wait. Few events would better reveal the HEPC'S attitude toward rural electrification, and its single-minded pursuit of monopoly, than those that took place in Bruce County during the late 19203.

CHAPTER SIX

The Battle for the Bruce No desire to interfere with legitimately conducted private enterprise HE PC Chairman Charles A. Magrath to Premier G. Howard Ferguson, 8 February 1929

The earliest hydroelectric developments in Ontario were of very modest size. Often a limited area was served by a generating plant running off a small head of water and producing one or two hundred horsepower. All this changed, however, once technological developments in the early twentieth century made it possible to harness tens of thousands of horsepower and transmit the energy over hundreds of miles. In short order, the small rural power distributor seemed doomed to extinction. Conversely, few now doubted that the key to lower rates in so capital-intensive an industry was to expand productive capacity constantly.1 Not least among the "big-is-best" zealots was Adam Beck, From the HEPC'S infancy he preached that if every corner of the province, urban as well as rural, was one day to enjoy the fruits of accessible and affordable hydroelectricity, then Hydro's focus must be on continually improving its economies of scale. Unfortunately for many Ontarians, another Hydro maxim, "power at cost," seemed destined to delay indefinitely that glorious day. Until Hydro discovered ways of reducing the high transmission costs of serving sparsely populated, low-load districts, the only source of centrally generated power available to many rural residents would remain local, privately owned plants, with their reputation for unreliable, exorbitantly priced service. Despite availability of government construction bonuses by 1921, some rural areas, because of either size or location, simply remained beyond the HEPC'S reach. Several communities in Caledon Township (Peel County) were representative of these. Alton, Caledon, Erin, and Hillsburgh each had access to the lines of the Cataract Power Co., but all believed that the provincial system offered more reliable, less expensive service. Yet when they asked for estimates in 1921,

ioi

The Battle for the Bruce

Hydro refused to consider their requests. Because of their low power loads - the four hamlets used less than 25 horsepower apiece - and their distance from both the Eugenia and Niagara systems, Hydro knew that it could not possibly offer them "reasonable rates." Until the Commission consolidated its position among the larger municipalities and more prosperous farms and hamlets of the district, these and other similarly disadvantaged communities would continue to fall between the cracks of Hydro's existing systems.2 Given the HEPC'S obvious limitations, some observers felt that the utility should do more to encourage use of localized private and municipally owned generating stations. "Junius," a regular contributor to the Farmers' Sun editorial pages in 1922, thought that Hydro actually hindered development in the remoter districts by perpetuating the belief that it alone provided truly satisfactory service: "Before some of our urban friends become over-filled with the notion that electric power emanates from Sir Adam himself and that Niagara would balk and perhaps turn and flow up hill if he were not supervising its actions, it might be well to mention that electricity may be generated locally to advantage without any assistance from the 'dear' Hydro power and without waste in transmission." Several years later the Sun itself argued much the same way. Citing "a correspondent of long experience," it claimed that "in the stress of the development of the Hydro the farmer was overlooked," as promoters concentrated on high-voltage trunk lines designed to serve "urban municipalities remote from one another." In fairness, it was now imperative to promote development of "the smaller water powers to be found on all sides in the streams pouring into the lakes." If from every such site low-voltage electricity could be distributed over inexpensive transmission lines to an adjacent town and two or three townships, "at prices with which the Hydro could not compete," the results would be nothing short of revolutionary.3 The UFO endorsed this philosophy at its annual meeting in 1928. It resolved that the only way for Ontario farmers to receive fair treatment from the HEPC, short of a uniform rate, was for the government to encourage "the development of the smaller water powers ... for the local distribution of electricity at low voltage at rates cheaper than those which the Hydro Commission are supplying." When the UFO'S legislation committee pressed the point in a meeting with Ferguson the following February, the premier indicated that his government was uninterested in any local power sites not targeted for takeover by Hydro. Referring to six small plants recently purchased "with the object of rendering service at lower costs in certain districts," he forecast future acquisitions

1O2 Power at Cost

"where it was deemed economically sound." Otherwise, private and non-Hydro municipal systems would have to fend for themselves, for the government was already doing everything possible for the rural consumer. When J.R. Cooke announced just five months later that the HEPC intended to acquire all private waterpowers and generating plants in the province, the Farmers' Sun was incensed. It could not imagine a more objectionable policy. Besides engaging the government "in what private enterprise can do better," Hydro's policy was destined to add to the public debt by "not less than a hundred millions."4 Rather than resisting Hydro, some private developers actively sought its financial and technical assistance when contemplating new projects. Such co-operation was seldom forthcoming. RJ. Delyea and his two partners in the Bancroft Light and Power Co. asked the Commission in November 1923 whether it "might be induced" to help them develop their site "on a scale commensurate with the supply of power available here." Gaby would not hear of it. Referring to "trifling" stream flow and "insignificant" markets, he dismissed the enterprise as "one of a numerous class of small isolated water powers scattered throughout the Province which are quite beyond the scope of the activities of the Commission."5 Nevertheless, small-scale power systems remained attractive, but entrepreneurs' willingness to build them depended very much on whether Hydro could be expected to keep out of local markets. In 1924, Andrew W. Gray (Cons., Leeds) told Cooke of a proposal by some constituents to produce hydroelectricity on a section of the Rideau Canal between Kingston and Newboro. They were willing to assume full responsibility for the area's power needs, but only if "the Hydro will agree not to interfere."6 Similarly, in 1936 Charles E. Bell, who was contemplating erecting a power station at Burk's Falls, twenty-three miles north of Huntsville, asked another Hydro commissioner, Arthur Roebuck, whether the HEPC planned to expand into that district. Although Roebuck offered no guarantees either way, he nevertheless attempted to dissuade Bell from proceeding. "The experience in the past of small privately-owned plants has been anything but satisfactory," Roebuck wrote. Load growth and line extensions generally resulted in insufficient plant capacity after only a few years, "and further sources of power are either difficult to obtain or too expensive."7 Taken as a whole, the HEPC'S relations with small and independent power producers were decidedly mixed. The Gregory Commission noted in its 1924 report that Hydro had frequently discouraged private enterprise, only reluctantly conceding it a place "in those re-

iO3 The Battle for the Bruce gions were the developments are essential for the maintenance of a specific industry, and into which territory the Commission has not extended its services." However, Beck was able to boast in December 1920 that each of the ninety-four power companies acquired by Hydro and its municipal partners had been won "by friendly negotiations"; not once had expropriation been necessary. Then and later, as P.P. Morrissey observed in his 1951 Columbia University doctoral dissertation, Hydro facilitated co-operation by "assiduously paying the full investment of the private investors, and often much more," thereby demonstrating a "respect for private property."8 Some vendors may have believed that the day of the independent producer had passed. Others, fearing the financial repercussions should they be the first to incite Hydro to use its power of expropriation, may well have decided to sell their operations while they could still profit by doing so. For whatever reason, Hydro encountered remarkably little resistance as it gradually acquired control of southern Ontario's rural power market. A notable exception occurred in Bruce County in the late 19203. The HEPC had demonstrated little interest in the Bruce power market until a private investor, Wilbur Burton Foshay, burst on the scene in 1928 and threatened to exclude the provincial commission entirely. Up for grabs was a primarily small town, hamlet, and rural clientele. Since Hydro was at that very moment intent on proving the efficacy of its own rural electrification program, to critics both inside and outside the province, some type of face-saving response to Foshay's intrusions seemed imperative. It was serious enough that an independent developer would be so impudent as to challenge Hydro openly, but the fact that he was an American citizen compounded the offence. For several years past the HEPC had been subjected to a steady barrage of anti-public ownership propaganda from south of the border. This had stirred deep resentment in the Commission, which in effect came to see in the events on the Bruce a chance to strike back at its American accusers. The organization responsible for much of the propaganda directed against Hydro was the National Electric Light Association (NELA), an alliance of privately owned electric utility companies in the United States committed to halting the growth of public ownership. Between 1902 and 1922 the number of publicly owned light and power establishments in that country grew from 23 per cent to 41 per cent of the total. More important, private companies still served 87 per cent of all consumers, but the trend was disconcerting nonetheless. In the words of the NELA'S historian, advocates of public ownership were considered "barbarian socialists tearing at the fabric of civili-

104 Power at Cost

zation." Free enterprise and the profit motive, whatever their shortcomings, were much preferred to the "economically unsound" dogma of public ownership.9 The NELA relied on a broad range of promotional techniques newspaper advertisements, public speakers, and university courses and scholarships dedicated to public utilities research. Small investors were also encouraged to dabble in utility stocks, so that "average" Americans would sense that they too had a vested interest, however minute, in the preservation of private ownership. The NELA'S most controversial activities commenced in 1921, when it began sponsoring the publication of books and pamphlets for distribution in schools and among the general public. Most of the works vilified public ownership in general, and the HEPC in particular. Critics of the American utilities had recently begun to distribute frequently exaggerated reports of their own in which the supposedly tremendous progress of the HEPC was compared to the lack-lustre record of most private companies. Thus, the NELA realized that if it hoped to stop the us government's proposed publicly owned hydroelectric developments at places like Muscle Shoals and Boulder Dam, it must first discredit the HEPC. TO Hydro's rural electrification program received its fair share of the abuse, although not every attack was directly attributable to the NELA. In 1924, the us National Grange referred to the Ontario experiment when it passed a resolution urging the American government to construct and operate electric power plants so that farmers could be provided with electricity "at cost." G.M. Gadsby, president of the Pennsylvania Electric Association, tried to persuade the convention that its model was flawed. The Ontario government's grantsin-aid, he said, distorted the true picture of costs and resulted in an "indirect charge for the service being paid through taxes at the expense of all, whether users or not."11 Two NELA-inspired tracts appeared in 1925. The first, a pamphlet by Samuel Wyer, condemned the entire Hydro system because "the short hour domestic consumer" was "arbitrarily and without regard to the 'cost' situation, given a lower rate than the cost situation would warrant." Similarly, rural electric service had been subsidized "at the expense of the public," thereby "adding to the tax burden of the farmers." Niagara in Politics, by Professor James Mavor of the University of Toronto, partially contradicted Wyer. Accusing Hydro of conducting a "reign of terror," he charged that in urban areas domestic electricity users were given "abnormally low rates" at the expense of large-load "power" customers. By contrast, "in the rural districts where the population is scanty and the votes are distributed,

105 The Battle for the Bruce

the rates alike for domestic service and for power are abnormally high." Albert Ottinger, attorney-general of the state of New York, expressed a similar viewpoint the following year. He urged his state to avoid what had happened in Ontario. There "a small group of self-perpetuating politicians" had "the Government and the people ... at their absolute mercy." As a result, "farmers and the poor people in the counties" were "compelled to pay higher rates than those in congested areas" simply because they had fewer votes.12 The most comprehensive critique of the HEPC'S rural electrification efforts was written in 1928 by E. A. Stewart, a professor of agricultural engineering at the University of Minnesota. "Quite commonly," he noted, "speakers and writers in the United States convey the impression that practically all the farms in Ontario are electrified, that electric energy is available to the Ontario farmer at 2 and 3 cents a K.W.H., and as a consequence has lifted the burden of drudgery from him and his family." To determine the truth of these claims he spent several days during the fall of 1925 touring the farming districts of Woodstock, Waterloo, and Stratford, as well as interviewing officials at HE PC headquarters, all the while flogging his university credentials as proof of his scholarly objectivity. His report, although not so inflammatory as Hydro's reactions to it suggested, nevertheless contradicted much of the propaganda being spread by public ownership's supporters in the United States.13 Stewart did make a point of identifying many of the strengths of the rural program, such as the high construction standards in the distribution system. He also admitted that Ontario farmers on average used more electricity than their counterparts in the central United States and applauded the provincial government for building transmission lines "for which capital otherwise was not obtainable" and taking on itself much of the "burden of pioneering work in rural electrification." In addition, he acknowledged that certain factors retarding the program's expansion, such as the high cost of electrical equipment and appliances, were largely beyond Hydro's control. His principal criticism was that hydroelectricity was considered "more a matter of convenience than an income producing investment" by those Ontario farmers using the service: It is certainly a sad fact that those farmers, who are paying a high price for this service, and who are being helped so much by the Provincial Government, are not making more use of such service. When only 24% of these farmers have any motors (outside of those on washing machines and vacuum cleaners), only 16% have washing machines and only 44% are using electricity for any other purposes than lights and an electric iron, electricity

106 Power at Cost is not taking its place in agriculture as it has done in other industries. It is not contributing very much toward earning its cost by reducing labor and operating costs.14

Stewart then took aim at some of the more common misrepresentations. Despite the high level of government assistance, only 2.52 per cent of Ontario's farms had central-station electrical service, slightly less than the American average. As a rule only the "richest agricultural districts" were served, and much of the area that Hydro classified as "agricultural" was actually "suburban." Stewart also disputed the HEPC'S reputation for low rates; fewer than half of all rural consumers (20 per cent in some districts) received power for as little as two cents per kilowatt-hour, and only those using very large quantities qualified for "cheap electricity." Based on this evidence, Stewart concluded that the HEPC could never duplicate the benefits of American utilities unless it first taught Ontario's farmers how to make hydroelectricity a labour-saving, money-making device.15 Stewart's report touched a raw nerve at Hydro headquarters. For several years thereafter the Commission brooded over how the professor had tricked it into believing that in return for co-operation he would issue a fair and unbiased publication under the auspices of the University of Minnesota. Instead, he had denied Hydro final editorial control over the manuscript and had taken payment from the NELA. The Commission's reaction was understandable, although Stewart's criticism was hardly excessive. Admittedly, Stewart erred by basing many of his conclusions on a small and arguably unrepresentative sampling of farms. But many of the data he used could easily have been gleaned from Hydro's own annual reports, thereby debunking the charge that he betrayed the Commission's confidence. The report's major flaw was that Stewart used unfair criteria to judge the HEPC. Instead of comparing Hydro's progress to that of a private utility serving rural customers in a similar environment, he projected an ideal performance rating and then demonstrated how far short of that ideal the Commission fell.16 This was unrealistic, but Hydro's reaction was nothing short of paranoid. The Commission felt betrayed, and when the opportunity presented itself on the Bruce Peninsula, it lashed back. The HEPC first contemplated a major expansion into Bruce County in 1917, when the Walkerton Electric Light and Power Co. (WELPC) and the Southampton-based Saugeen Electric Light and Power Co. (SELPC) were offered for sale. Negotiations soon collapsed when the

icy Trte Battle for the Bruce

firms' co-owners, David Robertson and John Rowland, refused to budge on their extravagant asking price of $235,000.17 They had every reason to bide their time; Hydro's closest generating station was at Eugenia Falls, thirty-five miles east of Walkerton, and its power lines reached only a handful of Bruce County residents. Thus their hold on the local market seemed secure for some time to come. Following this initial rebuff, Hydro showed little interest in the two properties throughout the early 19205. Yet the idea of an HEPC purchase was not allowed to die altogether. Representatives of Southampton's power users, frustrated at the SELPC'S unwillingness to correct the recurring problem of power shortages, periodically reminded Hydro of their discontent. The Commission's response was to retain an air of polite detachment, never completely dispelling the notion that it might one day rescue Bruce County from the alleged abuses of "private power," yet not encouraging it either. Consequently, when an angry delegation from Southampton and Port Elgin descended on the HEFC'S head office in January 1928, demanding some form of provincial redress, no one could have imagined what would follow.18 Robertson promptly appealed to Premier Ferguson to understand that the SELPC'S record was not as bad as its critics claimed and that "in every small municipality" there was always "someone in opposition." If municipalities were to have the right to contract with the HEPC for light and power, then the province should assume some responsibility for those private entrepreneurs displaced in the process. In his own case, he was prepared to reopen negotiations for the sale of the Saugeen system. Robertson estimated that Hydro's alternative, building a twelve-mile connecting link to its nearest transmission line at Tara, would cost $30,000. Yet that would be "throwing away money" by needless duplication, because the SELPC'S facilities were already built. Besides, the Saugeen generating station would be a handy auxiliary for the Eugenia Falls plant, recently plagued by low water levels. Robertson conveniently neglected to mention that his own company's history of power shortages was largely responsible for the present unrest. Nevertheless, he warned that he would not be cowed into abandoning the Southampton and Port Elgin markets. Unless the Commission agreed to buy his company, it would find further expansion in Bruce County a tedious and costly venture indeed.19 Hydro had encountered, and generally ignored, similar threats from other localities in the past. But this time it was rumoured that more was involved than a disgruntled businessman attempting to preserve a lucrative monopoly. In fact, a month after receiving Rob-

io8 Power at Cost ertson's ultimatum, Gaby was instructed to report on the activities of private companies currently engaged in rural electrification in Ontario. The Commission wanted descriptions of their rate schedules, line mileage, and clientele, both present and anticipated. Gaby was also "to ascertain and report under what authority such private corporations were making these extensions."20 Although not all of the chief engineer's findings are now available, the mere fact that such an investigation was held speaks volumes about Hydro's growing concern over competition for the rural market. For whatever reasons - political, economic, or ideological - the HEPC was preparing itself to compete as aggressively for the farm and hamlet customer as traditionally it had done for its urban domestic, commercial, and industrial clientele. It did not have to wait long for a fight. In June, to the surprise of townsfolk and Hydro officials alike, the Walkerton and Saugeen firms were sold to an American holding company, the Public Utilities Consolidated Corp. of Arizona (PUCC). Based in Minneapolis, Minnesota, the PUCC was the umbrella under which Wilbur Burton Foshay had amassed banking, public utility, and steamship holdings in Central America and over thirty us states. The PUCC, as was its custom, allowed each of the Bruce County properties to retain its separate corporate identity, and John Rowland stayed on as manager.21 The HEPC'S first involvement with the new owners occurred two months after the purchase, when Foshay asked permission to tie into the provincial system as insurance against further power shortages. Hydro denied the request and suggested instead that Foshay sell it all of his recent Bruce County acquisitions, without profit. Foshay's understandably brusque rejection of this blunt proposal effectively set the tone for his subsequent relations with Hydro.22 Spurned thus, Foshay set about winning support locally. He hoped to prove, with the help of a highly publicized $200,000 improvement and expansion campaign, that private enterprise was anxious, following so many years of neglect, to satisfy the county's total power needs. Heading the list of improvements was a transmission line to link the Walkerton and Southampton systems. Before work on this could begin, Foshay needed Bruce County council's permission to erect his lines along its roads. When it became apparent that a decision in this regard would take several months, the company forged ahead with the much less expedient, and considerably more expensive, alternative of purchasing a right-of-way from private landowners in Brant and Greenock townships. Despite Foshay's obvious enthusiasm, his detractors in Bruce remained un-

109 The Battle for the Bruce

convinced. Earlier a story had circulated that Foshay was importing hydro poles from Chicago, instead of purchasing them locally. Now he was doling out large sums for easements, probably unnecessarily. Rather than winning supporters, Foshay's initial activities merely raised concerns among his existing customers that they would eventually "pay through the nose" for these and other extravagances.23 Undeterred, Foshay next secured an option on the Sauble Falls power plant which supplied the town of Wiarton, fifteen miles northwest of Owen Sound. The transaction, if completed, would mean that every hydroelectric site of consequence in Bruce County had been allowed to pass into foreign hands. Equally significant, by cornering the most lucrative sections of the power market within a Walkerton-Saugeen-Wiarton system, Foshay would make it virtually impossible for the HEPC to serve the county's remaining farms and hamlets on anything approaching a competitive basis. Many local residents sensed that things were happening much too quickly. The Owen Sound Sun-Times, a relentless champion of public ownership, articulated the fears of many when it predicted that "sinister motives" were behind this radical turn of events.24 Far more ominous notes were sounded in Toronto, where the Globe and the Telegram warned that the very existence of Ontario's publicly owned power network depended on stopping Foshay. Both papers believed that Foshay was a pawn or front man for the preeminent us private power mogul, Samuel Insull. What other purpose, the Globe asked, could the "so-called Arizona corporation" have in entering Ontario "if not to promote private ownership of power?" Private utilities throughout the United States, desperate to protect their "large profits and 'melon cutting'," were engaged "in a fight to the death against public ownership"; Foshay's bid to establish an independent network in Bruce County was but another step in an odious scheme to export the struggle northward. The Telegram was certain that Bruce County was Insult's next objective, since it was "absurd" to suggest that the Walkerton and Saugeen systems had been acquired for their small revenues alone. Every toehold that private power companies won in Ontario brought closer the day when "the influence and strength of public ownership" would be "gradually sapped through political manipulation, and through the powerful propaganda organization of the u.s. power ring."25 The HEPC'S initial foray into the Bruce campaign was less than auspicious. T.C. James, an engineer on the Eugenia System, described to Southampton's town council in September 1928 the procedure for becoming a partner municipality. He explained how Hydro, strictly on its own initiative, had already worked out the

no

Power at Cost

estimated costs of serving the town. Before the figuYes could be released, however, council needed to issue a formal request. This was done on 5 October 1928, despite Foshay's repeated assurances that the provincial service could never match his own. When the estimates arrived a few days later, the councillors must have wondered whether they had not been too hasty in dismissing the brash newcomer. On the basis of supplying Southampton and Port Elgin with a combined load of 300 horsepower, Hydro's price was $61 per horsepower. Foshay's rate, which many had previously considered extortionate, was $60 per horsepower.26 Gaby attempted to justify the price by listing the many benefits associated with an HEPC contract. First and foremost, by joining Hydro and paying slightly higher rates, the townsfolk would be building equity in their own distribution system. By contrast, any money they paid to Foshay was lost for ever, since much of it would go directly into shareholders' pockets. Second, provincial power might cost more initially, but by gradually eliminating its various reserve fund obligations the town could anticipate rates "much lower" than could "possibly be obtained under private ownership." Third, Hydro's interconnected network of generation and transmission facilities enabled it to supply "almost any quantity of power," whereas Foshay, who lacked access to additional supplies of hydroelectricity, would become increasingly dependent on expensive steam or diesel auxiliary plants.27 No doubt encouraged by the HEPC'S poor showing at Southampton and Port Elgin, Foshay continued on the offensive. In early October he finalized the Sauble Falls purchase and promised to increase the capacity of the i8o-horsepower generating plant to 1,000 horsepower within eight months and to tie it into the Walkerton and Saugeen systems before Christmas. Increasingly it seemed, to the Sun-Times at least, that Hydro simply did not care about Bruce County. Wiarton town council had expressed an interest in the HEPC back in March, but no response was received until July. Then, when the proprietors of the Sauble Falls Co. announced that their company was up for sale, Hydro neglected to meet with them to discuss the details. Only after Foshay completed the purchase did Hydro's engineers survey the town, and even then they kept their results secret. Under the circumstances, the Sun-Times doubted that Wiarton would join with Walkerton and Southampton in agitating for public ownership: "At present the disposition certainly is not to struggle any more with Hydro apathy, but to wait and see what the Minneapolis power interests have to offer."28

111 The Battle for the Bruce

The HEPC'S reluctance to release the report was understandable: because of Wiarton's small power load and relative isolation, the engineers were recommending an embarrassingly high rate of $110 per horsepower. The Commission feared, quite properly, that Foshay would not hesitate to use the report "for propaganda purposes detrimental to Hydro service." Publicizing that type of information would only tarnish the image that Hydro was attempting to promote of itself as the peoples' champion and the defender of small interests victimized by rapacious private corporations.29 The Wiarton reversal merely hardened the HEPC'S resolve to prevail elsewhere in the county. Meeting with town council members at Walkerton and Southampton on 16 October, T.C. James, C. Alfred Maguire, a former mayor of Toronto who had been appointed a Hydro commissioner in 1925, and the OMEA'S T.J. Hannigan intimated for the first time that expropriation might be used to rid the district of its troublesome elements. Despite its legal right to do so, never before had the HEPC resorted to such a drastic expedient to dispose of a competitor. Expropriation could be a slow and costly process, strewn with public relations perils. Therefore the delegation announced a second ploy to force Foshay into acquiescence; henceforth, the rate for provincial power in Southampton would not be $61 per horsepower, as previously quoted, but only $40. The HEPC had taken liberties in the past when interpreting "power at cost" in rural areas, but usually the result was to increase rates slightly, not slash them by one-third. When pressed for an explanation as to how such a dramatic reduction could suddenly be possible, Hydro replied only that a "different hook-up" was planned. Frederick W. Elliott (Lib., Bruce North), although pleased by the prospect of lower energy charges, questioned the Commission's integrity: there had been "no change in the rivers and no new developments," he told the legislature several months later, "so why was the hook-up not available sooner?"3° Hydro did not feel compelled to defend its actions. Whatever its previous derelictions, it was now committed to controlling power production and distribution in Bruce County. By making a special offer to Southampton, the HEPC risked alienating further the few customers that it did have in the county. Tara had been paying $90 per horsepower for the past ten years, largely because of a miscalculation not of its own making. Hydro had originally planned to build a transmission line from Owen Sound to Southampton and Port Elgin, passing through Tara en route. But by the time the line reached Tara in 1918, the other two communities had decided to remain with the SELPC. Consequently, Tara inad-

112 Power at Cost vertently had become responsible for paying all construction, maintenance, and reserve fund charges on a transmission line designed to carry loads several times larger than its own. Thus the community was adamant that any new pricing arrangements implemented in Bruce must also include a substantial rate reduction and rebate for Tara.31 Kincardine, an HE PC customer thirty miles south of Southampton, was piqued that whereas its own rates had been permitted to rise at will, Hydro would engage in a bidding war elsewhere in the county. Kincardine's advice to the uninitiated was to be aware that the Commission could at any time renege on the attractive rates it initially offered. In Kincardine's case, power originally promised at $40 per horsepower had since risen to $70. Not surprising, the little lakeshore community had come to regard Hydro's campaign in Bruce as an undignified "catch-as-catch-can fight with a private concern."?2 Foshay was determined that the matter not rest on rates alone; rather, he intended to defeat Hydro at its own game - area coverage. So far he had spared no expense in updating the Walkerton and Saugeen municipal systems. But what won him the most converts were the lines he had built out to the surrounding farms and hamlets, "something," the Kincardine Review-Reporter claimed, that Hydro had been "entirely indifferent of doing." The paper hoped that he would have a chance to complete his rural extensions before the HEPC used its "legal clout" to take away his properties, for then Hydro would have "to serve the neglected parts of Bruce," whether it wanted to or not. Foshay soon had another ally in the Farmers' Sun, which repeatedly criticized the Commission for its "unreasonable opposition" to private initiative. The publication thought Hydro foolish to belabour Foshay's nationality, since foreign businesspeople already dominated the provincial economy. Hydro should instead, swallow its pride and bravely face up to what Foshay appeared to have accomplished: by relying on small waterpowers, low transmission voltages, and auxiliary diesel plants, he had effectively disproved every HEPC theory about the financial viability of rural electrification. 33 Maguire, James, and Hannigan returned to Southampton on 27 October, but this time they had to share the podium in the council's chambers with Foshay's new general manager, William H. Groves. Groves was unequivocal - his company would match any offer that the HEPC made to the town. He thereupon matched Hydro's earlier bid of $40 per horsepower and announced a minimum monthly bill for domestic lighting customers of $1.25 (Hydro's was

113

The

Battle for the Bruce

$1.39). Groves also outlined Foshay's plans to open appliance stores in Port Elgin, Southampton, Walkerton, and Wiarton; to upgrade the Sauble Falls plant; and to remedy Southampton's chronic power shortages by installing a 650-horsepower diesel generator.34 Groves made a forceful presentation, but not strong enough to prevent the council from voting five to one in favour of turning matters over to the ratepayers. If, in light of the SELPC'S recent resurgence, townsfolk still wished Hydro to complete the estimating process, then the Power Commission Act stipulated that they must vote accordingly in a municipal by-law. The sole dissenter was the mayor, CM. Bell, a furniture manufacturer and ardent advocate of privately owned utilities. The remaining councillors could be swayed either way but sensibly chose to keep interest in the provincial scheme alive, particularly since all that the community stood to lose was the expense of holding the vote.35 In a candid letter to Ferguson, C.A. Magrath expressed his reluctance to engage Foshay in a public brawl. Earlier in the year the chairman had emphasized that the Commission had "no quarrel with private enterprise," but now he dwelt on the impossibility of private and public interests sharing the same field. Magrath's personal ambiguity over the question may have been partially responsible for Hydro's hesitancy in entering the Bruce County controversy. Nevertheless, he recognized that any municipality purchasing energy from an independent supplier had the right to solicit estimates from the provincial commission, even if it meant thrusting Hydro into the midst of a nasty fracas. In order to minimize any adverse publicity, Magrath recommended that whenever possible Hydro limit its involvement in local disputes to furnishing requested information. He realized that many did not share his views and believed instead that Hydro had a responsibility to wage aggressive campaigns against private interests wherever the opportunity arose. But such conflicts, Magrath lamented, would "have but one ending": they could only "bring the Commission into disrepute." Although the path of cooperation and negotiation was to be preferred, Magrath admitted that occasionally situations would arise where conflict was unavoidable. In those instances Hydro should act aggressively and not hesitate to flaunt its authority to expropriate, so that its competitors would know that failure to behave reasonably would invite trouble.36 Nor did Magrath feel that all private competitors should be regarded equally. With a capacity of over one million horsepower, Hydro had little reason to fear distributors capable of handling even 50,000 horsepower. Naturally, exceptions might arise when the

ii4

Power at Cost

HEPC would be justified in adopting special measures - such as "below cost" rates - to hinder the expansion plans of a competing power distributor and thereby avert future conflicts. It is significant that Magrath was still not prepared to rule out altogether some limited form of coexistence between Hydro and the independent firms. So long as competitors could be confined to their present distribution areas, there was little reason for the Commission to assume the inconvenience and expense of purchasing their entire operations. Similar discretion should be exercised when dealing with Americans. Certainly Magrath believed that the province could not afford "to be stampeded into buying property" every time rumours circulated of the impending arrival of another foreign competitor. Besides, Hydro's strength and reputation in Old Ontario virtually guaranteed that few American utilities would dare to venture northward. Once again, there would always be exceptions - like Foshay - but strategies for handling them could be developed on an ad hoc basis.37 Having taken his ambiguous argument almost full circle, the chairman came down on the side of firm action in Bruce. Three public meetings were scheduled at Southampton during the two weeks preceding the crucial 26 November by-law vote, and Magrath was determined not to waste any opportunity to affect the outcome. It is unlikely that Ferguson was the least bit influenced by Magrath's muddled musings. Nevertheless, the premier pledged a strong government presence during the final stages of the campaign. This time when the HEPC "took to the stump in Bruce County," he promised that it would not be acting alone.38 Magrath's fellow commissioners, Cooke and Maguire, as well as Ferguson's minister of lands and forests, William D. Finlayson, joined him at Southampton on 15 November for the first meeting. Never before, according to Hannigan, had the entire Commission, and a personal representative of the premier, appeared together on the same public platform in an attempt to recruit a new Hydro municipality. Accompanying them at Southampton were several representatives from similar-sized Hydro communities, each of whom in turn delivered a rousing testimonial to the benefits of the provincial system. Unfortunately the Hydro officials failed to distinguish themselves; all they had to offer was the same unimaginative sales pitch that their underlings had trotted out hundreds of times before in other centres. Finlayson proved equally lack-lustre; he dutifully rhymed off a hackneyed list of public ownership plaudits and reminded the audience that the government was "most anxious" that Hydro receive a strong endorsement in Southampton. Only

ii5 The Battle for the Bruce

Hannigan offered a fresh insight. He noted that within one week of Hydro's promise to reduce Southampton's power rates to their lowest level in twenty-five years, the Foshay group had followed suit. In this way the HEPC was responsible for a significant decline in power costs even before the community had formally entrusted it with a contract.39 In presenting the Foshay viewpoint on 21 November, Groves remained adamant that the PUCC had no ties to American corporate interests hostile to public ownership; its concerns were purely economic, not political. Since Foshay's aim had always been to operate the Bruce County properties as going concerns, rather than to speculate on their resale value, he was "quite satisfied to be isolated in this two-by-four space, entirely surrounded by Hydro."40 The following evening, Cooke, Gaby, Magrath, and Maguire again climbed onto the town hall stage in a bid to discredit the Foshay option. This time their presentation was decidedly more forceful. Magrath cajoled the capacity crowd the longest, warning that unless Hydro were given the go-ahead, the bothersome issue would inevitably return to haunt everyone. Without offering an explanation, he declared that publicly and privately owned systems simply could not coexist in Bruce County. Cooke went even farther and intimated that Hydro would do its utmost to exacerbate tensions in the event of a proFoshay decision. He reminded the audience that the PUCC controlled less than 5,000 horsepower in the county, whereas the HEPC dominated every other hydroelectric site of consequence in the region. The Commission could therefore severely limit Foshay's ability to expand his services, simply by refusing to sell him additional power.41 Both sides continued campaigning until the polls closed on 26 November. When the last vote was cast, the HEPC had prevailed by a decisive margin of 228 to 125, but it soon became apparent that Hydro had failed to deliver the knockout blow. Groves promptly announced that the SELPC intended to "ignore" the vote, since it was "just an expression of opinion" and did "not bind the town to anything." Work on previously planned extensions would proceed "as though nothing had happened," so that when the vote was taken on the Hydro by-law to approve the necessary funding, service would have been "so improved in the district" that the town would not "listen to any suggestion for change."42 Foshay won a major concession on 5 December, when Bruce's council finally granted him permission to run his lines along certain county roads. One month later, the ratepayers of Greenock and Saugeen townships voted overwhelmingly in favour of a Foshay

n6

Power at Cost

contract, ignoring Hydro's warnings that private distributors never bothered to serve farmers in "the more sparsely populated sections." Then, in February 1929, Foshay added the Cargill Electric Light and Power Co. (six miles northwest of Walkerton) to his previous acquisitions.43 Hydro's engineers, meanwhile, had worked out the cost of building a new distribution system in Southampton. Before releasing its findings, the HEPC insisted that town council "make every effort" to purchase the existing facilities "at a reasonable figure," but Foshay was still not interested. When the Commission's solicitor, I.B. Lucas, finally presented the estimates - an outlay of $32,500 would "enable Southampton to be self-sufficient in power" - council was definitely in a mood to listen. Massive ice mounds in the Saugeen River had of late dramatically reduced the SELPC'S generating capacity, caused annoying power outages, and revived memories of the unreliable service provided by the previous owners. The councillors therefore agreed that on 11 March the ratepayers would decide once and for all whether their town was to remain with Foshay or issue $33,000 worth of debentures and join the provincial network.44 Magrath now seemed concerned not so much about protecting the HE PC'S public persona as with ridding the province of the troublesome Foshay. In a letter to Ferguson, he revived the bugbear of nefarious Americans attempting to discredit Hydro. Although the Commission had "absolutely no desire to interfere with legitimately conducted private enterprise," Magrath could never accept that Foshay was legitimate. If a "centralized organization" like the NELA could use customer revenues to finance people like E.A. Stewart to criticize unfairly the HEPC, then Magrath saw no reason "why they might not attempt to make use of such funds to embarrass us ... through the operation of a small plant controlled by a power corporation of that country." He therefore urged Ferguson to declare publicly that Hydro would expropriate any company that it had "reason to feel" was "engaged in such a policy."45 In a second letter, written the next day, Magrath outlined for the premier a measure designed to strip Ontario's hydroelectric industry of the last vestiges of competition: What would you think of your saying when making your statement that if necessary one solution, apart from expropriation, would be for the Government to obtain authority to use the Commission for the purpose of seeing that power rates are based on actual expenditures, which after all is the accepted policy of the Province. It might be helpful to say that if necessary the Government will not hesitate to put through legislation authorizing the

117 The Battle for the Bruce Commission to investigate the affairs of any private company where there is reason to believe that it is carrying on its activities with the object of embarrassing this public ownership enterprise.46

Having met its equal at rate manipulation, the HEPC hoped to raise the stakes, and not just in Bruce County. Ferguson ignored his overzealous Hydro chairman's suggestion. It was one thing to protect the HEPC'S cherished image; it was another altogether to tear out the remaining roots of free enterprise. Occasionally in the legislature, Ferguson uttered mild reminders about expropriation when referring to anonymous private interests seeking "to undermine the Hydro organization" - statements that prompted the Farmers' Sun to compare him to the Italian fascist, Benito Mussolini - but beyond that he would not go. Other members were less reticent about staking out a position. Charles A. Robertson (Lib., Huron North) and David J. Taylor (Prog., Grey North) were two veterans of the Bruce County power battle who vigorously applauded Foshay's initiative. Given his superior service and low rates, they thought the people of the Bruce were entirely justified in turning their backs on the provincial commission.47 Denied the additional authority that Magrath had sought, Hydro continued to tighten the pincers around Foshay in other ways. Late in February 1929 it purchased two of the area's remaining generating stations. These were the plant owned by the Canada Cement Co., at Hanover, and John Burrill's Maple Hill plant, situated four miles east of Foshay's WELPC station. Although the HEPC claimed that it needed the two small sites to augment its Eugenia Falls facility, it seems likelier that Hydro hoped to hinder Foshay by depriving him of the remaining neutral sources of supply. Shortly thereafter, and only one week before Southampton voted on the debentures bylaw, the Commission showed a fine sense of political timing by distributing over $100,000 in refunds among the neighbouring municipalities of the Georgian Bay System.48 In Southampton itself, the population was said to be "all agog" over the impending vote. Even the local Anglican congregation divided, as pro-Foshay parishioners tried to prevent the church wardens from placing the rector, a staunch Hydro supporter, on the voters' list as the representative of the rectory property. The Foshay group was forced to have its promotional circulars and pamphlets prepared outside the community, since the proprietor of the local printing shop, Ernest E. Shortt, was also Southampton's new proHydro mayor. Arguably the most contentious issue was the reliability of the HEPC'S $40-per-horsepower quotation. Foshay's

118 Power at Cost supporters took great pains devising ingenious formulae that purportedly proved that provincial rates would rapidly exceed $80 per horsepower. Some of the area's more prominent manufacturers were also recruited to denounce the HEPC. William Krug, who owned a furniture factory in Chesley, twenty-one miles southeast of Southampton, advised against giving "every control, soul, and body to Hydro" as his own town had done. He maintained that by taking power from a private distributor, a community could always resort to pressure tactics if the service became unsatisfactory. Under the autocratic HEPC, however, with its propensity for reducing local utilities commissions to mere pawns, there was no hope for redress. 49 Hydro sent Hannigan to Southampton to co-ordinate its activities during the final ten days of the campaign. The main event occurred on 5 March, when the HEPC'S star pitchmen arrived to peddle their public ownership panacea one last time. Maguire led the way, denouncing Foshay for being so presumptuous as to operate a hydroelectric system in defiance of "the accepted policy of the people of Ontario." He also referred to a recent PUCC bond issue that paid a hefty y-per-cent interest. Since the HEPC'S money only cost 4.5 per cent, he deduced that Southampton and the rest of Foshay's Bruce County customers would ultimately pay higher rates so that American investors could snatch up an additional 2.5 per cent.50 Hydro was again victorious on 11 March, but by a reduced margin. Of the 442 votes cast - almost a loo-per-cent turnout - 228 favoured the provincial system (the same number that had supported the enabling by-law), and 214 were opposed. Foshay's supporters did not take the defeat lightly. Three hundred residents of Saugeen Township signed a petition promising to boycott Southampton's merchants in the event that town council went ahead and signed a Hydro contract. They feared that if Foshay were ejected from Southampton, he might abandon his plans to carry hydroelectricity to farms and hamlets elsewhere in the township. A more imaginative tack was tried by two local businessmen a few days later. William Eldridge, a saw-mill owner, and Peter Loucks, a liveryman, secured an injunction restraining Southampton council from contracting with the provincial commission.51 The pair argued that both by-laws were illegal because property owners only, and not the entire electorate, had been allowed to vote. However, Mr Justice Rose of the Supreme Court of Ontario overturned the injunction on 27 March, ruling that the Southampton by-laws, which were fundamentally identical to every other municipal Hydro by-law ever passed, were valid and proper. Section 297 of the Municipal Act was clear on the matter:

119 The Battle for the Bruce

whenever a municipal corporation planned to incur debts that would not be repaid under the current year's estimates - such as a twentyyear HEPC contract - it must first acquire the assent of a majority of electors entitled to vote on money by-laws.52 At the very moment Rose was handing down his judgment, the legislative assembly was in an uproar over the government's handling of the issue. The standard practice was to consolidate and ratify as one bill all municipal Hydro by-laws passed during the preceding year. But when Ferguson's Conservatives pushed through by a vote of fifty-seven to twenty-eight the 1929 version of the bill, which included the Southampton by-law, the opposition was outraged. It accused the government of attempting to override the impartial judgment of the courts, not to mention sheltering the HEPC from criticism, by introducing the legislation while litigation was pending.53 Predictably, the Farmers' Sun labelled the event "the most startling episode in the history of the Provincial Legislature" and claimed that here at last was irrefutable proof of the premier's desire to stifle free enterprise in Bruce County. Instead of stepping aside and granting private initiative a fair opportunity to "make good its claim" to provide rural dwellers with affordable power, Ferguson had "violently assailed" Foshay's projects with "unseemly threats" from the beginning. Such an "amazing course," the paper believed, could be explained only by the government's determination "to defer an inevitable conflict with the farmers" by concealing the fact that private interests were able to serve rural areas more efficiently than Hydro could.54 Against this background of debate and criticism, the HEPC'S representatives hurried to secure their hold on Southampton. Seldom had the Commission monitored a municipal situation so attentively; it demanded frequent updates from staff members on the scene and emphasized in no uncertain terms that Hydro must not be compromised. Negotiations were also resumed in earnest on 17 May for the purchase of Foshay's entire Bruce County holdings. I.B. Lucas, who was instructed to develop a contingency plan in the event that a "diplomatic settlement" proved impossible, knew that expropriation was out of the question. The controversy in Bruce had attracted far too much publicity across the province to permit the Commission "to adopt any strong-hand methods."55 Foshay himself travelled to Toronto from Minneapolis to meet with Ferguson and the Commission. The discussions were frank but inconclusive. Hydro continued to quiz Foshay about links to Samuel Insull and the NELA, and he in turn reiterated that financial consid-

120 Power at Cost erations alone had influenced the PUCC'S decision to enter Ontario. Only after the Saugeen and Walkerton purchases were finalized did he and his associates realize that the province's power situation had been "entirely misrepresented to us." Foshay claimed that prior to making the investment he knew "practically nothing about Hydro" and certainly harboured "no designs on the policies that had been accepted by the people of Ontario." Rather, he believed that Bruce County provided a setting ideally suited to his corporate philosophy. In contrast to the HEPC'S approach, which relied on large and integrated generating and distribution systems, Foshay believed that higher profits could be earned by concentrating on smaller communities that were relatively self-sufficient in energy and far removed from metropolitan areas and saturated power markets. Without giving away any corporate secrets, he insisted that his method, in addition to being profitable, also enabled him to charge rates comparable to those available in larger centres. If his inquisitors wanted proof, he referred them to his American subsidiaries which sold power to 192 communities with average populations of less than 1,600 persons each. Ferguson, whose motivation was political, was in no mood to back down. He began by denying that Foshay's citizenship was an issue in the dispute, only to emphasize later in the conversation how difficult it was for an outsider "to understand the position of the publicly-owned Hydro Electric Power enterprise in the life of this Province." Not wishing to be regarded as "in the least attempting" to dictate to Foshay, Ferguson was none the less adamant that "in view of the agitation" that had developed, the only solution lay in the Commission buying the American's Ontario assets in their entirety. The premier hoped that an amicable acquisition could be arranged, but he made it perfectly clear to his visitor that expropriation was also conceivable.56 Foshay promptly departed for home to confer with his fellow investors. For its part, the HEPC was confident that a favourable settlement was imminent. To its consternation, the next word the Commission heard of Foshay was not that he was prepared to surrender his holdings on command but that he had embarked on another frenetic round of promotions to extend his Bruce County distribution network. Between April and August, the ratepayers of Amabel, Brant, and Bruce townships, and the villages of Hepworth, Tiverton, and Underwood, voted by substantial margins to grant Foshay their power franchises. Bruce's council was equally accommodating and granted the company wide authority to erect its lines anywhere in the county.57

121 The Battle for the Bruce

It was in Southampton, however, that the best opportunity for scoring propaganda points still existed. The HEPC'S failure to commence construction on the Tara-Southampton tie line by late June was causing some residents to question whether they had misplaced their confidence. While Foshay's crews scurried about the community's periphery, building extensions and signing up new rural customers, Hydro was inactive. There was even a movement afoot, not entirely at Foshay's instigation, to petition town council to resubmit the power by-law. Under no circumstances, the Commission warned, should another vote be allowed, for several councillors already were predicting that this time the HEPC would lose by a margin of two to one.58 Hydro was discovering that local goodwill could be a fleeting commodity indeed. Duly reproved, the HEPC finally began to act. Having satisfied itself that the SELPC did not possess an inalienable franchise to run transmission lines along Southampton's streets, Hydro advised council to sever all connections with the company by i October.59 Work also resumed on the long abandoned Tara-to-Southampton extension. Having publicly declared its intent to remove Foshay's equipment from the town, the HEPC preceded yet again to negotiate some sort of comprehensive settlement. Its valuators placed the original purchase price of Foshay's properties at $450,000 and allowed for approximately $200,000 in subsequent improvements. After closer examination of the financial records they raised their estimate to $797,670, but when the two sides met during the first week of September, Foshay demanded $1,210,475. Hydro countered with $825,000; commissioner Cooke thought this to be an amount that not only provided for all of Foshay's expenses but represented "a generous allowance as well." The Minneapolis entrepreneur was unimpressed. "Perhaps I have an exaggerated opinion as to the value of my own time," he responded, "but I believe the time I have spent on this alone is worth considerably more than that figure." Also at issue was the critical question of how much revenue the properties were expected to generate. Foshay insisted that annual earnings would be $100,000 by 1930, once four or five hundred new rural customers were signed up, the revenue from whom would be "nearly all profit." The HEPC thought $22,000 more realistic. This was a significant difference, but Cooke told Ferguson an agreement was definitely attainable, especially since the Commission would not hesitate to spend an additional $10,000 or $15,000 "if absolutely necessary to take care of the deal."60 Foshay remained as unpredictable as ever. Just when the HEPC thought a settlement within reach, he commenced yet another round

122 Power at Cost

of highly publicized extensions. Most notably, in late August he prepared to expand into Grey County for the first time, with a short three-mile line from Hepworth to Shallow Lake. According to the Sun-Times, Shallow Lake's village council was thrilled at the prospect of buying power from a private distributor and had decided long before that the twenty-year contract required by Hydro was too great a commitment to make.61 The move into Grey was more symbol than substance; Shallow Lake's anticipated load was less than 50 horsepower and unlikely to have a significant effect on the system's overall profitability. Nevertheless, Foshay had demonstrated that he was still able and willing to operate independent of the great Hydro behemoth. But the HEPC remained equally resolute. Even when Foshay hinted that he would accept $900,000 and keep the transaction quiet until after the provincial election at the end of October, Hydro refused to budge from its previous offer of $825,000. Then, the unexpected occurred.62 On i November 1929, W.B. Foshay's twelve-year-old PUCC declared bankruptcy, a victim of the same chilling wind that roared up Wall Street and across the western hemisphere, toppling thousands of similar paper empires in its wake. Joseph Chapman, a Minneapolis receiver, wasted little time in revealing the flimsy foundations on which Foshay's holdings rested. With assets valued at approximately $20 million when it collapsed, the PUCC had been financed by the public sale of almost $50 million worth of securities. So frenetic was the buying spree that over 70 per cent of the total sales value had been realized during 1927 and 1928 alone. The operation began to flounder shortly thereafter; sales virtually ceased between July and October 1929, while liabilities rose by $12 million.63 Hydro officials had long suspected that Foshay was involved in some financial sleight of hand. Magrath had indicated to Ferguson, as early as February 1929, that the PUCC'S investment strategy was not as sound as the residents of Bruce believed. He referred to Foshay's recent attempt to finance purchase of the Nevada, California and Oregon Telegraph and Telephone Co. with a $375,000 stock issue. After the California Railroad Commission investigated his valuation, an issue of only $210,000, or 56 per cent of the original amount, was allowed.64 Groves denied that the corporate collapse would hurt Foshay's 2,500 customers in Bruce County. Chapman had ordered him to continue with construction, and Groves naively believed that it would be just a matter of weeks, if not days, before Foshay and his associates refinanced the puce.65 What he did not count on was the HEPC'S opportunism. After hastily reassessing Foshay's Ontario

123 The Battle for the Bruce

holdings, Hydro reduced its offer to $450,000, or $375,000 less than it had been willing to pay just one month earlier. Chapman was rightfully indignant, insisting that the properties were worth "exactly as much today as they were a few weeks ago." He thought the new offer "entirely unreasonable" and refused to recommend acceptance. If the HEPC refused to stand by its initial bid, he was confident that a deal could be forged with one of several private utility companies currently expressing an interest. ^ The HEPC called Chapman's bluff. When making acquisitions, Magrath explained, Hydro traditionally insisted that "the value of a property to a very great extent depends upon its earning capacity." However, in Hydro's earlier dealings with Foshay, an importunate press and public had pressured it into deviating from normal procedures. To "avoid any further trouble," the Commission had offered $825,000 for properties that it believed Foshay purchased and upgraded at "an improvident figure." Once that offer was refused, Hydro reverted to its original "value-based" formula, a decision that Magrath believed justified by recent market trends. In October alone, securities on the New York Stock Exchange had declined by over $15 billion; what better proof could possibly be needed that society was "returning to that fairly sound doctrine of value being based upon earning capacity?" Thus it was purely coincidental that the revised valuation coincided with the PUCC'S passing into receivership. Magrath ended the communication with a warning; under no circumstances, he told Chapman, would Hydro allow itself "to be placed in the same position with other interests that may acquire these properties in Ontario, that we found ourselves in with Mr. Foshay, namely, ignorance as to the difficulties that may arise due to the policy of this Province in respect to the development and distribution of power. "6? Although Hydro had never carried out its oft-threatened expropriations, Magrath was willing to gamble, successfully as it turned out, that merely hinting at the possibility would help to keep rival suitors at bay. The stalemate persisted throughout the fall and winter of 1929. By late March 1930, Chapman finally acknowledged that the expected inquiries from viable private concerns were not going to materialize. Lacking a more promising alternative he telegraphed Magrath with a new proposal - $550,000 for the Ontario properties, with the receiver retaining all receivables, liabilities, and the Southampton diesel engine. The HEPC countered with a bid of $520,000, which he accepted on 3 April. The summer months were occupied unravelling the maze of agreements that Foshay had signed with various customers throughout Bruce County and amending the

124 Power at Cost

purchase agreement accordingly. Finally, on 25 September 1930, a Federal Court judge in Minneapolis signed the order consummating the purchase.68 The HEPC could at last convert its Bruce County purchases into true Hydro municipalities. The distribution systems were reconstructed and sold to their respective communities, local commissions established to administer them, and necessary service contracts signed. With the completion of the Tara-Southampton connection, and the tying together of the many extensions begun under Foshay's auspices, much of Bruce County was suddenly transformed into a vital link in Hydro's Georgian Bay System. Nor was there any substance to the fears expressed earlier that Hydro, having rid the county of all challengers, would impose stiff rate hikes. The HEPC kept its promise to Southampton of energy at $40 per horsepower and actually reduced the price by a dollar in 1940. Wiarton's initial service cost $75 per horsepower but fell to $54 in just nine years. Port Elgin and Walkerton paid $40 and $35 respectively. Tara gained the most from Foshay's misfortune; charged $80 per horsepower in 1931, its rate was down to $42 by 1940. Much of the remainder of the county was transformed into the Bruce Rural Power District in October 1931.69 Hydro had swept the board. As for Foshay, financial downfall was followed by criminal charges. On 18 February 1931, he and six other PUCC officials were indicted by a grand jury on seventeen counts of using the mails to defraud the public. Evidence presented revealed that stockholders and potential investors had been sent prospectuses overstating the values of many Foshay companies and the monthly dividends they paid. Of those funds actually distributed, most were drawn from the issuing corporation's capital base, not from its earnings. The first trial ended in deadlock after eight weeks, when one juror kept demanding an acquittal. She later was found in contempt of court for concealing the fact of her previous employment by Foshay. A second trial, lasting ten weeks, resulted in a guilty verdict on 21 March 1932. Foshay was fined $1,000 and sentenced to Leaven worth federal penitentiary for fifteen years. After President Franklin Roosevelt commuted the sentence to five years in January 1937, Foshay was paroled on 6 May of that year, after only three years of imprisonment. His fine was remitted as well. 7° In their 1981 comparison of several North American utilities, M.J. Roberts and J.S. Bluhm concluded that the strong opposition that Hydro encountered in its early years was "more or less completely

125 The Battle for the Bruce

settled" by the mid-igzos.71 Bruce County in 1928 represented one of the few remaining pockets of resistance. This time, however, the provincial commission was the aggressor. No doubt its highly combative response to Foshay was related to its propaganda war with its American adversaries. Otherwise, Hydro had little reason to question Foshay's ability to serve Bruce County properly, aside from the widely held belief that the profits in serving rural districts were too small to interest most private distributors. Certainly the SELPC'S ambitious construction program should have allayed some of these doubts. Nor did Hydro possess any concrete evidence, Magrath's suspicions notwithstanding, of the PUCC'S fragile foundations. The more than 20,000 stockholders throughout the United States and elsewhere who had elected to invest in his many enterprises obviously considered Foshay as safe a gamble as any of the empirebuilders of the day. Furthermore, the HEPC could never point to anything more substantial than Foshay's citizenship as evidence of his supposed ties to Insull and the NELA. What Hydro refused to admit was that Foshay was a bona fide competitor, whose main crime was that he dared to challenge it with his aggressive new approach to rural electrification. The HEPC had two principal concerns. First, it was anxious not to be excluded entirely from Bruce's municipal power market, since here was the cornerstone on which future rural extensions in the county would need to be based. Second, the Commission was determined not to be outperformed by some impudent independent distributor at the very moment when consolidation of the rural program had been made the highest priority. There is no way of knowing how much pressure would ultimately have been brought to bear on Foshay had the Depression not intervened. As it was, the HEPC'S sudden determination to control a market that it had hitherto neglected appeared to be motivated as much by a desire to save face as by any commitment to furthering the growth of the rural distribution network. "Power at cost" had already been sacrificed to grants-in-aid in 1921; the events of 1928-29 in Bruce County showed that when the stakes were high enough, Hydro would turn to a policy of "power regardless of the cost," so long as the provincial system ultimately prevailed.

CHAPTER SEVEN

Remnants of Discontent and Political Plums To make the countryside of Ontario bloom like a rose Premier G. Howard Ferguson, 30 October 1929, as quoted the next day in the Toronto Evening Telegram

By the end of the 19203, the future of rural electrification in Ontario clearly rested with the HEPC. Most of the private power producers who traditionally had served rural areas had largely failed, even in the absence of competition, to develop technical and financial resources capable of withstanding a challenge from the rapidly expanding Hydro monolith.1 Increasingly, the independent distributors who survived did so because the provincial commission felt no compelling urge to encroach on their tiny markets, not because they enjoyed a competitive advantage. The HEPC'S undisputed dominance proved a mixed blessing. For those living within the most accessible and densely populated rural districts, chances were good that a Hydro sales representative would be knocking at their door within a few years. Elsewhere, residents faced the HEPC'S well-known reluctance to build any lines that might not meet its arguable definition of "self-supporting." Consequently, many parts of rural Old Ontario could anticipate long delays before they too were allowed to enjoy the electrical conveniences that most urban residents had taken for granted for almost two decades. Bruce County's experience had shown that under exceptional circumstances Hydro could be impelled to throw caution to the wind and vie for less lucrative markets, but most rural communities could not count on another Foshay coming along to act as a catalyst. Although many individuals were frustrated by what they perceived as the HEPC'S ponderously conservative approach to rural electrification, the utility was subjected to remarkably little organized criticism during the 19205 and 19303. Eastern Ontario, which felt that it had been denied a fair share of the benefits of public power, was heard from sporadically, but its grievances were as much urbanbased as rural. At the same time, not every proponent of the uniform

127 Remnants of Discontent

rate had abandoned the cause when the Ontario Hydro Power Uniform Rate Association (OHPURA) disbanded; several continued to level a steady chorus of criticism against Hydro's "inequitable" method of distributing costs. By and large, however, the dissent that manifested itself was unorganized and restrained. It seemed as if, following the demise of the OHPURA in 1920, Hydro's opponents decided that the Commission deserved a decade relatively free of interference to prove itself. But as the optimistic 19205 gave way to the despondent 19308, patience with the Commission's traditional practices and excuses again wore thin. Fortunately, Hydro's political guardians at Queen's Park detected the changing mood and responded by addressing the rural clientele's two oldest grievances service charges and the mandatory twenty-year contract. Not since introduction of the grants-in-aid had rural electrification been the subject of so much political interference. The Eastern Ontario Municipal Power Union (EOMPU), created at Brockville on S December 1919, was intended to articulate growing dissatisfaction over the HEPC'S laggard expansion throughout eastern Ontario. The approximately one hundred delegates to the EOMPU'S founding convention, representing communities as far west as Frontenac County, were adamant that the provincial commission end its "long standing and vexatious delays" in building a generating facility specifically for the eastern market. The HEPC referred repeatedly to long transmission distances and costly frequency conversions when dealing with eastern municipalities' complaints about the excessive price of Niagara power, but eastern Ontarians had grown weary of hearing the same excuses year after year. Of the $39 million that Hydro spent between 1907 and 1918, less than $500,000 had been used for developments east of Kingston. In western and central Ontario, 160 municipalities received HEPC service by 1919; east of Kingston, fewer than a dozen were so blessed.2 None of this evidence swayed the government. To a degree the province's hands were tied, since by the early 19203 the east's two most promising power sources, the Ottawa and St Lawrence rivers, were the subject of lengthy jurisdictional disputes involving the governments of Ontario, Quebec, Canada, and the United States. These difficulties aside, the HEPC continued to doubt the efficacy of filling eastern needs from local sources. As late as 1926 Gaby cautioned the Commission against undertaking "any large developments," since the "slow growth of power demands in Central and Eastern Ontario" meant that the expense would be impossible to

128 Power at Cost justify. The chief engineer thus imposed a demoralizing double standard, for in the western districts Hydro had always been an aggressive promoter, attempting to create power loads that matched available supplies. By contrast, in eastern Ontario Gaby seemed content to sit back and wait for demand to build on its own.? Long after the EOMPU disappeared from view in the early 19203, the east continued to perceive itself as the recipient of the Niagara System's dregs, while "other parts of the province" were "supplied with a super-abundance." The Eastern Ontario Chamber of Commerce, formed in 1926, tried to keep the EOMPU'S message alive. It accused the HEPC of failing to provide sufficient supplies of affordable hydroelectricity, thereby denying eastern Ontario its rightful place "at the foremost in industrial development." In the end, the Chamber as well proved largely ineffectual.'* Some solace was provided in 1927, when the province satisfied the east's immediate needs by signing a ten-year, ioo,ooo-horsepower purchase agreement with the Gatineau Power Co. Three years later, the hitherto separate Trent, Central Ontario, Ottawa, and St. Lawrence systems were amalgamated into the Eastern Ontario System, a move designed to reduce administrative costs and improve the district's overall load factor. Otherwise, the HEPC left the region to its own devices.5 Much of eastern Ontario's organized dissent emanated from the larger urban centres, distraught over their inability to compete with the cheap-power towns and cities of the Niagara System. An exclusively rural viewpoint was not evident in the east until 1919, when the EOMPU'S example incited several municipal councils, farmers' clubs, and individuals to petition the government to end western Ontario's "unfair advantage" over the east. The message that J.W. Kennedy, reeve of Kenyon Township (Glengarry County), sent to Premier Drury in December 1919 was typical: "This part of Ontario has been looking for Hydro development for some years but hitherto nothing has been done so far as serving the rural sections is concerned. There is a feeling in this end of the province that we have been somewhat neglected in this regard and we are all looking to our own farmers' government to speed things up somewhat."6 Also representative was an appeal by a Brockville-area resident, John Derbyshire, who asked Drury for some "even-handed justice." He thought it unfair that western Ontario's farmers, many of whom complained about the quality of the service, received provincial power at a "nominal cost," while "our beautiful wives and daughters are slaving away without."7

129 Remnants of Discontent The rural community's sporadic complaints failed to impress the HEPC, which maintained that its inactivity merely reflected demand. In fact, Gaby was still reporting to his superiors in 1928 that the eastern farming community seemed "indifferent to Hydro service." Donald A. Macdonald, who chaired the Alexandria Public Utilities Commission and was president of the Eastern Ontario Liberal Federation, made it a personal crusade to clear away the confusion. He corresponded regularly with each provincial government between 1928 and 1936 and suggested numerous ways in which the HEPC could improve its rural service. In his letters to Ferguson, for instance, he explained that the problem was essentially one of education; if eastern Ontario's farmers appeared less enthusiastic than those "in the neighbourhood of Niagara," it was only because they did not fully appreciate hydroelectricity's many agrarian applications. Thereafter, Macdonald became more innovative in his proposals. He told Premier Mitchell Hepburn in 1935 that since the HEPC'S rates were at least $20 per horsepower higher than most farmers could reasonably afford, the government should encourage Quebec-based power companies to develop the eastern market. With their surplus generating capacities and shorter transmission distances, surely they could offer rates well below the HEPC'S. The companies in return would pay rentals sufficient to cover the maintenance and debt charges on the distribution system. Besides keeping "Hydro intact in the Niagara System," this scheme would allow the government to avoid having to subsidize eastern power consumption.8 Unfortunately for Macdonald, Hepburn could not possibly have condoned such an arrangement, since the government was embroiled at the time in a bitter dispute with the very companies that Macdonald wanted to employ. The source of this dispute was the Hepburn government's recent cancellation of several power contracts made under Ferguson and Henry between 1926 and 1931. These contracts, which committed the HEPC to purchase 791,000 horsepower annually from the Quebec firms, were largely responsible for Hydro's embarrassing power surplus. Until the contract issue was resolved, Hepburn could not be expected to take any action that might work to his adversaries' advantage. Macdonald's alternative to drawing on the resources of the Quebec companies was to introduce in a given locality a maximum rate of $40 per horsepower wherever the cabinet felt that "such assistance was absolutely necessary to the life and well-being of the community in question." As he envisioned the plan, the government would pay any costs

130 Power at Cost

above the $40 maximum. But Hepburn rejected this proposal also and without explanation. Nine years would pass before a slightly amended version of Macdonald's maximum rate would be introduced. 9 Macdonald's frustration over the slow pace of rural extensions came to a head late in 1936. "We are all anxious that our farmers should become Hydro users," he wrote Hepburn, yet the HEPC continued to impede progress by "following the original policy of providing 'power at cost', no matter how high the cost may be." Unless Hydro ceased looking on eastern demands as requests for special "favors" and began to provide some form of additional assistance, rural electrical service would never be uniformly available across the breadth of southern Ontario. Macdonald evidently abandoned his campaign soon afterward. Nonetheless, the rural press continued to echo his message for several years to come, but the onset of war in 1939, and an accompanying moratorium on construction of rural transmission lines, largely muffled the impact. The east, and rural Ontario generally, would have to await the return of peace for existing grievances to be addressed.10 Hydro's distribution statistics substantiate the east's accusations of unequal treatment. In 1931, the area east of Oshawa and south of Pembroke accounted for slightly more than 20 per cent of Ontario's population yet received only 7.8 per cent (85,857 horsepower) of the power distributed by the HEPC. Ten years later, eastern consumption had increased to 180,650 horsepower, although this still represented a miserly 7.8 per cent of the provincial total." Eastern Ontario fared considerably better under Hydro's rural program. Ten years after the grants-in-aid were introduced in 1921, the east accounted for 9,616 (17.3 per cent) rural customers, 1,459 miles (17.4 per cent) of primary lines, and $3,202,030 (17.4 per cent) of rural expenditures. By 1941, its standing had improved to 27,042 (20.6 per cent) rural customers, 4,637 miles (23.1 per cent) of primary lines, and $10,648,725 (22.5 per cent) of capital expenditures. It thus appeared that Hydro was gradually redeeming itself, statistically at least, on the back concessions of eastern Ontario. The steady yet largely unorganized series of criticisms emerging from eastern Ontario during the 19203 and 19305 had its counterpart elsewhere in a minor revival of the old uniform-rate agitation. This caught Hydro by surprise. After all, the Lethbridge Committee had examined the proposal in 1920 and found it lacking, the OHPURA had disbanded promptly thereafter, and the Drury and Ferguson governments had responded with grants-in-aid. Further debate

131 Remnants of Discontent

seemed pointless, the more so because of the HEPC'S predictions that the bonuses would bring about a revolution in rural electrification. But Hydro and the governments of Drury and Ferguson had gone too far in raising rural expectations and playing down the problems associated with providing every nook and cranny of southern Ontario with affordable energy. When, before many years had passed, it became clear that the bonuses alone could not immediately correct the imbalance between urban and rural rates and services that had developed over the preceding fifteen to twenty years, a new round of protest began. Once again the uniform rate, or a slightly amended version thereof, was put forward as the simplest and fairest means of sweeping aside the obstacles to progress. This time, the "flat raters" acted independent of each other, without the benefit of an umbrella organization like the OHPURA. Although they would fail once again to move the HEPC, they did keep aglow the spark of an old issue that would again be fanned into a fullblown controversy in 1943. The UFO remained a committed, albeit largely ineffective, proponent of the uniform rate. Throughout the 19203 it followed a monotonously predictable course on the issue. At its annual meeting each December, the UFO would pass a resolution endorsing a province-wide uniform rate, which a special delegation in turn would then present to the premier the following February. The government's response was equally predictable: Hydro was doing everything possible to facilitate rural electrification, but the UFO'S opinions would be taken under consideration. There the matter would rest until December and the next convention. Only rarely did the UFO offer any fresh solutions to the impasse, such as the recommendation made by the 1927 convention that the existing bonuses be replaced with a form of local improvement tax. Under this plan, a majority of property owners could decide if construction costs for rural transmission lines were to be assessed against every property in the township, regardless of who took the service. Unfortunately, the UFO discarded the idea at the first hint of resistance from Ferguson.I2 The legislative assembly was the other forum in which the uniform rate cropped up from time to time. A few rural MLAS, as the OHPURA had done before them, contrasted their own constituents' exhorbitant Hydro rates with the relatively inexpensive service available in Toronto. Their comparisons were often rife with inaccuracies - few politicians bothered to master the intricacies of the rate-setting process - but the fact that they frequently mixed up two or more quite dissimilar classes of service did not diminish the impact of their arguments. The point they were making, and which few save the

132 Power at Cost

HEPC denied, was that the large gulf separating urban and rural rates did not appear to be diminishing. Granted, the uniform rate had already been subjected to one official inquiry and found wanting. But with changing economic conditions, and the HEPC'S continued growth, perhaps it was time for a re-evaluation. Adam H. Acres (Cons., Carleton), who never allowed party loyalty to interfere with his charge that the government should be doing more to further rural electrification, was by 1929 to the fore in calling for such a fresh look. He urged the HEPC to carry its service into every home in three "representative" townships of southern Ontario. Only then could it be determined "whether a flat rate for rural hydro service is as hopeless as Government leaders insist."13 A fellow Conservative, J.R. Cooke, remained one of the uniform rate's staunchest critics. Cooke, who had been a member of the Lethbridge Committee, was appointed to the HEPC as the Ferguson government's representative in 1923. In 1930 he explained to the minister of highways and future premier, George S. Henry, that the government's policy of limiting financial assistance to the areas of greatest need precluded it from endorsing a flat rate. He hastened to add that bonuses offseting high rural construction costs represented quite a different matter, since there a genuine need was evident. In urban municipalities, by contrast, the government did "not give one dollar of assistance" but demanded that "the Commission ... repay with interest every dollar... advanced." Three years later, as HEPC chairman, Cooke still maintained that rates could "never be uniform because the service must always be at cost, no more and no less." As he explained to a gathering of the London Chamber of Commerce, one need only look at the numerous components of a typical Hydro rate to understand that every municipality, farmstead, and class of user produced a different set of costs.14 In 1935, a letter published in the Stratford Beacon-Herald gave the uniform rate another brief airing. Written by W.S. Dingman, a former editor of the paper, the letter repeated many of the arguments that the OHPURA had used to espouse the flat rate but offered no new evidence. Dingman even relied on the most weather-beaten and unconvincing defence of all - the "postage stamp principle." He quickly discovered that if the OHPURA was dead and buried, its old opponents had only been dozing. The Toronto Telegram was especially anxious to reveal "the fallacy" of Dingman's position. It contended that mail delivery was a "deficit-producing auxiliary service," and "were it necessary to set up a separate system for trans-

133 Remnants of Discontent

portation for mail alone, a uniform rate would be utterly impossible." To apply the postage stamp concept to Hydro, and thereby oblige one group of customers to subsidize another, was inherently unfair - in short, "equalized rates would mean inequitable rates." Besides, public ownership had already enabled every class of consumer to enjoy hydroelectricity for less than private interests charged; it was inconceivable, therefore, that any municipality, urban or rural, could "reasonably ask that this benefit be supplemented by charges ... below the cost of supplying the service."15 The Windsor Border Cities Star and the Niagara Falls Review also came out four-square against the proposal. The Star especially was concerned with the urban implications and warned those cities currently enjoying cheap power that under a uniform rate they would be bonusing their competitors' industrial buildup. In the end, it predicted, "we would lose much and gain nothing."16 The final blows in this phase of the flat rate controversy were exchanged by the Brantford Expositor and an enraged correspondent known only as "Eastern Ontario of Almonte." The Expositor argued that electrical rates in general, and a flat rate in particular, had little bearing on regional development. Municipalities near a power source could certainly offer prospective manufacturers attractive energy rates, but "so many other matters" affected industrial location that cost of hydroelectricity was "seldom the determining one." "Eastern Ontario of Almonte" disputed the Expositor's cavalier attitude toward the hardships that "power at cost" imposed on areas lacking Brantford's geographical advantages. Communities that supported Hydro's policy of "distribution to the elect" tended to forget that electricity was a necessity, not a luxury. They did not realize that it cost the average farmer the equivalent of "a small herd of cattle per year" to purchase power in sufficient quantities to be "really worthwhile." Nothing short of a uniform rate, "Almonte" insisted, would calm the growing dissatisfaction evident in rural districts, both east and west.17 Many who supported the uniform rate were astute enough to realize that it was unlikely to be adopted in an unadulterated form. Eventually they compromised by proposing an "almost flat rate." The concept seems to have originated in July 1924, at the Jamieson Committee's hearing in Woodstock. A participant suggested that Hydro distribute the current to every municipal boundary, township as well as urban, at a uniform rate. From that point, the total cost of local distribution - including everything from line construction to bill collecting - would be assumed by the individual municipality.

134 Power at Cost

Thus, any rate discrepancies between towns or RPDS would be attributable to the nature and administration of the local distribution system.l8 The Farmers' Sun, which had lost patience with the UFO'S inept handling of the uniform rate, swung its support behind the new principle in March 1928: "It is impossible to avoid the conclusion that the prices of power ought to be nearly equal throughout each field of distribution. That is, the electricity itself ought to be so priced as to overcome the differences in the cost of distribution. Shocking as this view may seem, it has in principle been adopted by the Legislature in a most inequitable way. It pays half the cost of a rural distribution, for which half the province receives nothing at all. Even this aid is enjoyed by few farmers."19 W.S. Smith, a former editor of the Farmers' Sun, wrote in the same year that farmers would much prefer the "almost flat rate" over the "awkward and unbusinesslike" provincial construction bonus which placed them "in a semi-pauper position."20 Two years later, Farquhar Oliver (UFO, Grey South), William J. MacKay (Lib., Bruce South), and David J. Taylor (Prog., Grey North) drew the legislature's attention to the issue. The three, all representatives of Hydro-poor constituencies, believed that greater efficiency would ensue the moment that rural power distribution became a local responsibility. For instance, the HEPC'S "wasteful" practice of stepping down the current at every farmer's gate would be halted and more economical construction procedures introduced. The Farmers' Sun, which gave prominent coverage to the trio's exhortations, added its own comments on Hydro's alleged profligacy: "It is beyond question that if local construction and local distribution were in the hands of municipal councils, poles would cost less than now, and four or five men would not be sent out as at present to do work that could as well be done by two."21 The "almost flat rate" engendered pockets of enthusiasm throughout the province, but no one person or organization had appeared to lead them forward to victory. A possible candidate was Robert Dezell, who pursued many Hydro-related interests in the first half of the 19305. An Owen Sound-area farmer, Dezell was secretary of the local Hydro Users Association (HUA). Although none of the HUA'S records has survived, its objectives are well known, thanks to Dezell's penchant for letter-writing. Established in 1931, the HUA strongly urged the HEPC to restructure its holdings into one omnibus system, so that the surpluses earned in one part of the distribution network could be used for offsetting deficits accrued by the others.22 Equally important to the HUA was adoption of a uniform rate.

135 Remnants of Discontent

Although Dezell admitted that "so revolutionary an idea" would need to be introduced gradually, he did not doubt its practicability. After all, were not the "iniquitous mass buying" practices of large power users, rather than transmission costs, the real cause of the large gulf separating urban and rural rates? The HUA also sought abolition of service charges and creation of a government department to replace the HEPC'S "irresponsible" and "autocratic" commissioners - two goals that it shared with many rural critics. What made the association truly distinct, however, was its proposed abolition of grants-in-aid. It preferred that farmers build and pay for their own lines; the bonuses, by preventing adoption of a uniform rate, had actually been "a blind to farmers [and] a base for high rates."23 Dezell's battleground was the Globe's editorial page. For twelve months following April 1931, he issued a series of broadsides against the HEPC'S rate-making policies and elicited forceful rebuttals from chairman Cooke. Dezell contended that Hydro's declining block rate structure placed most farmers at a disadvantage since their monthly power needs were too small to permit them to take advantage of the cheapest available rates. He thought that the only way out for some was to introduce a flat rate which would "ease the excessive burden of the few," without causing "hardship to anyone." For every HEPC customer paying seven cents per kilowatt-hour, approximately one thousand were paying six cents or less. If a customer in the seven-cent bracket amassed annual bills of $65, yet was required to pay only a uniform rate of $15, the $50 balance could easily be provided for by tacking a five-cent-per-capita surcharge onto the 999 who were enjoying the less expensive power classifications.24 As this example reveals, Dezell, like his predecessors in the OHPURA, devised superficial solutions to complex technological problems which, to the uninitiated at least, sounded credible. He mocked the HEPC'S "infallible judgement" which allowed it to "introduce a large variety of prices no matter how similar the situations may be." Moreover, like so many past and future Hydro critics, he tried to prove his point by drawing parallels between rating categories that defied fair comparison.25 Cooke challenged Dezell's "gratuitous and entirely erroneous" accusations at every turn. He insisted that the price of hydroelectricity, as with any commodity, was regulated by certain unalterable "circumstances," among which transmission costs ranked foremost. With regard to Dezell's rate comparisons, Cooke pointed out that the expensive class 7 (Farm Service, Special) service contract, which Dezell portrayed as representative of Hydro's rural rates, had in fact been adopted by fewer than one-quarter of i per cent of Ontario's

136 Power at Cost

farmers.26 Dezell managed to have the last word, not that it mattered. "My purpose," he replied to Cooke, "was largely to show the folly of telling the farmers if they wanted cheaper rates to use lots of power, while at the same time the Commission erected barriers in the form of multiplied hours on higher rates." Dezell confessed that he might have exaggerated somewhat. But if the gap separating city and farm rates was as narrow as Cooke and the HEPC insisted, it was odd that urban customers were not asking to be transferred to the Rural System, "in order to escape bearing the full proportion of costs and enjoy the advantages of Government aid."27 Nothing further was ever heard from Dezell after 1934, when he is rumoured to have abandoned Ontario for a fresh beginning in the prairie provinces - admittedly a curious choice of destinations in the midst of the Depression. What is certain, however, is that Dezell's departure signalled the demise of the HUA. Yet his letter-writing campaign, even if it failed to sway the HEPC, had not been entirely in vain, for it had led several other farmers to vent similar frustrations in the pages of the Globe and elsewhere.28 All may not have advocated a uniform rate, but most supported some element of the HUA'S platform. Altogether, the response to his initiative fell well short of what the flat-raters had achieved during the 1919-20 campaign the ruinous combination of hard times and inadequate organization saw to that. But if the Olivers, Dingmans, and Dezells of the province had failed to re-create the excitement that the idea of a uniform rate had once inspired, they could at least take heart in the success of other Hydro-related reform efforts. Two other matters long regarded as deterrents to rural electrification - service charges and twentyyear contracts - were in fact modified in this period, though not necessarily because the HEPC was suddenly more amenable to change. Rather, for the first time since the bonusing legislation was passed in 1921, governments came to see in Hydro's Rural System a source of political dividends. In March 1929, a Peterborough-area woman wrote to Cooke complaining of the difficulties that local recruiters were experiencing in persuading farmers to sign up for the HEPC'S service. She explained that most people's reluctance stemmed from two sources. The twenty-year contracts were a major irritant, but what irked farmers even more was the prospect of paying a monthly service charge of $4.10 for a class 3 (Farm Service, Light) contract, when in urban centres a basic hook-up cost only 33 cents per month.29 Her complaint touched a raw nerve in Toronto, but relief was just around the corner.

137 Remnants of Discontent

When the HEPC had initially set its rate schedules, service charges had been intended solely to ensure that sufficient revenues were collected to meet the distribution system's many fixed operating costs. (Unless otherwise stated, all references to service charges are to class 3 - Light Farm Service. Together, classes 3 and 2B - Small Farm Service - accounted for more than 90 per cent of all farm contracts. See Appendix c for classifications.) Rural service charges had been reduced twice prior to 1930. Originally set at $6.20 per month in 1920, they fell to $5.07 in 1921, when the provincial government assumed half the construction costs of primary lines. Three years later, when grants-in-aid were extended to secondary lines, the service charge was further reduced to $4.10.3° On 12 March 1929, Cooke provided the first hint that another change was imminent. Claiming to speak as a private member and not as the government's representative on the HEPC - a distinction that was both unnecessary and unconvincing - he told the legislature that if Hydro eliminated the 3-per-cent maintenance component from the service charges, customers could save $240,000 annually. If transmission-line construction costs of approximately $2,200 per mile were divided among three families, the 3-per-cent reduction amounted to savings of nearly $2.00 per month per farm contract. According to Cooke's calculations, the net result would be a service charge of only $1.50 for most farm contracts (in fact, it would have been closer to $2.00).31 Only after he had thus raised the prospect of another rate reduction did Cooke instruct the HEPC to devise some means of financing it. His sole suggestion was that Hydro itself absorb the almost quarter-million dollars in anticipated lost revenues. The Commission was understandably reluctant to comply. As Jeffrey explained to chairman Magrath, the major flaw in Cooke's scheme was that some RPDS were currently accumulating considerable surpluses, while others barely broke even; reducing service charges would undoubtedly push those marginal districts into a deficit. An identical problem had been circumvented in 1927 when Hydro had issued rebates to selected RPDS, instead of making an across-the-board reduction, as was now proposed. In 1929, however, an election was looming, and the government wanted something to offer every rural customer, not just a privileged handful. Accordingly, it informed the Commission in early September that if Cooke's original proposal were deemed too ambitious, then a monthly service charge in the order of $2.50 would do quite nicely.32 Hydro could drag its heels no longer. Its political masters had spoken, and its duty was clear find the least expensive way of implementing this latest deviation from "power at cost."

138 Power at Cost If the HEPC now had no choice but to act, it was also true that the government no longer expected it to bear the resulting losses. Hydro therefore began its task by considering how much the grantsin-aid would need to be increased in order to finance a lower service charge. The province's taxpayers had not objected in 1921 and 1924 when they had been saddled with half of all rural-line construction costs; perhaps they would be amenable to accepting a slightly bigger share in 1929. But that idea was quietly dropped when preliminary investigations revealed that a $2.50 service charge would require raising the government bonus to 92 per cent. Even a $3.00 service charge would necessitate a 5O-per-cent increase over the province's existing contribution.33 Not surprising, the Commission decided against recommending to Ferguson so politically perilous a course. Instead, it suggested that the government, at Hydro's request, issue loans to any RPD that could not otherwise afford to introduce the $2.50 service charge. As an RPD'S customer density and power consumption increased, and its financial standing improved, the loans would be repaid out of operating surpluses. The HEPC estimated that most older districts would need this assistance for "a comparatively few years." Alternatively, the government could simply reimburse from consolidated revenues the RPDS' losses. Hydro's engineers were less enthusiastic about this second option - they estimated that it would drain provincial coffers by more than $86,000 in 1929 alone. Aware that the Rural System already was perceived by some urban taxpayers as receiving more than its fair share of provincial largesse, the engineers were worried that yet another infusion of provincial cash might spark a negative political backlash. Furthermore, the impact on newer RPDS would be disastrous should a subsequent government cancel the contributions. Whichever procedure were adopted, it was now clear that if the government introduced a $2.50 service charge, it must be prepared to provide financial assistance to new and sparsely populated districts well into the future.34 Ferguson was not deterred, and whether he reviewed the arithmetic or not he included the $2.50 service charge in his platform for the election that he called in mid-September. Taking credit for every rural electrification initiative of the preceding five years, Ferguson admitted that still more could be done to make the service "more generally available" in the province's farming and hamlet communities. For its part, the Farmers' Sun, which labelled the Conservatives' election manifesto "a plausible document designed obviously to cajole the rural vote," considered the service charge reduction "the biggest plum promised." Ferguson also pledged "increased

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sums" of public money for a vigorous program of county and township road construction. Roads and hydroelectricity together, the premier proclaimed, would make rural life "prosperous as well as socially comfortable." But the Farmers' Sun, ever sceptical of the Tories' motives, took the announcement in stride. "Better to be wooed with specious and seductive promises," it opined, "than to be ignored entirely."35 Ferguson's blatant use of Hydro for partisan purposes evoked cries of foul from his opponents, but none disputed the desirability of the rate reduction itself. J.G. Lethbridge, the veteran Hydro-watcher and leader of the Progessive party, denounced Ferguson for failing to explain how the service-charge reductions were to be financed. Was the government planning to increase provincial grants-in-aid, Lethbridge asked, or was this "just a vague promise to catch farmer votes?" Did this sudden ability to reduce service charges mean that the farmer had not been getting his service at cost all along? Finally, how could the Tories justify even a $2.50 service charge, when urban customers in some instances paid only 33 cents?36 Lethbridge was not alone in questioning the government's motives. One Bruce County farmer, for instance, was annoyed that Ferguson had waited until an election to announce the new rates. He suggested that anyone "intelligent enough to farm" must seriously doubt whether the reductions would actually be made. The premier could lower rural Hydro costs only if city folk consented, and they would never agree if it cost them. But the cynics failed to turn the tide; on 30 October, Ferguson's Conservatives were swept back into power with 92 of the legislature's 112 seats.37 The government moved quickly on Ferguson's election-night promise to "make the countryside of Ontario bloom like a rose." Hydro was ordered to implement the $2.50 rates in every RPD as of i January 1930, while Ferguson reassured Magrath that the government intended to honour its pledge to assume full responsibility for whatever deficits resulted. Ferguson's own view was that the assistance would be temporary, since most RPDS would quickly readjust their operations to offset any drop in revenues that the lower service charges caused. Magrath thought otherwise, for his evidence pointed to deficits larger and more persistent than Ferguson imagined.38 The chairman's doubts nothwithstanding, Cooke introduced the Rural Power District Service Charge Act on 24 February 1930. The legislation enabled the government, once again at the HEPC'S recommendation, to fix a maximum service charge for every class of customer. Any deficits that an RPD incurred as a result of the max-

140 Power at Cost imum charge were to be paid from the province's consolidated revenue fund. That amount would then be charged to a Rural Power Service Suspense Account set up in the defaulting RPD'S name. Any surpluses that the RPD earned thereafter would be applied to the deficit until the account's balance was wiped out. The act protected weak RPDS by declaring them ineligible for subsequent reductions in service charges until all government advances had been repaid. The opposition found little in the legislation to criticize, beyond demanding that $2.50 be specified as the maximum service charge. The government refused. It argued that such a clause was redundant, since the $2.50 rate was already in force.39 More to the point, Ferguson dared go no further; he wanted an avenue of escape in the event that Magrath's pessimistic predictions came true. By the HEPC'S fiscal year-end on 31 October 1930 - ten months after the reduced rates took effect - government loans to seventyeight RPDS amounted to $85,965. The total deficit was actually $210,937 niore, but accumulated surpluses reduced the losses by almost $125,000.4° This was an inauspicious beginning and indicated just how ill-timed the change had been. Introduced as the effects of the Depression were spreading, lower service charges were only of limited benefit, considering the financial straits in which many farmers soon found themselves. The greater energy consumption that Ferguson and the HEPC had hoped would offset the monthly revenue loss of $1.60 per customer simply did not materialize. Under the circumstances, service charges remained a convenient whipping boy for a rural community bewildered by the economic malaise. The UFO, for example, without having a plan of its own, criticized the RPD Service Charge Act for merely "readjusting," not reducing rates. In other quarters, dissatisfaction over service charges focused on Hydro's construction procedures, the most common argument being that private contractors could erect transmission lines for only half the cost. It followed, therefore, that if the Commission tendered the work, service charges could be reduced by a further $1.25 per month.41 These and similar criticisms would continue to circulate throughout the rural community until Mitch Hepburn's Liberal government threw its support behind a second overhaul of the service charge in 1935. In the mean time, Hydro had been joined by Hepburn's Conservative predecessor, George Henry, in tackling the equally troublesome twenty-year contracts. At virtually every stop during the Jamieson Committee's travels across Ontario in 1924, angry farmers complained of being forced to sign twenty-year HEPC contracts, whereas an annual agreement

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was deemed sufficient for non-RPD residents. As already noted, the committee largely ignored rural Ontario's energy-related grievances in its final report, and the objections about length of contract proved no exception. The HEPC, under no pressure from the government to alter the status quo, continued to preach that the twenty-year term was intended for the rural network's own protection: "If some of those who had represented themselves as prospective partners were permitted at will to withdraw their entire support," Hydro argued in an official publication in 1932, "clearly an unfair burden would be placed upon those who remained." Consequently, when an elderly subscriber sought permission to sign a two-year agreement in lieu of the standard twenty-year one, on account of his advanced age, the Commission refused him outright. Short-term agreements, it argued, were not secure enough, for if customers failed to renew their contracts after only a few years of service, their share of the fixed costs would become a burden on the remaining subscribers. Hydro was justifiably concerned that prospective customers would be reluctant to join a fledgling RPD if they knew that their own rates could be increased by a neighbour's decision to discontinue the service.42 Alexandria's Donald Macdonald, in addition to looking out for eastern Ontario's interests, tried to persuade Howard Ferguson in 1928 that a five-year contract would do much to overcome rural disenchantment with the HEPC. Macdonald explained how the spectre of the twenty-year contract had thwarted his personal efforts to attract local farmers to the Hydro network. Most of the people he approached were wary of being "tied down" to something about which they knew so little. The large installation and equipment charges, when combined with twenty years of uncertain agricultural returns, represented too foreboding a proposition. Others worried that the contracts would detract from their properties' marketability. If an interested buyer did not wish to use hydroelectricity, the added Hydro "mortgage" might diminish property values substantially.43 To overcome this contractual obstacle, Macdonald thought that the government should authorize the HEPC to issue short-term contracts to rural users and then guarantee the necessary revenues over twenty years. Farmers were "naturally afraid of a corporation as powerful as the Hydro-Electric Power Commission," but if the province would act as a guarantor Macdonald was certain that rural power usage and revenues would increase immediately, and at little additional cost to taxpayers.44 Agnes MacPhail, dominion UFO member for South-East Grey, and a fervent crusader for Canada's farmers, made a similar observation in December 1927 when she addressed

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a Toronto meeting of the United Farm Women of Ontario. She noted that few people could afford a farm that included a Hydro contract and all of the accompanying electrical equipment. "Only people who are in very fortunate circumstances could buy such a farm," MacPhail said, "and such people do not want to buy farms, because they know quite well that farming is not a paying job."45 Another common objection was that the twenty-year term was imposed on all rural residents and communities the moment they joined an RPD, regardless of their prior record with the HEPC. The village of Saltford (Huron County), for example, had been receiving its power for seven years from a Hydro affiliate, the Goderich Water and Light Commission, when it was transferred into the Goderich RPD in 1926. Hydro thereupon told the villagers that unless they signed the requisite twenty-year contracts, their service would be discontinued immediately. The villagers protested that some allowance should be made for the seven years of line charges already paid, especially since the local distribution system remained unchanged. Gaby would not hear of it. He saw "absolutely no justice in this argument" and denied that the people of Saltford should be "treated any different from other customers in the Province."46 The issue of the twenty-year contract provoked a minor uprising in 1929. Several township councils in counties stretching from Essex and Kent in the west to Frontenac in the east passed resolutions imploring the provincial government to eliminate the twenty-year "payment plan." All were "strongly opposed" to the existing arrangement and urged that farmers "be put on an equal basis with Towns and Villages."47 The HEPC was unmoved by the appeal and in responding made no attempt to disguise its growing impatience with ungrateful rural customers who mistakenly believed that they should be supplied with energy on exactly the same terms as urban residents. Whenever possible, Hydro avoided discussing the limitations of its rural service, but the rising groundswell of opposition to its policy was proving too noisy to be ignored. The Commission urged the petitioners to be grateful for small blessings, for without the municipal partners at the core of the distribution network "any extensive rural electrification would be economically impossible." The "remarkable thing," it continued, was not that rural service cost slightly more, or required a long contract, but that it was available at all in areas where population density averaged "less than 10 homes per mile of necessary line."48 The Farmers' Sun had its own distinctive point of view on the matter. Referring once again to the advantages of returning responsibility for local energy distribution to the townships, the paper

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argued that enough money could be saved to make the twenty-year contracts unnecessary, simply by discontinuing the extravagant practice of stepping down the current at each farmer's gate. The UFO followed the Sun's lead soon thereafter. In its address to the 1929 annual convention, the organization's Hydro Committee identified the twenty-year contract as "the most iniquitous feature in installing Hydro." The extended term might protect the HEPC, but "no one thing" so discouraged potential users. In any case, farmers were better qualified than Hydro's engineers to predict agricultural conditions, and what they foresaw did not encourage them to undertake such long contracts. Declining land values, increased reliance on motorized equipment, larger farms, and greater emphasis on livestock grazing were all in the Hydro Committee's crystal ball. Farmers could therefore anticipate using less instead of more hydroelectricity in the years to come. The committee cautioned prospective customers that as demand for the service declined, unwanted "Hydro mortgages" of $50 or $60 per year could reduce the average farm's value by as much as $1,200.49 Such attitudes reveal the uphill struggle still facing the HEPC after almost two decades in the rural electrification business, for a large segment of its potential clientele remained doubtful about the usefulness of its product. What the UFO'S Hydro Committee failed to realize, along with thousands of other rural residents, was that hydroelectricity would soon be adapted to hundreds of farm and domestic chores, thereby increasing immeasurably its worth to rural families. Nevertheless, the committee's call to arms in favour of shorter contracts was warmly received by the delegates at large to the 1929 convention. Cooke did not deny that Hydro needed to enhance the appeal of its rural services, but he considered the twenty-year contracts essential until some viable alternative was found. His own efforts to make rates more affordable particularly for first-time recipients met with little success. When he instructed the Commission to study the financial implications of deferring for a four- or five-year introductory period the sinking-fund and contingencies portion of new customers' service charges, the engineering staff assured him that the remainder of the rural network could not possibly bear the added financial burden. Lacking other recourse, Cooke resorted to rationalizing the twenty-year term on the grounds that electric service had long been considered a necessity in urban areas, whereas in rural districts it was not. He argued that anyone buying a home in the city automatically assumed that water, sewage, and electrical services were provided. Similar assumptions were not made in many

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rural areas. In fact, it was entirely possible that if the purchaser of a Hydro-equipped farm had no previous experience with electrical conveniences, he or she might discontinue the service in order to save the monthly charges. Unless there were twenty-year contracts to prevent this from happening, continuing capital costs on idle transmission equipment would be shifted, with dire consequences, onto the remaining consumers in the district.50 In Cooke's mind, rural electrical service was not unlike such local improvements as drains, roads, and bridges. Since townships financed these other facilities with twenty-year debentures paid for out of property taxes, he could think of no convincing reason why Hydro's rural services should not be covered for a similar term. What he conveniently overlooked, however, was that all taxpayers shared proportionately the costs of local improvements, and usage never entered the equation. With Hydro, by contrast, only those persons who actually signed service contracts received monthly bills. Cooke's logic failed to impress the OMEA. At its annual meeting in January 1930, the association voted unanimously in favor of a five-year rural contract. Some delegates even suggested that any term longer than one year was excessive. Hydro usage was simply a habit, they claimed, and one that certainly could be acquired in less than five years. "Let them have the service for a year," a member insisted, "and you will find that you couldn't take it away from them even if you doubled the rate." Another warned that long-term contracts merely created suspicions among rural users "that someone had something up his sleeve." But now it was Cooke's turn to question the OMEA'S reasoning. When he addressed the legislature barely one month later, he reaffirmed that the twenty-year contracts were inviolable. Urban centres and RPDS were not comparable, he said, because the former constructed their own distribution systems and in effect created "a blanket mortgage on all property in the urban district." Since no such guarantee covered Hydro's rural lines, shortterm contracts were out of the question. 51 The onset of the Depression brought this increasingly heated debate to a premature halt. As economic fortunes tumbled and farmers struggled to retain their homes and farms, a Hydro hook-up with its many attendant expenses became less attainable than ever. Yet despite the hard times, construction on the rural network continued, with 7,710 customers and 945 miles of primary lines being added in southern Ontario between 1931 and 1934.52 Then, without any advance warning, W.H. Price, Henry's attorney-general, announced at a nomination meeting in Welland, on 25 April 1934, that the HEPC suddenly found itself "in a position to

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relieve the farmers of the twenty year contract period." Henceforth, only a five-year term would be required. At the end of five years, contracts could be renewed on an annual basis, subject to one-year notification of cancellation by either party. Two groups of customers were declared ineligible for the reduced terms - those who had signed "guarantee contracts" and recipients of HEPC installation loans. The former would not become eligible until the number of customers on their respective transmission lines reached the minimum average of three class 3 contracts per mile. As for the latter group, their twenty-year contracts would remain in force until the loans were repaid in full. Responsibility for implementing the revisions, Price added, would rest with the townships, since all rural contracts were technically between individuals and their local councils. 53 The announcement received as much attention for the way it had been made as for its substance. The Globe applauded the shortened term but believed that an HEPC official should have issued the statement, not a government minister speaking at a political rally. Price had done more than make a blatant bid for the farm vote in the approaching provincial election; he had also asserted the government's right to set policy for Hydro. Was this not another example of politicians attempting to usurp the HEPC'S authority - a process the Globe claimed had begun shortly after Beck's death in 1925 - by making "the Hydro a donkey engine for the discredited rulers of the Province?" The Brantford Expositor reached a similar conclusion. It considered the concessions to be "in accord with plain common sense" and long overdue. But Price's action had also confirmed a long-standing tendency of the government "to make the system an adjunct of the Conservative Party."54 Yet another critic of the government's action was C.B. Sissons. He pointed out that a five-year contract adjusted "an indefensible discrimination" but hardly provided farmers with the substantial relief they sought. The Liberal leader, Mitch Hepburn, appreciated better than most the political savvy behind the manoeuvre. He accused the Tories of refusing to address the contract grievance until the government "was in its death-agonies." An anonymous correspondent in the Globe, who failed to see how the shorter contract represented an improvement, concluded that "the Commission had hoodwinked the townships to find a market for its surplus power." Even the UFO was unhappy with the proposed change; the reduced term, it resolved at its December convention, still represented an "unfair" deal for farmers.55 Cooke, who only a short time earlier had vigorously opposed any suggestion of a shorter contract, was suddenly responsible for per-

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suading the townships to amend their by-laws to accommodate the new term. To this end he sent HEPC representatives to explain the new contractual arrangements to each council, instructing his officials to emphasize that the shorter contracts would take effect only after every township in a given RPD passed the appropriate amending by-law. In the event, the plan met little resistance. By the beginning of 1935, 348 of the 367 townships served by the Commission's 171 RPDS had complied. Within two years, the fiveyear contracts were available province-wide.56 Unfortunately for Henry's Conservatives, they had been relegated to the opposition side at Queen's Park before the first five-year contracts were drawn up. As with so many other governments that bore the brunt of bad times, Henry's became a convenient scapegoat for a Depression-weary electorate. It could not save itself simply by amending a well-established Hydro policy and offering a nastily contrived concession to a relatively privileged segment of the rural community. For its part, Hydro now had to look to Mitchell Hepburn's Liberals for support in furthering rural electrification. The new government immediately demonstrated its willingness to cooperate by joining with the Commission in addressing the widespread discontent that had continued to surround the rural service charges. By 1934, the OMEA had heard quite enough about the "unjust and indefensible disparities" separating Hydro's rural and urban customers. Although the association had frequently assisted rural consumers in securing the best terms possible from the HEPC, it believed that under the current economic conditions any further rate reductions would jeopardize the financial well-being of the entire rural network. It took aim especially at agitators who relied on inaccurate rate comparisons to make a case for lower service charges. To set the record straight, it placed advertisements in several newspapers and farm journals. The most common error, it explained, compared the 33-cent urban service charge, which provided for domestic lighting and small appliances, with the $2.50 class 3 farm service, which allowed all of the above plus a three-horsepower motor. The ads stressed that the price of a comparable service in the city was actually $3.03, not 33 cents. Furthermore, service charges formed only half of the equation. According to the OMEA, energy costs, which comprised the balance of the rate, were generally more favourable in RPDS than in urban municipalities.57 Discrepancies between urban and rural service charges were not the only source of complaint. Some customers felt that the rural rate

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schedule itself apportioned costs unfairly. In 1935, W.B. Cleland, a farmer with a class 3 contract, asked Hydro to upgrade his system to class 6A (Farm Service, Heavy) so that he could use a fivehorsepower motor. He was appalled at the added expense. His service charges automatically jumped by $2.39 a month, and the minimum consumption rate, which had been four cents each for the first 42 kilowatt-hours, became four cents each for 126 kilowatthours. Altogether, he could expect to pay an extra $5.75 per month without using any additional power, while Hydro "gave nothing in return." Cleland rejected the HEPC'S "old argument" that the higher classifications were more expensive because a larger quantity of power had to be held in reserve for the customer. If the Commission "were called upon by everyone in the neighborhood to deliver this reserve you charge for," Cleland retorted, "it could not be done." He also thought it odd that Hydro would promote increased consumption and then penalize those who used more power.58 In truth, had Cleland used the class 6A to its full potential, he would have experienced significant savings per kilowatt-hour. As it was, he and numerous others continued to regard the HEPC'S method of billing as inherently unfair, simply because they could not afford to make maximum use of the service. Hydro was well aware of the continuing dissatisfaction and by September 1935 had completed another investigation into the possibility of further cuts in service charges. On 26 September it recommended that the i-per-cent contingencies reserve be eliminated and that the renewals reserve be lowered from 2 per cent of total capital to only 1.75 per cent. The combined effect would be a 10per-cent reduction in service charges for classes IB to 2B (hamlet and small farms) and a 2o-per-cent reduction for classes 3 to 78 (standard and large farms) (see Appendix c). Hepburn grasped the opportunity. Barely three months had passed since a hard-pressed electorate had handed him a mandate to put the province's derailed economy back on track. If fulfilling that task involved cutting into the Rural System's reserves, then so be it. All that the HEPC asked of Hepburn in return was that the changes not be made public until nearer its fiscal year-end on 31 October.59 Nothing further was said about the pending rate revision until 24 October, when Cooke's replacement as chairman, T. Stewart Lyon, spoke at a memorial service near Kitchener in honour of Daniel B. Detweiler, one of the province's original public power visionaries. Lyon, who had risen through the ranks of the Toronto Globe to become its editor-in-chief, had used the editorial pages of his paper in the early 19308 to criticize what he considered to be the HEPC'S

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maladministration under the Tories. A grateful Hepburn rewarded him accordingly with the Hydro chairmanship one month after the June 1934 provincial election. At the Kitchener service, Lyon expounded on what had become one of the Commission's most recurrent themes - how the wellbeing of farmers and the HEPC alike depended on harnessing hydroelectricity to farm machinery and not restricting its use to lighting purposes alone. Interspersed throughout his remarks were frequent references to the one-dollar service charge that the Niagara Hudson Co. had recently begun to offer farmers in New York state. Lyon waxed eloquent about a not-too-distant day when the HEPC would no longer need to impose service charges of any sort and when farmers would be billed only for current actually used. In the mean time, he asserted, Hydro should attempt to emulate the New York example. Queen's Park made it official the following day: class 3 rates were to be reduced by $6 per annum, to $24, as of i November 1935. Service charges might still be twice as high as in New York, but Lyon was confident that they had now been lowered enough to enable individual consumption to increase appreciably. The immediate saving to rural customers was estimated at $150,000 annually.60 Lyon reiterated what his predecessors had been saying for nearly thirty years: Hydro and the government would provide whatever assistance they could to make rural electrification affordable, but the only way that customers could be assured of lower rates was by increasing their own energy usage. The Commission reaffirmed this point on 31 October when it met a delegation from the Thurlow Township Ratepayers' Association (Hastings County). Thurlow's representatives were told that the service charges they found so irritating would be reduced and eventually abandoned only "by a greater use of electricity in the Rural Power Districts." Pending this development, the HEPC was justified in asking rural users to pay higher rates.61 The HEPC knew, of course, that gentle persuasion by itself could not, in the current economic climate, induce rural Ontarians to take full advantage of hydroelectricity. Many customers, by habitually confining their energy usage to an absolute minimum, consistently fell only a few kilowatt-hours short of advancing into the much cheaper follow-up categories. Worse still, as Hydro's overall power surplus continued to grow, the Commission began to fear that the problem was no longer confined to the RPDS. Lyon believed that the time had arrived to conduct a comprehensive overview of the rate structure, the first in over twenty years. As a result, on 29 April 1936 he appointed a Special Rating Com-

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mittee to reconsider the existing scheme of rates and the adequacy of the various reserves and "especially to discover whether it would be to the advantage of the Commission, the Local Hydro Commissions, and the Rural Power Districts to abolish, or materially reduce existing service charges." Although the committee's mandate included urban rates, Lyon asked its members to confine their inquiries initially to the rural program. He wanted them especially to study New York's experience and to report back on the advisability of "materially reducing or abolishing the service charge by absorbing it in the first consumption charge."62 Hence, the committee would attempt to determine how the Rural System would be affected by a new marketing concept - a simplified and, he hoped, less confusing rate that was based on energy costs alone yet remained true to Hydro's basic working principle of "power at cost." The Special Rating Committee handed over much of its data to the New York-based Stone and Webster Engineering Corp. for further analysis. When Stone and Webster reported back in November 1936, it focused on one fundamental problem - the absolute necessity of simplifying the HEPC'S rural network. Buttressing its recommendations with a comprehensive assessment of rural electrification practices throughout the United States, the consulting firm argued that Hydro's rate structure had become unwieldy; customers in southern Ontario's 167 RPDS were subject to over 250 rate variations. But reducing the number of permutations presented only a partial solution. Stone and Webster encouraged Hydro to amalgamate its many RPDS into just one district per system, or three or four at the very most. It would then be possible to introduce a single uniform rate for each service classification and thereby, they predicted, increase overall energy consumption in the process.63 Stone and Webster agreed with Lyon that the service charges, although undeniably the fairest means of allocating costs among the various classes, should be eliminated. Many American utilities had discovered that customer relations improved after they adopted a single-charge "minimum bill." In place of separate service and consumption charges, consumers paid a fixed "block" rate, for which they also received a predetermined amount of power. For example, class 3 customers might pay a flat fee of $2.50 per month, which entitled them to consume up to 14 kilowatt-hours of energy. While objections to the minimum charge were not unknown, Stone and Webster claimed that they were "generally less insistent because some service [was] given for the payment." The firm also recommended that Hydro alter consumption rates in the event that service charges were abolished. In this regard, it suggested a maximum rate

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of five cents per kilowatt-hour for the first energy block, down from the existing high of six cents, and well below the seven- and eightcent rates that had been common only two years earlier. The consulting engineers believed that if the entry rate were kept to a minimum, customers would be more inclined to increase and diversify their energy usage, although that had not been Hydro's experience to date. Finally, Stone and Webster urged the HEPC to discontinue the "unpopular" prompt-payment discount and devise other means of instilling punctuality.64 The engineering firm's conclusions stemmed from a few basic assumptions about the future of rural electrification in Ontario. It seemed evident that "for a long time to come" the HEPC would have little choice but to extend its lines into sparsely populated areas. Unless these extensions were somehow linked to financially solvent RPDS, increased subsidization would be unavoidable. The report therefore put forward two possible strategies. First, any surpluses earned in prosperous RPDS could be applied to the deficits incurred by the others, a process that would be greatly facilitated by the aforementioned amalgamations. If that option proved too controversial among wealthier RPDS, then Hydro could consider, second, using its contingencies reserves, to which all districts contributed, for absorbing the losses; Stone and Webster thought that well-todo RPDS would not object to this approach so long as they received Hydro's assurances that all requests for extensions into lightly settled areas would henceforth be accorded "reasonable resistance." Whichever course was decided on, the report emphasized, continuous raids on the provincial treasury could not be defended indefinitely if the "spirit of the service" were to remain power at cost.65 The HEPC acted before receiving Stone and Webster's final submissions. Late in October 1936 it followed the Special Rating Committee's advice and reduced the RPD renewals reserve from 1.75 per cent to i per cent, thereby lowering users' costs by $186,000 annually. This in turn enabled Hydro to revise its service charges for the second time in just fourteen months. But only the farm classifications (27), and not the hamlets (class i), benefited: service charges on the two most popular classes, 2B and 3, were lowered to $1 per month, and rates for classes 4 through 78 were reduced by 25 per cent. These rates, Lyon believed, heralded a new age for Hydro. The New York standard had been achieved at last, and once the vast majority of customers began paying the $1 service charge on i December, the Rural System's capital costs could be distributed almost on a flatrate basis. In Lyon's optimistic view, the "compromise" now achieved in the method of billing would reconcile supporters of the

151 Remnants of Discontent

flat rate and of power at cost and produce greater "co-operation than ... in the past."66 Hepburn immediately took credit for the lower rates. He wanted the "thousands of farmers" who had hitherto "considered the service charge a serious obstacle" to realize that only his government's "courageous action" the previous April in cancelling the "nefarious" Quebec power contracts signed by the Ferguson and Henry governments made possible the lower rates. Hydro's industrial and municipal customers had already been rewarded with rate reductions of $2.00 and $2.50 per horsepower respectively. Now it was the Rural System's turn to cash in. Hepburn proclaimed that the alternative to repudiating the Quebec agreements would have been the imposition of a 25-per-cent rate hike on every HEPC customer. Naturally, the opposition thought otherwise. It dismissed the measure as a Liberal ploy to win political points in the vigorously contested Hastings East by-election then under way, but Hepburn insisted that he was merely delivering on an earlier promise to provide Ontarians with "sweeping reductions in rates." Indeed, he predicted that more cuts would be made before the end of 1937, regardless of the outcome of the by-election (which, in the event, the Conservative candidate won by a comfortable margin).6? The revised schedule was in operation only a few months before the OMEA petitioned Hydro alleging unfairness. During the 19205, many farmers had objected to the HEPC regulation that forced anyone who owned and occupied fifty or more acres to pay higher rates than residents with smaller properties in neighbouring hamlets. Now the tables were reversed. Hannigan told the OMEA at its annual meeting in February 1937 that far from treating all rural customers equally, Hydro continued to discriminate by determining service charges on the basis of acreage, among other criteria. Hamlet consumers, those "who made the rural areas possible" and who generally used more power than the average consumer with a large acreage, were now the ones paying the higher service charge. This was because the typical hamlet user of electricity did not have an acreage large enough to qualify as a farm. With this evidence before it, the OMEA passed a resolution urging the HEPC to reconsider its method of differentiating between rural and suburban rates and suggesting "that the service charge be based upon the amount of power used and not upon the number of acres occupied."68 Wilson H. Mills, Liberal member of the dominion House of Commons for Elgin, voiced similar concern. He told Hepburn of complaints that he had received from constituents in the village of Sparta (Elgin County), the majority of whom were "labouring men and

152 Power at Cost people of rather limited means." They could not see the justice in charging farmers $1 for an electrical service capable of handling house lighting, a range, and a three-horsepower motor, while in Sparta $1.90 provided house lighting and a range only. When asked for an explanation, Hydro's secretary and controller, A. Murray McCrimmon, admitted to the premier that the Commission had thus far "only tackled the real farmer"; next it would be considering the needs of the hamlet and small-farm user.69 One month later, the one-dollar service charge was extended to the remaining rural rate classifications, IB, ic, and 2A, as well as to summer cottages where no ranges were used. Jeffrey calculated that rural customers of all classes would save over $457,000 annually as a result of the latest round of rate cuts. Hannigan did not hesitate to credit the OMEA for the breakthrough. "Suburban areas, which in many cases have made rural Hydro districts possible," he wrote to Jeffrey, "are now promised equal treatment with those whom they helped to supply with power."70 Although rural service charges had not been eliminated altogether, the HE PC was now confident that they no longer presented a serious obstacle to expansion. Hydro estimated that the average farmer could afford to spend between $35 and $40 annually on electricity. Consequently, when the yearly service charges amounted to $30, many farmers did not have the additional means to purchase light and power. Now that it charged only $12 per year, the Commission believed that consumers would have the cash to buy energy in worthwhile quantities. No doubt Hydro's planners were pleased by the surge in new contracts that accompanied the revised rates. In the three years between 1937 and 1939, the HEPC added 37,763 new customers to its rural network in Old Ontario, compared to just 13,677 new customers during the preceding four years. Unfortunately, the other half of the Commission's objective, increased consumption, did not achieve comparable growth for many years to come. The Rural System's power load grew from 21,138 horsepower in 1929 to 68,433 horsepower in 1939, an increase of 224 per cent, but the rise in the average customer's consumption was barely perceptible, and grew only from 0.57 horsepower to 0.6 horsepower. In short, while reductions in rural service charges had saved power users an estimated $828,000 over three years, a merciless Depression continued to negate many of the benefits.71 The HEPC could claim only partial credit for the new policies governing contract terms and service charges. Throughout the 19203 and 19303, Hydro had generally opposed any suggestions from the

153 Remnants of Discontent

public that involved changing its traditional principles and practices, as spokespeople for eastern Ontario and die-hard advocates of the flat rate would no doubt have attested. It was in this same vein that Hydro had initially rejected the rural community's requests for shorter contracts and lower service charges. The Rural System could not afford such extravagances, the Commission claimed, nor should the province's taxpayers be expected to assume a larger share of the cost of rural electrification. In the end, Hydro had to be pushed into change by provincial governments that had come to see the Rural System as a political plum ripe for the picking. For the first time since the bonusing legislation of 1921 and 1924, the provincial government attempted to curry political favour by dictating Hydro's rural distribution policies. Admittedly, when Ferguson and Hepburn fiddled with the service charges for partisan purposes, they did not take the HEPC completely by surprise. But the same could not be said of the Henry government's announcement of a reduced term for rural contracts. Moreover, all three governments made it abundantly clear that they were not prepared to brook any opposition from the Commission; Hydro was expected to carry out orders as expeditiously and inexpensively as possible. A seemingly irreversible precedent was thereby set, as politicians thereafter became increasingly involved in making policy for the Rural System. In the future, it would not be so easy to determine the origins of, and the motives behind, any particular rural electrification initiative. The legislated changes proved significant for two additional reasons. The shorter contracts signalled to potential customers that the Rural System was maturing: its financial well-being no longer depended on a contractual chain spanning two decades. Hydro and the provincial government were gambling, successfully as it turned out, that the quality and price of the service would dissuade customers from cancelling their contracts. Furthermore, with the decision to levy service charges arbitrarily, rates on the Rural System had moved even farther away than before from "power at cost." Politically this made sense, given the poor state of the construction program and the unlikelihood of an immediate turnaround in economic fortunes. The situation had demanded aggressive action. Hydro orthodoxy notwithstanding. Thus, if the episodes of contract and rate manipulation smacked of political opportunism, they were also the product of necessity. Fortunately, although Hydro had to be led on some issues, it was not without constructive ideas of its own during the Depression.

CHAPTER EIGHT

Responses to the Depression Stable lanterns hung up to gather cobwebs all across Ontario Editorial, Toronto Globe, 15 December 1934

The Depression did not so much create new problems for the HEPC'S rural electrification program as aggravate many old ones. Even during relatively prosperous times, Hydro had struggled to overcome the rural community's financial limitations. After 1929, however, as farm incomes plummeted and indebtedness grew, attracting new customers became more challenging than ever. The Commission could conceivably have postponed expansion and waited for economic fortunes to revive. But Hydro also, for the first half of the 19303 at least, had on hand a large surplus of energy for which it needed a market. If this power surplus were to be readily disposed of, not only would new customers need to be secured, but existing customers would have to increase energy consumption as well. Moreover, the government, which had guaranteed almost $222 million in Hydro liabilities - an amount equal to 56.3 per cent of the provincial debt in 1929 - realized that the utility's capital obligations would continue to grow even if its customer base did not. Thus financial and political necessity alike demanded that no part of the distribution network, urban or rural, cease trying to increase the power loads of its respective clienteles. For Hydro to meet its own obligations, it had, by one means or another, to sell its product. Shortening the term of the rural contracts and reducing service charges were just two ways in which the Ferguson, Henry, and Hepburn governments tried simultaneously to win political points and to prevent the Rural System from becoming a greater drain on the province's finances than it already was. Special loans, additional rate reductions, and adjustments to the traditional three-farm-permile minimum-density requirement were among the politicians' contributions. Fortunately, the politicians did not have a monopoly on initiative. Especially under T.S. Lyon between 1934 and 1937, Hydro

155 Responses to the Depression

acted on its own to ward off stagnation in the rural network. For its part, the HEPC experimented with the most alluring marketing ploy of all - offering something for nothing - and introduced free power for selected appliances. It also began a comprehensive promotional campaign that gave special attention to the rural community's needs. Together, the various government and HEPC initiatives kept the Rural System intact through the dark days of the Depression. Even if results occasionally fell short of expectations, not to have slipped backward was itself an accomplishment in such tumultuous times. On the same September afternoon on which Howard Ferguson kicked off his 1929 provincial election campaign with the promise of $2.50 rural service charges, he outlined a program of government loans to assist RPD residents in installing and upgrading their electrical equipment. * Hydro's engineers had been trying to reduce overhead costs since Jeffrey's Rural Rate Committee had first broached the problem back in 1912, but with only modest success. As a result, high installation and equipment costs remained a major obstacle to the Rural System in 1929. Electrical equipment had improved in quality and versatility during the 19203, and the price of many household appliances had declined steadily, but the cost of the initial hookup was still prohibitive. The Commission merely aggravated the problem by constantly emphasizing increased customer density and consumption as the key to lower energy rates, when in fact the price of energy was inconsequential to anyone unable to afford several hundred dollars in installation charges. Ferguson had that group in mind as he presented the loan scheme. Some doubts were expressed as to whether Ferguson's proposed loans, by adding to the rural community's debt load, represented the best means of building up the Rural System. The Family Herald and Weekly Star, long an avid proponent of rural electrification, feared that the loans would tempt farmers to purchase equipment more powerful and expensive than they needed. Factory owners, the paper pointed out, could finance large plant outlays simply by adjusting their prices. Farmers, by contrast, had far fewer controls over production and profits and therefore were at much greater risk every time they incurred more debt. Until the average farmer knew more about how hydroelectricity could reduce production costs, great care needed to be taken when purchasing electrical equipment.2 C.A. Robertson (Lib., Huron North) issued a similar warning. Referring to the loan proposal as a "very doubtful favor," he maintained that any farmer unable to afford Hydro's installation costs was better off without electricity, since it was a "semi-luxury" and not necessarily "a money-maker."^

156 Power at Cost As with his promise of lower service charges, Ferguson first committed the government to the loan program and then instructed Cooke to work out the details. The premier's only instructions were that the loans be self-supporting and in no way construed as further government bonusing.4 Cooke in turn recommended a plan that Ferguson tabled in the legislature along with the service-charge legislation on 24 February 1930. The Rural Power District Loans Act empowered the government to withdraw up to $2 million from consolidated revenues for the purpose of installing electrical services in RPDS. The money was to be distributed by the HEPC in loans of up to $1,000 per contract holder. All new as well as existing customers could apply, provided that they belonged to an RPD and actually owned the property for which the loan was intended; tenants were not eligible for the funding. If the property was encumbered, Hydro was to notify the mortgagee of the application. The mortgagee in turn had two weeks to file an objection. The money could be used for extending secondary lines onto the borrower's property; wiring houses, barns, and outbuildings; and purchasing and installing transformers, utility motors, milking machines, grain grinders, pumping equipment, and washing machines. The loans carried quarterly interest payments of 6 per cent per annum and technically were negotiable for terms of up to twenty years, although Hydro never granted a repayment period longer than ten years. The scheme's intent was clear - to furnish substantial financial assistance without "the formality and expense of normal borrowing procedures."5 Opposition to the measure in the legislature focused on section 9(2), which granted HEPC loans precedence over any prior lien on the property. The Liberal leader, William E.N. Sinclair, was outraged that the government, in its rush to accord special privileges to Hydro, would risk undermining "the faith of the investing public" by proclaiming that an individual's debts could "be superseded by something that he subsequently buys." The Farmers' Sun was equally critical and accused the government of creating a "provincial mortgage" at the expense of private investors. Since many farms were heavily mortgaged, the proposed legislation came "perilously near to confiscation, by provincial enactment, of part of the value of existing securities privately held." Furthermore, if the HEPC were allowed a right of prior claim, rural residents would find it extremely difficult to secure loans from private lenders. Cooke thought the criticisms totally unwarranted. He noted that the government already possessed similar authority under the Drainage Act, and abuses had not resulted. The RPD loans legislation differed only in

157 Responses to the Depression

that it was directed at electrical installations rather than at drainage problems, and a provincial commission rather than the government itself had first claim on any funds collected. The sole purpose of clause 9(2), Cooke insisted, was to protect the taxpayers by preventing unscrupulous borrowers from placing liens on their properties after the Hydro-financed improvements were completed.6 C.A. Robertson believed that the government's efforts were misdirected, for he had yet to hear any public demands for the type of assistance being offered. Listen to the people and reduce rural rates, he said, and installation loans would be unnecessary. Besides, farmers preferred to pay private lenders higher interest rates and retain a degree of confidentiality than to receive slightly better terms from the government and have their "affairs known through all the country." D.J. Taylor (Prog., Grey North), most of whose constituents were still waiting for HEPC service, thought a $1,000 borrowing limit excessive; $500 was ample for wiring buildings and purchasing any appliances that farmers in strapped financial circumstances might need. Taylor supported the Farmers' Sun when it pronounced that the program would entice farmers into overextending themselves by borrowing money for non-revenue-producing luxuries. But Ferguson vigorously denied that electric irons, toasters, and washing machines were luxuries. Farmwives, he explained, "are doing more than rocking the cradle nowadays [and] pretty well run the whole show." He went on to say that if the agricultural industry were to be made prosperous again, it was as important to provide women with a comfortable and sanitary environment as it was to alleviate the physical burdens of men.7 After the RPD Loans Act became law on 3 April 1930, the HEPC spent the summer and fall finalizing the program's details, and it began considering applications in early November.8 In the first year the Commission approved seventy-four of the 126 requests (58.7 per cent) and disbursed $23,542. The most popular uses for the money were wiring homes (32 per cent of all loans), wiring barns and outbuildings (25.1 per cent), erecting secondary lines and transformers (14.2 per cent), and purchasing grain grinders (10.1 per cent). A majority of the loans were for terms of either five or ten years (25.7 per cent and 36.5 per cent, respectively).9 The program's structure and intent altered little over the ensuing decade, despite the worsening Depression and Hydro's anxiety over its growing power surplus. In 1935, loans were extended to cover milk coolers, cream separators, ranges, and soil heating equipment, and thereafter a fiveyear term was the longest granted.10 Two years later, the interest rate was reduced to 5 per cent on all existing and future loans.

158 Power at Cost

Otherwise, the program proceeded without change until its very existence was questioned at the onset of the Second World War." Thomas H. Hogg, who replaced Lyon as chairman in November 1937, asked Hepburn in June 1940 whether his government intended to continue issuing rural loans "in view of the present unsettled conditions." The cabinet decided later in the month that because the program was of such modest scope it could be preserved - less than $100,000 had been lent since 1938, and the vast majority of outstanding loans appeared secure. Only four months later the deteriorating military situation in Europe forced the government to reverse itself. During March 1941, in an attempt to reduce domestic expenditures, the Hepburn government imposed a moratorium on disbursements under the RPD Loans Act. The legislation was not repealed, but no new loans were ever issued.12 It seems little short of remarkable that a novice lender like Hydro could enter the loans business at the beginning of a crippling depression and escape with only a few delinquent accounts. Out of principal and interest payments totalling $407,022, the HEPC failed to recover only $1,559 (°-3& Per cent). This success can perhaps be related to the fact that the 1,776 loans issued during the program's eleven years of life represented a cautious 76 per cent of all requests. Hydro was also well protected against defaulting borrowers by its ability to add overdue loan payments, along with unpaid monthly accounts, to an offender's tax bill, a recourse the Farmers' Sun considered "even more drastic" than clause 9(2). As it turned out, most of the problematic loans were issued very early on, before anyone fully realized the depths to which the economy would plunge. As conditions worsened, Hydro tightened the borrowing requirements - three years became the maximum repayment period, and loans were denied anyone whose indebtedness exceeded 60 per cent of a property's value - but the act none the less remained the last refuge for anyone turned down by the conventional lending institutions.13 Given its well-secured position, the HEPC could afford to show leniency toward defaulters. Whenever possible during the early years of the Depression, it avoided pressuring those who had fallen behind in their payments, preferring instead to believe that most farmers would become solvent once agricultural conditions improved in a year or two. In the interim, Hydro attempted to minimize the arrears. In a number of cases borrowers were employed on transmission-line construction gangs as a means of working off their indebtedness. If an individual's financial situation seemed irredeemable, the HEPC could also repossess any equipment purchased from the loan proceeds and credit the customer's account accordingly.

159 Responses to the Depression

This expedient was rarely used, however, because most of the delinquent loans had gone toward wiring buildings.14 Hydro claimed from the beginning to be satisfied with the program's results, but it soon realized the futility of conducting a loadbuilding campaign during a severe economic downturn. The Rural Loans Department eventually distributed $360,852, an average of $203.18 per loan. Only the first year's transactions, when the average loan was $318.14, were anomalous. Thereafter, a much smaller share of the annual allocations went toward installing the service, while greater emphasis was placed on appliance purchases. Getting the power onto the farmer's property, and wiring the buildings, accounted for 31.9 per cent of all monies spent. Grain grinders, which were purchased by 939 borrowers and accounted for 50.3 per cent of total funds expended, were the single most popular item by far. Pumping systems and milk coolers ranked second and third but represented only 6.1 per cent and 5.7 per cent of expenditures, respectively. More surprising still, only three ranges and two cream separators were purchased in eleven years.15 What, if anything, had gone wrong? Prior to tabling the RPD Loans Act in 1930, Cooke had ordered a survey of all electrical equipment in use on farms served by the HEPC. That study's findings provided a useful scale for measuring the legislation's impact. First, whereas 49.7 per cent of all farm households previously owned an electric washer, only fifty families turned to Hydro for help in financing the purchase of what clearly had been a highly prized appliance. A similar pattern appeared with electric motors and pumping systems, which were found in 26.5 per cent and 22.7 per cent, respectively, of all HEPC-serviced rural homes prior to 1930. Only 3 per cent of the RPD loans were used for electric motors, and 8.8 per cent for pumping systems.16 No doubt some farmers continued to rely on traditional lenders, so the HEPC'S statistics do not tell the entire story. Nevertheless, the fact that Hydro attracted only 2,336 applicants from among 120,000 farm and hamlet customers - not to mention the tens of thousands of rural residents who had not yet received the service but were eligible to apply for a loan - suggests that the program was largely ineffective. The explanation is not to be found in the loans themselves; the HEPC'S terms were as favourable as those available from private sources. Rather, the poor response stemmed from the dire economic straits in which rural Ontario found itself. The farming community's gross annual income began its devastating slide after 1928, when it averaged $1,764 per farm, eventually bottoming out at $944 in 1932. Over the next four years incomes climbed back to only $1,260 per

160 Power at Cost

farm. The annual increments were more pronounced thereafter, but it was 1941 before the average farmer's income, at $1,851, was finally restored to its pre-Depression level.17 Electrical appliances, by contrast, improved in quality and diversity yet steadily declined in price throughout the 19303. Whereas washing machines sold for $85 in 1930, a much improved model cost only $57 in 1939. Similarly, rangettes dropped in price from $25 to $19, and electric irons went from over $3 to less than $2. The major obstacle to the loan program thus remained the crushing combination of high installation costs and falling incomes. So long as the average farmer had to hand over more than half a year's gross income for the hook-up alone, demand for Hydro's service was bound to remain minimal.18 In hard times, it seems, few people were prepared to run the risk of additional debt, especially since there was still doubt about hydroelectricity's usefulness on the farm. The HEPC'S rural load-building initiatives would simply have to await more propitious times. The RPD Loans scheme suffered from having been conceived before the full severity of the Depression was realized. Fortunately, not every HEFC initiative during the 19303 was so ill-suited to the challenge at hand. In fact, the Commission responded to the worst of the economic downturn with some of its most innovative promotions to date. Hydro's critics continued to complain that more should be done to assist farmers in their time of greatest need. But compared to how governments in Canada generally reacted to the emergency, Hydro's response was positive. This is not to suggest that the HEPC abandoned its traditionally cautious approach to new extensions, as witnessed by its response to those who regarded rural electrification as a ready source of unemployment relief. All the HEPC need do, so the argument ran, was accelerate its program of transmission-line construction, and jobs would instantly be provided for Ontario's growing ranks of unemployed. In September 1931, the UFO was among the first to urge the Henry government to redirect relief funding into rural extensions. Three years later, its pleas having been largely ignored, that organization's Hydro Committee met with T.S. Lyon. The committee emphasized on this occasion that "a considerable portion" of all relief monies should be used for building transmission lines "to the farmer's gate," with the resulting savings in construction costs being passed on to Hydro's rural customers in the form of reduced service charges. This was only fair, the delegation maintained, because rural

161 Responses to the Depression

dwellers had been making large contributions to relief programs all along, without receiving a proportionate share of the benefits.19 Lyon admitted that Hydro's construction program was in a "tragic condition/' but he doubted whether relief labour could be used to any significant extent. New lines could be built only if there were demand for them, and at present many farmers did not have "sufficient capital to have Hydro or take advantage of the accessories which were on the market." Jeffrey was even less amenable to the idea. He reminded the delegation that every provincial government since 1921 had generously conceded special benefits to the agricultural community in the form of construction bonuses. Accordingly, it was inappropriate for the UFO to expect further concessions during these troubled times. The most Jeffrey could promise was that Hydro's engineers would continue to conduct year-end evaluations to determine whether operating costs in RPDS justified rate reductions.20 Variations of the UFO'S proposal were bandied about for several years to come, but Hydro remained wary of building a maze of new lines for which there were few customers. Providing relief to the unemployed might be honourable and necessary, but the HEPC also needed to consider how a surfeit of expensive and underused rural transmission lines would strain its finances in years to come. Its critics demanded aggressive action, and rightly so, but the Commission refused to erect lines willy-nilly across Old Ontario.2I In September 1934, barely two months after his appointment as chairman, Lyon outlined what he considered to be a more sensible approach to the rural network's problems. Lyon was dissatisfied with the progress in farm electrification to date - only 29,000 of the HEPC'S 63,000 rural customers were "real farmers." He also believed that Hydro, because of its lack-lustre record in the farming community, must assume some of the blame for the lamentable exodus of rural youths to the cities. If the "greatest contributing factor" to their discontent was, as he maintained, the lack of modern sanitary equipment on the farms, then the province's future well-being depended on the HEPC'S immediately addressing the problem. What better way to begin than by making the cost of pumping water in RPDS so inexpensive that virtually anyone could afford the energy required to operate household sanitary facilities? This move would eradicate a serious social ill, enhance the Rural System's load, and help to whittle away Hydro's troublesome power surplus. Obviously excited by the prospects, Lyon instructed Jeffrey to calculate what effect giving a limited amount of free power to established customers

162 Power at Cost

would have on the Commission's finances and load. He also asked how much it would cost to add 10,000 new customers to the existing transmission network.22 Lyon's fellow commissioners, Thomas B. McQuesten (Lib., Hamilton-Wentworth) and Arthur W. Roebuck, Hepburn's attorney general and minister of labour, were of like mind. Both agreed that urban consumers could be persuaded to pay a larger share of the expense of introducing electricity to the province's farms, since urban centres would benefit in the form of higher employment, lower power costs, and a burgeoning trade among electrical equipment manufacturers. For his part, Jeffrey tried to steer the three commissioners, who at the time collectively had less than six months of HEPC experience, away from so adventurous a course. To the veteran bureaucrat, such talk of free power and of a further shifting of the Rural System's costs onto urban users was anathema. He protested that extensive efforts to promote rural electrification were already in place and that the introduction of "entirely different methods" was unnecessary. Rather, any change contemplated should be made within existing programs. But the Liberal commissioners, fresh from the hustings, were not disposed to listen. They hoped to distinguish themselves from their Conservative predecessors whom Hepburn had summarily deposed. In the end, dutiful subordinate that he was, Jeffrey set about gathering the information requested of him.23 Lyon immediately tested in public his belief that urban communities should bear greater responsibility for helping rural areas to obtain cheaper energy. On 12 September, while addressing the Georgian Bay Municipal Electric Association at Collingwood, he announced that the HEPC would soon be promoting rural electrification by selling energy to farmers at less than cost. He told his audience that the municipal partners had themselves set the precedent long ago, by trying to attract new industries with promises of below-cost power. Any benefits that were derived from these municipal handouts, he predicted, would pale by comparison with what the Commission now had in store for the Rural System.24 It was a theme to which Lyon returned frequently over the ensuing months. The following May, while attending the opening of the Ottawa Hydro Commission building, he spoke of giving "the forgotten man" on the farm the same "benefits of cheap power and light which were available to urban dwellers." As a measure of "social amelioration and social reform," affordable energy was certain to keep farm people off city bread lines. Once again he emphasized that the welfare of the entire province would be enhanced, but only if the HEPC were able to "carry the townspeople" with it.

163 Responses to the Depression

In his crusade Lyon enjoyed the support of at least one influential urban ally. The Globe believed that towns and cities would not begrudge the rural community the many benefits of electricity that they themselves had long taken for granted. "Ontario city-dwellers," the paper maintained, "will give no heed to the voice of a sectionalism that would obstruct the extension of Hydro service to the farms at a price that farmers can afford to pay."25 Having been favourably received at Collingwood, Lyon hoped that any new rural electrification initiative would command the "almost unanimous support" of Hydro's municipal partners. He therefore instructed Jeffrey to narrow his inquiry's scope and to consider the implications of bonusing rural customers who used electricalpowered water pressure systems and washing machines. Lyon was more specific in his comments to the press: My own idea is that by experiment an average cost of operating a system for providing water pressure in farm houses should be worked out so that the monthly bills to households with modern plumbing and washing appliances could be rebated on the basis of perhaps .05 or .03 cents per kwhr. for that portion of the current which, by such experiments, could be shown to have been devoted to these purposes. This bonus in the form of power below cost should be extended for a definite period of from three to five years to all present users on the farm of modern plumbing and washing machines, and for a like period to all persons who within the next three years shall install similar appliances.

Lyon warned that no matter how appealing the bonus, "the initiative must not be left entirely to the prospective consumer" if the plan were to succeed. Henceforth, every Hydro employee in every RPD must routinely visit prospective customers situated along the existing distribution system. Their promotional activity would be part of a general effort to compensate for a reduced revenue base by increasing the number of users per mile of line. "Salesmanship," the Globe pronounced, would assume a "new meaning" among Hydro's staff.26 The analysis that Jeffrey presented on ^ October contained some stark facts about the limitations of the publicly owned system that were certain to cause the neophyte commissioners to reconsider their adventurous approach to rural electrification. Of approximately 200,000 farms in the province, 36,000 (18 per cent) were believed sufficiently isolated to remain forever beyond the reach of HEPC lines. Only 30,000 (18.3 per cent) of the 164,000 "accessible" farms were currently Hydro customers. Jeffrey calculated that 15,390 pros-

164 Power at Cost

pects (10,410 farm; 4,980 hamlet) requiring short secondary extensions could be tied into the existing transmission network for $1,836,800. The next most accessible group, comprised of 25,022 farms and 5,338 hamlet residences, presented a different situation altogether; they would need 7,873 miles of new lines at the staggering cost of $14,177,900.27 Jeffrey then attempted to quash enthusiasm for the chairman's pet project of cheap energy for sanitary and pumping equipment. He explained that a pump and washing machine could be operated for approximately $7.20 per year where power was available for two cents per kilowatt-hour. Installation and equipment costs, by comparison, something Lyon had ignored, ranged between $400 and $500. Given the present economic situation, Jeffrey believed that his findings pointed to only one conclusion: "Even if we give the farmer free current for an entire year, it is but little inducement to him in the installation of this costly equipment, even though it is an excellent convenience on the farm."28 Jeffrey proposed several other ways to increase rural electrical consumption, but most involved additional government subsidies. Lyon, by contrast, preferred that cost overruns in the Rural System be absorbed by the rest of the Hydro network. Jeffrey suggested lowering the minimum number of class 3 contracts per mile from three to one, with the government covering resulting deficits. He also thought that reduction of the interest rate and inclusion of a wider choice of appliances under the RPD Loans Act warranted consideration, as did an increase in the government's 5O-per-cent share of costs for rural-line construction. By the same token, the number of kilowatt-hours that customers were obliged to take under the relatively expensive first energy block could be lessened. Nor did Jeffrey feel that the notion of free electricity should be discarded altogether. Instead, he recommended limiting the offer to a threeor six-month period following purchase of certain appliances. Before any decisions were made, however, he thought that the HEPC should thoroughly canvass at least six "representative" RPDS. Only then would its engineers know for certain how many new customers to expect and what type of incentives were needed to persuade established power users to install additional appliances. Jeffrey concluded his report with this pointed advice to his superiors - whichever path they took, their expectations should be tempered with the knowledge that few farmers could afford the cost of wiring their buildings, and even those who could were unlikely to experience sufficient "prospects of betterment to warrant undertaking more expense."29

165 Responses to the Depression

The commissioners agreed to consider Jeffrey's alternative plan, but they were loath to discard the idea of supplying power for specific uses at "a nominal charge." Their resolve to proceed with an obviously flawed program was revealing; desperate circumstances demanded bold initiatives, and they had little patience with the innate conservatism of their own bureaucracy. On 5 October 1934, the Commission decided that for three years commencing i November any power that RPD customers used to operate washing machines, sanitary-system water pumps, and electric radios would be provided free of charge. So that there would be no mistaking the campaign's fundamental purpose, the benefits were not extended to "summer cottage" contracts, even though cottages were technically part of the Rural System. The estimated saving to consumers was $64,000 annually, an amount that the HEPC expected to recoup from increased consumption by present and future users.30 Hydro sweetened the pot the following week with another rate revision. It introduced in every RPD a maximum rate of 6 cents per kilowatt-hour - a reduction of as much as 2.5 cents in some instances - for the first block of energy consumed each month. The Commission was certain that if it pared the first consumption rate to an absolute minimum, overall usage would increase, thereby maximizing the rural network's revenues and relieving the power surplus. This one reduction alone was expected to produce savings in twentyseven RPDS of $6,400 per year, or approximately 75 cents per customer each month. The package also included a maximum second consumption rate of 2 cents per kilowatt-hour and a third rate of only 0.75 cents per kilowatt-hour, the latter to encourage such "long hour" uses as hot-beds and water heating.3I The Globe applauded both measures - free power as well as the rate reduction - claiming that they heralded "the commencement of a new era" for the HEPC and the province. Action was being taken at last to correct an injustice that allowed a majority of urban residents to reap "bargain rates," while fewer than 15 per cent of the homes in even the best farming districts were equipped with modern bathroom facilities.32 The Globe, having forgotten its own bitter denunciations of Beck when he was still alive, congratulated the Commission for exhibiting a progressive spirit unseen since the days when the "Hydro Knight" had held court on University Avenue. Beck's dream, the paper reminded its readers mawkishly, had not been one of "great manufacturing cities, of giant electric smelters, or of acres of electrically driven machinery." Rather, he had had visions of "women, working at ease in cool, bright kitchens; of chil-

166 Power at Cost dren studying their lessons in well-lit rooms; of farmyards flooded with light; of barns humming to the whirr of electric motors, and of stable lanterns hung up to gather cobwebs all across Ontario." Yet so few advances had been made in rural electrification since Beck's death that "it was beginning to look to rural Ontario as though the dream had died with the dreamer."33 Not everyone shared the Globe's enthusiasm. In keeping with their organization's traditionally stormy relationship with Hydro, delegates to the UFO'S annual meeting in mid-December 1934 were among the first to criticize the scheme. Harold Curry, a representative from the Strathroy (Middlesex County) area, felt that Hydro's "something for nothing" offer of free power should have been applied to farm "necessities," instead of "luxurious" items like washing machines and sanitary equipment. W.A. Amos, a veteran member of the UFO'S executive and chairman of its Hydro Committee, feared that the HEPC had strayed too far from its "power at cost" origins. He thought it unfair that people who were able to afford luxuries should be given power to be paid for by customers who were limited to using the service for "real necessities." Amos could only conclude that manufacturers of electrical equipment must be the secret force behind so misguided a campaign. Another delegate dismissed the rate reductions as inconsequential. He personally expected to save only four cents on a $40 bill every three months.34 The Toronto Telegram was equally condemnatory. Rejecting the Globe's "unfair and unfounded allegations" that Hydro's rural electrification program had stagnated since Beck's departure, the Telegram protested that it was the Hepburn-appointed Commission that was at fault. It dismissed the recent rate adjustment as "too trifling ... to be of any benefit" and calculated that if the measure saved customers $100,000 over three years, as Hydro predicted, the average saving per rural contract would still be less than fifteen cents a month. This was an amount "unlikely to attract any considerable body of new users." The Telegram wanted rural power users to receive the lowest rates possible, but only insofar as they, like their urban cousins, were served on a basis strictly "consistent with the principle of power at cost." What the paper found especially offensive was the "considerable political propaganda" surrounding the rate reductions. It accused the Globe of attempting to discredit the Conservatives by ignoring readily available construction statistics, such as the fact that over 48,000 new users had been added to the provincial commission's rural lines since 1925. Surely that figure alone was irrefutable proof "that the existing rates were not beyond the capacity of the farm community generally."35

167 Responses to the Depression

While the press flung accusations about, Jeffrey busied himself with the survey of six (later seven) RPDS that he had recommended in his October report. When the results were tabulated in January 1935, he identified 534 farm and hamlet residents as "good" prospects, from among the several thousand property owners visited by Hydro's sales representatives. Several hundred others were considered "fair" prospects — those who currently could not afford the service but who professed willingness to install electricity the moment their personal finances permitted. The survey's single most important finding was that many respondents, the Telegram's cynicism notwithstanding, credited the new rates, and the offer of free power in particular, with reviving their interest in the HEPC.36 These preliminary findings prompted the Commission to broaden the survey's geographical scope throughout the remainder of 1935. By year's end, sales representatives had interviewed 77,427 residents, 38,339 of whom were HEPC customers, in sixty-four RFDS. Of the remaining 39,088, only 15 per cent (5,875) agreed to sign a contract, although 1,867 °f these could not be served unless their neighbours also signed up, thereby providing the minimum customer density. The HEPC was satisfied with the immediate returns, as its experience had shown that one or two years had to pass before the full impact of a rural promotion or solicitation could be accurately measured. Consequently, the Commission was confident that the survey would ultimately produce a rate of return "considerably higher" than 15 per cent.37 Coinciding with the rate reductions and survey was the most intensive promotional campaign the HEPC had undertaken to date. A. Murray McCrimmon, the Commission's controller, provided much of the impetus. The office of controller had been created by an amendment to the Power Commission Act in 1916, in response to the provincial auditors' complaints that Hydro persistently flouted its government-imposed spending restrictions. One year later, the Hearst government inexplicably revised the legislation and turned responsibility for the appointment over to the HEPC. As a result, the position remained vacant until McCrimmon's appointment in November 1934.38 Born in Kincardine, McCrimmon had learned the intricacies of the utilities business during the 19205 while working in Brazil for the Rio de Janeiro Tramway, Light and Power Co., the Sao Paulo Telephone Co., and the Brazilian Traction Light and Power Co. After a brief stint as an investment counsellor, he had been hired by the HEPC, with the cabinet's approval, to "exercise general control over the Commission's expenditures." McCrimmon brought to the HEPC

168 Power at Cost a fervour that was bound to draw attention. Within a year of his arrival he had submitted a report harshly critical of Hydro's organizational and operating procedures and in the process provided historians with a rare insider's glimpse of the utility after its first quarter-century of operation. The Commission's fundamental problem, he explained, had been its failure to make a smooth transition from a "construction and heavy spending era to a new commercial or sales period." His observations, which were directed at the utility as a whole, were equally applicable to the Rural System.39 "A first and general criticism," McCrimmon began, was that the HEPC had never "developed along business lines." Because the demand for its services had always been high, it had not been necessary for Hydro "to be commercially efficient to be successful." As a result, "salesmanship was unnecessary and never learned." Worse still, Hydro had taken advantage of its "all powerful" position under the Power Commission Act and "disregarded the first principles of the public utility business" - service and courtesy to the customer. Certainly the UFO, which had long complained of the "needless arrogance and domination" of Hydro's "agents," would have concurred. McCrimmon also noted that personalities rather than "a planned economy" had been responsible for much of Hydro's organizational growth: "Individuals have built up little principalities, each jealous of their own rights and prerogatives, and striving for more and more power and authority without much thought for the co-ordination and consolidation of the Commission's activities as an operating entity." A high percentage of the executive staff, while loyal to "Hydro's principles," were narrow-minded because of their limited experience beyond the HEPC. In addition, they had for too long been isolated from the "buffetings of commercial life" and had largely outstayed their usefulness. McCrimmon contended that the sooner these tired veterans were replaced by aggressive young policymakers, the better. Only then could Hydro be expected to embrace the customer-oriented philosophy that was crucial to the utility's future well-being.40 Such bluntness could hardly have endeared McCrimmon or his office to Hydro's upper ranks, and when he left the Commission in November 1937, the position of controller was left vacant. Yet his advice was not wasted, for the Load Building Organization, established in February 1935, promptly pointed Hydro in the very direction he had prescribed. The Load Building Organization was comprised of ten subcommittees representing every facet of the Commission's marketing operations. Each subcommittee was responsible for devising techniques to increase energy consumption

169 Responses to the Depression

in its respective jurisdiction. Together, they sought to reduce Hydro's troublesome power surplus and to obtain sufficient additional revenues to offset carrying charges on the massive generating and distribution network that had been under construction since the 19203. The "Rural" subcommittee concentrated on developing marketing techniques geared specifically to a rural clientele, a tacit admission that Hydro's salespeople had hitherto failed to treat farms and hamlets as a distinct market, with electrical needs quite separate from those of the urban areas. The subcommittee also planned an educational campaign based on direct mail pamphlets and advertisements in agricultural journals.41 The series of electrification articles that the OMEA had placed in the rural press just the year before provided a useful model. It was not until 1937, however, when $600 a month was allocated for the purpose, that Hydro's ads appeared on a regular basis. At that time, the HEPC made an arrangement with three of the province's leading agricultural journals, the Canadian Countryman, the Farmer, and the Farmers' Advocate, whereby it promised to purchase advertising space if the editors reciprocated with articles promoting rural electrification. Hydro also encouraged manufacturers of farm electrical equipment to jump on the bandwagon by advertising their wares in the same journals.42 One of the subcommittee's most popular promotions after 1938 was an updated version of the travelling Power Circus first introduced by Beck almost three decades earlier. Dubbed the Rural Travel Shop, it consisted of a large trailer equipped with the latest electrical appliances. Its purpose was the same as its predecessor's - to travel about southern Ontario demonstrating how relaxed and profitable rural living could become with the aid of hydroelectricity. During the fiscal year 1939-40, it conducted 114 demonstrations, often at fall fairs, attracting almost 60,000 visitors. The HEPC estimated that the Travel Shop was directly responsible for increasing electrical consumption in RPDS by one million kilowatt-hours in that year alone.43 The HEPC resorted to a variety of measures, some quite novel, in an attempt to ease the rural network's Depression doldrums. Loans, free power, rate reductions, and the Load Building Organization's promotions were all intended to expand the Rural System's customer base and power load. Yet as the economy worsened, the rate structure itself magnified the very problems that these expedients were expected to solve. As P.P. Morrissey has noted, a major benefit of the "power at cost" principle was that it rendered "financial results

170 Power at Cost

independent of fluctuations in general industrial and commercial activity," provided that it was "adherred to rigidly." By the same token, a significant disadvantage was "the necessity of increasing rates in a severe recession or depression, merely because load conditions ... decreased."44 One way of avoiding hefty rate hikes every time that power loads and revenues fell was to establish a fund from which customers' costs could be temporarily subsidized. Given that fixed charges regularly accounted for almost 85 per cent of total power costs, the advantages of such a mechanism seemed obvious. Nevertheless, it was 1930 before the HEPC created a Rate Stabilization Fund. Even then contributions ceased after the first year, as the agreed-on assessment of ten cents per horsepower seemed excessive once the economy went into decline. Ironically, the fund designed to protect rural customers during hard times itself became a victim of the slump. No further deposits were made until 1936, when cancellation of the Quebec power contracts finally accorded the Commission's finances some relief.45 In the absence of a bountiful stabilization fund, the HEPC turned to its Equipment Obsolescence and Contingency Fund. This fund's balance plummeted from $14,629,578 in 1931, to just $3,780,571 in 1935, as Hydro continued to siphon off more money in a desperate attempt to avoid the rate increases that would only further diminish demand for its service. In 1935 alone, expenditures on all systems, urban and rural, exceeded revenues by almost $3 million. Even the Toronto Hydro-Electric Commission, which the Hydro hinterland traditionally regarded as the most favoured of the municipal partners, received subsidies from the contingencies fund averaging $5.33 per horsepower between 1932 and 1935. Commissioner Roebuck had no qualms about the unusual appropriations and argued that they were the "natural" response of any government in a "jam like this." The HEPC nevertheless proceeded to re-establish the Rate Stabilization Fund the moment its finances permitted. This time no specific levy was set. As commissioner J. Albert Smith (Lib., Waterloo North) explained to the OMEA, contributions would be made on an ad hoc basis "during exceptionally good years, to offset the necessity of increasing rates during unfortunate years." Hydro took advantage of the upswing of 1936 and 1937, adding $4,301,000 to the fund. Following a brief relapse in 1938 when no contributions were made - an incident that the Commission insisted did not violate Hydro "principle or policy" - the fund grew steadily thereafter and reached $17,143,874 by the end of the Second World War.46

171 Responses to the Depression To minimize the strain on the stabilization fund, McCrimmon promoted legislation to make RPDS more financially interdependent. A recurring problem for the Commission had been the economic imbalance within the Rural System: some RPDS consistently accumulated large surpluses, while others incurred deficits. By 1937, the surpluses of rural districts in the Niagara, Georgian Bay, and Eastern Ontario systems had grown to $1,204,196, while the deficits totalled $256,814. Moreover, a vast majority of the credit balances belonged to RPDS near the largest cities. Customers of the Welland RPD, for instance, had been overbilled $51,161 ($15,716 during 1935-6 alone), or more than $5 each. With passage of the 1937 amendment to the Power Commission Act, Hydro no longer agonized, as it had done in 1927 and 1929, about the best way to return these overpayments. Henceforth, all RPD surpluses and deficits would be pooled within the Rates Suspense Account, with any balances going toward "securing more equitable rates throughout the Rural Power Districts as a whole."47 By the mid-i93os, the need for rate stabilization was especially evident among several hard-pressed rural villages. The steady advance of transmission lines onto the farms of Old Ontario during the preceding two decades had not altered one vital fact - an infrastructure of prosperous hamlets, villages, and towns provided the power loads on which depended the financial viability of most RPDS. And yet as Middlesex County's J.W. Freeborn told the legislature on 27 February 1936, many rural communities were "threatened with extinction" unless the drift of people and industries from the countryside to the cities were halted by introduction of cheaper electricity. Referring to Ailsa Craig, a village eighteen miles northwest of London, Freeborn blamed high power costs for the recent closing of a flax and two grist mills, a foundry, and two carriage factories. The only way that many rural industries in his constituency had survived the Depression, he claimed, was by reverting to diesel power. The warning signs were ominous, and unless the government boldly supported the smaller rural centres the damage to the province's social and economic fabric might be irreparable.48 In calling for more government involvement, Freeborn overlooked the special measures that the Hepburn government had already taken to bail out a number of the worst-hit communities, of which Neustadt was representative. Located six miles south of Hanover in Grey County, Neustadt, which had a population of 480 in 1921, first received HEPC service in 1919. The community's power load had peaked at 239 horsepower in 1922. By 1934, shutdown of one fur-

172 Power at Cost

niture factory, conversion to steam power of another, and closing of the grist mill and creamery had pushed the load down to just 32.6 horsepower. In the same period, the price per horsepower jumped from $42.50 to $100.72, forcing the village to fall over $18,000 behind in its payments to the HEPC. Like so many other small communities, Neustadt had built an expensive distribution system to supply a handful of industries. When these industries failed, the remaining residential and commercial customers were left with the impossible task of carrying the heavy fixed costs.49 The HEPC, acknowledging Neustadt's hopeless position, succeeded in having an important amendment tacked onto the Power Commission Act in April 1935. The legislation empowered Hydro to supply power to any municipal partner at fixed rates, regardless of the actual cost of the service. As a result, rates to Neustadt and five other communities experiencing similar hardships were immediately reduced by as much as $28 per horsepower, with the balance being spread among the remaining municipalities. No one seemed to notice, or if they noticed to care, that "power at cost," which had been abandoned long ago on the Rural System, was now subject to arbitrary interpretation among the municipal partners as well. 5° The Hepburn government, in its zeal to set the rural network on a stronger footing, next set its sights on another of Hydro's most solidly entrenched policies — the minimum-density requirement. The HEPC had long regarded three class 3 contracts per mile as the absolute minimum for maintaining a financially acceptable rural distribution network. Others thought different, and gradually the density requirement was blamed for much of what ailed the rural program. As early as 1923, the councils of Lambton, Lennox and Addington, Perth, Kent, and Frontenac counties passed resolutions complaining that three customers per mile was impossible to attain in many areas, and probably always would be. Four years later, Duncan A. McNaughton (Cons., Stormont) pressured the HEPC to erect transmission lines even where the minimum number of contracts had not been secured, on the premise that other farmers would "hook up later." Gaby abruptly squelched the idea.51 The following year, Robert H. Kemp (Prog., Lincoln) urged the legislature to provide "a square deal in the matter of Hydro" by abolishing the "'three to the mile or no power' provision." But the HEPC remained adamant that the requirement was essential to the Rural System's well-being, and there the matter rested until it was revived by Farquhar Oliver in March 1937. Oliver, an indefatigable guardian of rural interests, particularly when the HEPC was involved, thought that the old

173 Responses to the Depression

standard had outlived its usefulness. A majority of Ontario's farmers would never receive their fair share of provincial power, he argued, until the minimum-density requirement was reduced to only two customers per mile.52 Hydro's Lyon had already shown himself an avid proponent of rural electrification, but he wanted no part of Oliver's proposal. In a forcefully worded letter to Premier Hepburn, he explained that assessing the many fixed costs against just two consumers per mile of line would raise service charges to "a prohibitive figure." One immediate consequence would be to force the cancellation of a planned reduction in consumption charges, since a lower customer density would necessitate energy costs of between nine and twelve cents per kilowatt-hour. Furthermore, reducing the minimum density would be feasible only if the government raised its share of construction costs to 75 per cent. But Ontario's taxpayers were already "dealing very liberally with a difficult question" by contributing 50 per cent of the price of rural extensions, and the government "would not be justified in asking for the payment of a greater proportion of these rural lines by the general public." Lyon saved the most foreboding news for last. As Hydro expanded its rural network into the more sparsely populated areas, it had experienced greater difficulty justifying the cost of new extensions, even on the basis of three contracts per mile. Without providing any specifics, Lyon assured Hepburn that several stretches of line were already losing money and were expected to do so for a long time to come. Consequently, to reduce the density requirement as Oliver advised would be an affront to "sound finance."53 Although he had suggested to the premier a political as well as a financial justification for not tampering with the status quo, Lyon completely misjudged the situation. Urged on by his government's easy re-election in October 1937, Hepburn did not share the Hydro chairman's cautious outlook. Instead, he promptly latched onto the lower density requirement as a promising way to reinvigorate the utility's ailing expansion program. He also saw in the proposed reform a worthy substitute for the recently terminated free power promotion. That program, which had saved consumers slightly more than $90,000 during the preceding three years, was not extended beyond its original deadline of 31 October 1937 on account of the recent reduction in service charges. Fear of a political backlash among urban taxpayers who were tired of paying the bill for rural electrification seemed not to enter Hepburn's mind.54 In effect, the bureaucrat and the politician had switched roles. In the past, one would have expected the HEPC to be pleading for

174 Power at Cost additional financial assistance, while the government nervously contemplated the popular support that it stood to lose by accepting responsibility for yet another Hydro loss. As it was, Harry C. Nixon, the provincial secretary, told the Ontario Concentrated Milk Producers Association on 17 February 1938 that a two-contract-per-mile provision would be introduced as revenues permitted and that the government would absorb any deficits that resulted. The Commission, presented with a fait accompli, was to calculate how extensive those deficits might be.55 The Rural Power District Service Charge Amendment Act, which passed the House on 8 April 1938, empowered the government, at Hydro's recommendation, to determine the minimum number of customers per mile that was required before a transmission line could be constructed. In keeping with Nixon's promise, all deficits incurred by RPDS as a result of the changes would be paid from provincial coffers. To minimize these losses, Hydro simultaneously introduced a new format for categorizing its rural customers. So long as every applicant belonged to class 3, there was little difficulty in enforcing the guideline of two farm contracts per mile. However, now that service charge revenues were about to be reduced by as much as a third in some areas, it was imperative that Hydro's engineers be able to equate precisely the other rural categories to a class 3. They needed to know, for instance, how many extra class IB contracts, or how many fewer class 78 contracts, would generate the same revenue per mile of line as the two class 3 contracts. The method adopted allotted a specific number of units to each class of consumer. When contracts were signed totalling ten units per mile, construction on the line could begin. All farm contracts, classes 3 through 78, were assigned five units. It was with the four remaining categories, IB through 2B, which included hamlet and house lighting and small farm services, that the new procedure was most helpful. In the past, Hydro's engineers had been accused of inconsistency when determining how many of these small-load contracts it took to justify a mile of transmission line. Under the new system, arbitrary decisions would no longer be necessary.56 The RPD Service Charge Amendment Act was forward looking, but, like many changes made during the Depression, it failed to produce a boom in farm hook-ups. The 9,232 rural contracts added in southern Ontario in 1938 were encouraging compared to the 6,652 signed during the four years 1933-6, but they were not a significant improvement over the results of 1937 (8,987), the last year the threeper-mile guideline was in force. Nor would matters improve for quite some time. The number of new farm contracts fell to 7,852 in 1939

175 Responses to the Depression

and to only 5,524 in 1940. By the latter year, imposition of a wartime construction moratorium on nonessential transmission lines had extinguished any hope of an immediate turnaround.57 The size of the HEPC'S total rural clientele in Old Ontario expanded more than threefold during the Depression - from 37,179 (16,134 farm; 21,045 hamlet) in October 1929, to 110,361 (59,820 farm; 50,541 hamlet) by the end of 1939. The growth occurred sporadically and mirrored fluctuations in the economy. Almost 25 per cent of the hook-ups were made between 1929 and 1931, followed by a fouryear hiatus when only 15.8 per cent of the decade's new customers came on board. The resurgence began in 1936 (7.8 per cent) and coincided with the gradual recovery of farm incomes. As a result, almost 52 per cent of the contracts signed during the 19303 were completed between 1937 and 1939. This growth may have been erratic, but it represented progress all the same and partially compensated for Hydro's failure to increase significantly the average power consumption by individuals. Under the circumstances, even incremental gain represented a victory of sorts for the Commission. The HE PC and successive provincial governments worked together as never before to protect the Rural System from the bufferings of the Depression. Even if the government's motives were somewhat less than altruistic - rural electrification was regarded as politically popular, as well as necessary for protecting the province's enormous investment in the HEPC - many of the initiatives that originated at Queen's Park were instrumental in maintaining moderate growth on the Rural System throughout the turbulent decade. Moreover, despite growing political interference in the decision-making process, the Commission's authority was by no means diminished. Politicians might decide that free power or a reduced minimum density requirement was the answer to the Rural System's problems, but it was still Hydro's responsibility to implement and administer those changes, and the provincial government repeatedly ensured that the public utility was legislated the requisite authority to do just that. The HEPC'S recommendations may not always have been adopted in toto by the government, but they continued to carry much weight all the same. In short, co-operation can be said to have been the order of the day on both sides. The principle of "power at cost" proved to be the decade's big loser. The Rural System's rates had long ceased to bear any relation to the actual cost of the service, and the offer of free power, together with the 1937 municipal bail-out legislation, confirmed the arbitrariness of the rate-setting process. But these further deviations

176 Power at Cost

from its founding principle seemed a small price for Hydro to pay in order to become more responsive to the market demands and thereby to use resources to maximum advantage. In any event, the Commission's attempts to make the Rural System more self-supporting by amalgamating RPD surpluses and deficits, and by relying on its own Rate Stabilization Fund and Rates Suspense Account instead of additional provincial hand-outs, all bode well for the future. The 1930S represented a benchmark of sorts for the Rural System. Caught between a farming population often unable to afford hydroelectricity, and a provincial government that lacked the means to pay for extensions into sparsely populated areas, the HEPC was forced to consider the logical limits to which its Rural System should expand. This was a question with no easy answer. Jeffrey estimated in 1934 that 134,000 "accessible" farms remained to be served. Yet by 1939, although fewer than 25,000 farm contracts had been signed in the interim, one as knowledgeable as Hydro's vice-chairman, W.L. Houck, told the Ontario Agricultural Council that "the limit of expansion in rural districts has been nearly reached." The only growth on the Rural System would be "in volume," he forecast, "due to increased usage of power by customers, rather than in new customers."58 Before the accuracy of either prediction could be tested, the HEPC would first have to marshal its resources for war.

Hydro-Electric Power Commission of Ontario (HEPC) primary transmission lines near the town of Norwich, c. 1916. (Ontario Agricultural Museum [OAM], Milton, Ontario)

An October 1912 "Power Circus" demonstration of wood sawing, one of farming's most labour-intensive chores. (Ontario Hydro Archives [OHA] HP 667)

An electric milking demonstration on a St Thomas-area farm, October 1912, with Adam Beck standing on the right. (OHA HP 669)

Washday on a farm in the Woodstock Rural Power District (RPD), c. 1916. (CAM)

The fully electrified Norwich Gore cheese factory, Norwich RPD, c. 1916. To make farm electrification more affordable, the HEPC increased Rural System power loads by connecting farms, hamlets, villages, and local industries to the same distribution network. (OAM)

Left: Sir Adam Beck, Chairman of HEPC, 1906-25 (OHA HP 687)

Below left: Charles A. Magrath, Chairman of HEPC, 1925-31 (OHA HP 688) Below right: John R. Cooke, Chairman of HEPC, 1931-4 (OHA HP 689)

A&oue /e/t: T. Stewart Lyon, Chairman of HEPC, 1934-7 (OHA HP 690) Above right: Thomas H. Hogg, Chairman of HEPC, 1937-47 (OHA HP 691) To mark C.A. Magrath's retirement as chairman, some Hydro officials involved in the rural electrification program gathered at Toronto's Royal York Hotel on 26 February 1931. Seated in background: second from left, J.R. Cooke, fifth from left, T.H. Hogg. Seated in foreground: first from left, I.B.Lucas; third from left, R.T. Jeffrey; fourth from left, C.A. Maguire. Standing: fourth from right, W.W. Pope; sixth from right, F.A. Gaby; seventh from right, C.A. Magrath, (OHA HP 433)

Hydro displayed these ranges, washing machines, refrigerators, and vacuum cleaners at the Stratford Plowing Match, October 1931. (OHA HP 1595)

Farm kitchen, Markham RPD, c. 1929, equipped with the most modern electrical convenienus of the day: refrigerator, range, toaster, iron, washing machine, and water pumping system. (OHA HP 1045)

Electrical equipment manufacturers - here, Canadian General Electric - promoted rural electrification; Canadian Countryman, 12 August 1945. (OAM)

Hydro offered farm residents "a home equal to the most modern city home," but with the traditional gender roles; The Farmer Magazine, September 1937. (OAM)

The Five Year Plan, 1946-50, in action. (OHA 9081)

CHAPTER NINE

The Rural System during the Second World War Only what is possible can be done Power Controller H.J. Symington to E.H. Corman, MP, 21 November 1941

After Canada declared war on Germany on 10 September 1939, Ontario was soon on the road to economic recovery. In short order, the chronic unemployment and underused productive capacity that had characterized the 19305 became labour and materials shortages. In the HEPC'S Rural System, however, events did not mirror what was happening in the economy as a whole. In fact, the war placed a new set of obstacles in the way of rural electrification, more burdensome even than those encountered during the Depression. The problem stemmed from the HEPC'S loss of autonomy. In the First World War, Adam Beck had used the excuse of power shortages to justify expanding Hydro's generating capacity to the point where it eventually became the foremost producer and distributor of hydroelectricity in Ontario. The public utility's dominance had never been challenged since that time. But with the onset of war in 1939 and the dominion government's decision to take total control over the country's energy resources, this situation suddenly changed. The King and Hepburn governments each agreed in principle with Hydro that renewed emphasis on rural electrification was essential if Ontario's farmers were to keep abreast of the wartime demand for foodstuffs. Yet when it came to allocating scarce materials among a multitude of essential services and industries, Ottawa invariably decided that only under special circumstances would additional rural extensions be allowed. Stripped of its freedom to determine where and when rural transmission lines should be erected, the Commission focused instead on reappraisal of the Rural System's administrative framework and rate schedule. The result, which owed much to the actions of the neophyte Drew government, elected in 1943, was comprehensive restructuring of the rural network and abolition of the two-tiered rate. These changes, it was correctly perceived,

178 Power at Cost

were certain to facilitate rural electrification once Hydro's autonomy was restored after the war. One day after the country officially entered the war, the dominion government imposed an 8-per-cent war-revenue sales tax on all domestic electricity consumption. The UFO, the Ontario Chamber of Agriculture, and Hydro commissioner William L. Houck (Lib., Niagara Falls) immediately sent letters of protest to J.L. Ralston, dominion finance minister, but to no avail. Houck expressed a view common to all the complainants: "The farmer is a business man and to tax his entire electrical takings would be to subject him to a penalty not invoked against other business men." Ralston, however, knowing that only 27 per cent of the hydroelectricity consumed on Ontario's farms was used for non-domestic purposes, fought back determinedly. He admitted that in some instances it would be impossible to differentiate between a farmer's domestic and outbuilding power loads, but anyone worried about paying too much tax could install separate meters. Beyond this, Ralston maintained that the additional tax should not impose undue hardship on anyone. Since the average annual farm bill was $33.13, the 8-per-cent levy amounted to only $2.65 a year, or 22 cents per month. Eldon Township council (Victoria County) suggested that the tax would be "more equalized" if based on kilowatt consumption rather than dollar value, but the Department of Finance rejected this idea out of hand. The decision was justified on the grounds that as rates lowered, consumption increased. It followed, therefore, that since customers' total electrical bills would be approximately the same, regardless of their individual rates, the differences in the amount of tax paid would be minimal.1 Ralston likewise rejected Houck's suggestion that all farmers should be exempted from the tax: "Apart from the question of revenue loss," he wrote, "and of the desirability of insuring that all should contribute under our war taxes, you will realize, I am sure, the real practical difficulties of drawing a line between different groups of users." Trying to decide "when a man was, or was not a farmer" would produce endless disputes. Houck countered that the dominion government could solve this particular problem by adopting the HEPC'S system of rural customer classifications, but Ralston still refused to budge.2 Houck made a final attempt at compromise when he urged Ralston to limit the farm assessment to the first $25 of power consumption - a maximum tax of $2 annually - but the finance minister would have none of it.3

179 The Rural System

No further objections along these lines were heard until the closing months of the war, when the Ontario Concentrated Milk Producers Association demanded, in February 1945, that the 8-per-cent tax be lifted from all hydroelectricity used in agricultural production. This time the Canadian Federation of Agriculture counselled its Ontario brethern to accept patiently the inconveniences of war: "It is unfortunate that many such things as this sales tax seem to be a little unfair in their application to the farming industry, but the administration difficulties in attempting to make any distinctions are tremendous."4 Even after the war had ended, and the tax remained in effect, criticism was muted and confined largely to the OMEA'S oncea-year petition to Ottawa to revoke the measure. Finally, on 17 November 1947, the tax was removed.5 The tax issue was indicative of Hydro's subordination to the dominion government during the war, but in truth the Commission also gained powers as a result of the conflict. The Hepburn government's Power Control Act, passed on 22 September 1939, empowered Hydro "to regulate and control the generation, transformation, transmission, distribution, supply and use of all power in the Province," thereby bringing all privately owned utilities, large and small, under Hydro's direct supervision. In effect, the ironclad control that the Commission had always exercised over its own operations was now extended to the private sphere and included even the right to set rates. Houck told the House that approximately sixty privately owned generating stations producing a total of 500,000 horsepower annually would find themselves accountable to the HEPC and that many of the smaller companies involved were actually looking forward to the change.6 While this last claim seems questionable, no private producers protested openly. Evidently, as with the 8-percent tax, patriotism temporarily carried more weight than financial considerations. Under the cover of war, Hydro had made yet another leap forward. The HEPC understood fully the magnitude of the task that lay ahead. In February 1940 Hydro's chairman and chief engineer, Thomas Hogg, told a joint meeting of the OMEA and its companion organization, the Association of Municipal Electrical Utilities (AMEU), that the war would place an unprecedented emphasis on mechanization. As a result, enormous supplies of reliable and inexpensive hydroelectricity would become vital to a winning effort. Although Hydro at this time had a power surplus on hand, shortages could very well occur once munitions and other war-related industries tied into the distribution system. Domestic customers, both

i8o Power at Cost

urban and rural, should therefore brace themselves for the possibility of consumption restrictions and an extended period without rate reductions. Furthermore, any new capital projects that Hydro might undertake would need to be self-supporting, since the provincial government would have little money to spare. Hogg concluded by noting that there would be at least one benefit in all this: the HE PC would be able to use the heavy wartime loads to rebuild the financial reserves that the Depression had depleted. 7 Despite Hogg's prediction that power shortages were imminent, the Hepburn cabinet agreed in June 1940 that maintaining the existing program of constructing rural transmission lines would be "one of the best things the Government could do at this time." Shortly thereafter, Harry Nixon revealed that there were ulterior motives behind this decision. As he explained to Jeffrey, who in turn informed Hogg, the government's real predilection was to cut back on the rural program, but "political reasons" dictated otherwise. According to Jeffrey, "every Member of the Government, at one time or another, bragged from the public platform what they were doing for the farmers in constructing rural lines," and to announce a cutback in new extensions now would be politically damaging to the provincial Liberals. Nixon therefore instructed the Commission to "back-pedal on the construction of rural lines as much as possible without making it too apparent." It would be Jeffrey's thankless job to determine which applications were most urgent.8 In a subsequent memorandum, Osborne Mitchell, Hydro's secretary, explained to Hogg that a combination of factors had led to this sudden change in procedure. The rural expansion program had always relied on the availability of the government's grants-in-aid. Since 1921, securing this funding had been largely routine: the HEPC prepared the year's construction schedule, informed the government of its share of the cost, completed the work, and requested reimbursement. The government's cheque would arrive shortly thereafter. But this cosy arrangement had ended abruptly in September 1941, when the cabinet unexpectedly lopped $1 million off the Rural System's spending estimate of $1,750,000. The deteriorating military situation in Europe also added to Hydro's woes. With all hope removed of speedy victory, it had become obvious that nothing less than complete mobilization of labour, materials, and capital would suffice. The principal components of a transmission system - copper, aluminum, and steel - also happened to be among the materials in greatest demand by the war industries. In the intense competition for scarce supplies, rural transmission lines were slotted far down on the government's list of priorities. Moreover, as skilled workers

i8i

The Rural System

entered the armed forces in increasing numbers, it became difficult for the HEPC to place qualified construction crews in the field. Furthermore, with wartime power loads expanding faster than even Hogg had originally anticipated, some type of rationing or conservation measures appeared unavoidable. Accordingly, Mitchell explained, "it would appear logical to try to decrease the number of new customers in order not to aggravate the situation."9 His advice made sense, and the Commission attempted to limit its own rural construction, and that of the private companies under its supervision, to extensions deemed of the utmost importance and for which materials could be spared. But in truth, whatever influence Hydro had over such matters was soon lost to the dominion government. On 24 June 1940, the Wartime Industries Control Board (WICB) was established within C.D. Howe's Department of Munitions and Supply, which had itself been in existence for only eleven weeks. The WICB co-ordinated the activities of seventeen controllers who were appointed between 28 June 1940 and 29 November 1943. Each controller was vested with sweeping authority to regulate the essential goods and services under his jurisdiction. Their work generally entailed increasing production, curtailing all consumption not directly associated with the war effort, and diverting scarce materials and services from civilian to military purposes. In the words of the official historian of the Department of Munitions and Supply, "it was the function of the Board as a whole to minimize the overlapping of jurisdictions and to see that the individual efforts of the controllers fitted into the complicated plan of industrial regulation." Until the WICB was dissolved on i December 1945, few elements of the nation's productive capacity escaped the close scrutiny of at least one controller.10 The HEPC came under the jurisdiction of the Metals and Power controllers. George Cecil Bateman, a Toronto mining engineer, was appointed metals controller on 15 July 1940 and was empowered thereby "to buy, sell, mine, process, store, transport or otherwise deal with all minerals, ores, metallic products, metal and alloy thereof, except coal and other solid fuel, oil, steel and iron." One month later, on 23 August, Herbert James Symington was named power controller. Symington, a Montreal lawyer and close acquaintance of Howe's, was a director of the International Power Co. and the Ottawa Valley Power Co. His authority, like Bateman's, was comprehensive and superseded only by that of the dominion cabinet. He could apportion energy supplies among consumers, force power producers to interconnect their systems, set rates, control imports and exports, inspect private producers' financial records,

182 Power at Cost

and take over any "works" used for the production and distribution of electricity. The power controller thus held absolute sway over the HEPC and every other facet of electrical production and generation in Ontario, the provincial Power Control Act of 1939 notwithstanding." Although under no legal obligation to do so, Symington made a point of soliciting the Commission's co-operation. On 6 September 1940 he met with Hogg, and J. W. McCammon of Quebec's Provincial Public Service Board, and secured their agreement that the power controller would be "the proper medium" for determining wartime energy priorities. Symington designated the HEPC as his Ontario "agent," but there was never any question where ultimate authority rested; Hydro was expected to follow, not to give orders, and as such possessed merely a trace of its previous independence. Nonetheless, Symington's diplomatic approach got a potentially difficult relationship off to a smooth start.12 On 7 October 1941, one month after the provincial government had trimmed the Rural System's construction budget by almost 60 per cent, Symington brought rural expansion to a grinding halt. He informed Hogg that Canada's stockpiles of electrical transformers were nearly depleted and that there was little chance of obtaining the raw materials to build more. An essential component in the transformers was a high-grade silicon steel available only in the United States, and since the Americans had recently prohibited its export they were unlikely to make any exceptions. Having themselves recently imposed a construction moratorium on transmission lines, they could not be expected to facilitate such work in Canada. Symington therefore insisted on the "absolute necessity" of discontinuing all installation activities on the Rural System for the duration of the war. The HEPC was granted one concession: it could complete any lines that had been approved prior to the 7 October announcement, if the customers had already wired their homes, purchased equipment, and signed power contracts. X3 The HEPC came under immediate fire for its capitulation on the issue to the dominion authorities. Symington admitted privately that his order had "stirred up quite a hornets' nest," but he left Hydro to face the criticisms on its own. The first barrage was fired during a meeting of the OMEA'S District No.7 at St Thomas on 24 October. The delegates demanded to know why the prohibition had not included urban centres. Jeffrey tried to deflect the blame onto the power controller and claimed that the HEPC had not received a directive dealing specifically with its urban clientele. Hogg corroborated his engineer's explanation and added that Hydro had "to

183 The Rural System

practically swear" that every transformer it purchased was "for war purposes." Confronted soon afterward by similar criticisms from the Kingston Whig-Standard, Hogg went on the offensive. He now linked the ban on rural construction to a much broader energy conservation campaign. It made sense to discriminate between urban and rural users, he said, since a dozen or more urban customers could be served from the same transformer and wire that were needed to complete just one farm hook-up. Moreover, many of the city homes that had received Hydro service of late belonged to workers employed in essential war industries. In any case, some rural applications might still be entertained if "great hardship" were involved or if a farm were already wired and situated near an existing transmission line.14 The occasional exception was indeed made, but rarely for the benefit of the agricultural community as such. Symington expected the HE PC to devote whatever spare materials it could muster to supplying the "suburban" homes of war industry employees. These residences, while technically part of an RPD, were rural in name only.15 Most requests for special consideration, however, were of quite a different character. One woman lamented to Hepburn that just when her husband had "woke up" to the advantages of equipping their farm with hydroelectricity, they were told that a hook-up would not be possible until the end of the war. She realized that power was "being used for unnecessary things," but her family did not want lights in every room or indoor plumbing. As a mother of five children with "a weak heart and plenty of hard work," all she sought was one wall socket for operating a washing machine and an iron. A transmission line passed "less than 30 ordinary steps" from her door, so she did not feel that her request "for a share of God's gift to the world" was unreasonable. Jeffrey was unmoved. Inured to issuing refusals, he promptly rejected her application with a terse reference to Symington's orders.16 Alf Collins, a farmer in the Cobourg RPD, discovered that even those who had wired their properties prior to 7 October 1941 were not necessarily assured a sympathetic hearing. The closest transmission line was more than three-quarters of a mile away from his farm, so the Commission was understandably reluctant to grant the request. But instead of rejecting the application on the basis of distance, the HEPC told Collins that only those applicants it perceived as "furthering the war effort" would receive service. Alex Hay of the Oil Springs RPD received the same treatment as Collins, even though his farm's productivity would clearly be increased by the introduction of hydroelectricity. Hay raised seventy cattle and 600

184 Power at Cost turkeys on a 2oo-acre farm - hardly a subsistence operation - and planned to take on more stock if granted access to provincial power. He believed that his dedication to the war effort was exemplary; he purchased war bonds/willingly paid high taxes, and did not protest when his hired help enlisted. He now wanted Hepburn to make the HEPC respond in kind: "If our government expects to take our sons away and tax us so we can hardly live, it should help us so we can continue working our farms." Hepburn passed the file on to Jeffrey, who forthwith rejected the request. X7 Numerous county and township councils censured the HEPC for continuing to expand its urban distribution system at the same time that it was telling farmers, who were under pressure simultaneously to increase production and lower their labour requirements, to do without. The council of Gosfield South Township (Essex County) spoke for several others when it resolved in December 1941 that "farmers engaged in the production of food and war materials" were "engaged in defence work, equally, with ... urban dwellers ... working in factories producing munitions of war." Symington, who normally heard of such complaints at second hand from the HEPC, did not suffer contrary viewpoints gladly. In a testy rebuttal to the Wentworth County council, which had accused him of "unfairly discriminating" against rural Ontarians, he wrote in November 1941 of his exasperation that so many people had not yet grasped the seriousness of the situation. "War effort is war effort," he chastised, "and only what is possible can be done." For the time being, Symington was content to define "possible" as short extensions serving the suburban homes of "war employees." Everyone else who had "got along without electric lighting to date" would simply "have to continue so for some time."18 Symington's forthright approach did nothing to enhance the HEPC'S popularity. York County council, after appointing a special committee to investigate the question, petitioned Hydro in December 1941 to serve all rural applicants whose properties were adjacent to existing transmission lines. The councillors were advocating not that more lines be constructed during wartime, only that restrictions prohibiting additional customers on existing lines be rescinded. They argued that a total war effort demanded nothing less, for as an embattled world became increasingly dependent on Canadian foodstuffs, extensive rural electrification in Ontario loomed as one way to avert devastating shortages.19 Hydro's reply sought to shift the blame elsewhere. The Commission told the York councillors that it was "entirely in accord" with their county's position but that unfortunately the matter was "solely

185 The Rural System

under the jurisdiction and control of the Dominion Power Controller." Symington managed to squeeze in the last word. "There never has been any official attitude with regard to discontinuing rural extensions or installations," he wrote to one council member. Rather, every decision had been made out of "absolute necessity." Quite simply, agricultural production could proceed without electricity, but munitions production could not. Without the latter, Symington warned, "we would have no farms to farm." Nor was he willing to let the HEPC off the hook entirely. He wanted his critics to know that Hydro had always shared his view that "until the matter could be righted," it would be "a sheer impossibility to go on with extensions and installations."20 By early 1943, the moratorium on rural construction was no longer affected by materials shortages alone. Dwindling power reserves had forced Symington to prohibit several types of electrical consumption as of 20 September 1942 - signs, store windows, ornamental lighting, and store and office heating. Increasingly it appeared that even if new customers were added to the Rural System, there would be insufficient electricity available to serve them. Metals Controller Bateman eased the situation, from the farmer's perspective, eight days later by ruling that construction permits would no longer be required for rural hook-ups where the length of the secondary line did not exceed 250 feet.21 Within the HEPC, opinion was nevertheless growing that the dominion government's constraints had been in effect long enough. Jeffrey in particular was worried by recent reports of food shortages. He feared that unless immediate steps were taken to increase food production - and in Ontario the most obvious way of accomplishing this was with rural electrification - a big problem would develop. The OMEA and the AMEU echoed Jeffrey's sentiments in February 1943. The OMEA'S president, Kenneth A. Christie, won overwhelming support for a resolution that urged King's government to modify the regulations dealing with "Hydro extensions in rural areas" so that "horsepower" could "replace manpower on handicapped farms." Here was a completely different attitude from the one expressed the year before by the retiring president, W.J. Chapman. He had argued that since the farming community had hitherto "been getting an exceedingly good break in the matter of extensions," those still without the service had only themselves to blame. But by 1943 conditions had deteriorated sufficiently at home and abroad to convince Hydro's municipal representatives that agriculture deserved to be recognized as an essential war industry and that hydroelectricity should be provided to any "efficient" farmer who could be

186 Power at Cost

serviced for a "comparatively small" outlay in materials. However, Christie's vaguely worded resolution failed to answer the vital questions of "who" and "how much." Still, the OMEA and the AMEU had come out firmly against the policy of rural electrification that Ottawa had handed down.22 Support for a more liberalized policy on rural extensions was voiced in other quarters as well. In 1943, the Trades and Labor Congress of Canada rated rural electrification foremost among the many factors essential to post-war reconstruction. The TLC, envisioning widespread unemployment at war's end, believed that demobilization of several hundred thousand armed forces personnel into the civilian work-force would be greatly facilitated if a large number could be persuaded to return to the countryside. In order for rural living to be regarded as an attractive alternative to life in the cities, electricity would have to become much more widely available.23 In March 1943, Symington and Bateman agreed to alter slightly their policy on rural extensions. The basic criteria, however, remained unchanged. Whenever possible, construction would have to be limited to secondary rather than primary transmission lines, and all hook-ups would have to "materially increase the production of foodstuffs, or prevent serious diminution in such production." In addition, applications must not be judged on the basis of a farmer's property or livestock holdings, as this "would give rise to interminable complaints that the big man was given everything and the small man nothing." The two controllers now agreed to increase the maximum secondary-line extension from 250 feet to 600 feet - the idea had originated with the HEPC - where it could be demonstrated to Hydro's satisfaction "that the supply of electric service to such customers" would result "in materially increasing the supply of foodstuffs to the Dominion." Some members of Bateman's staff resisted this circumvention of their authority and contended that no extensions, regardless of length, should be allowed unless first authorized by permit of the metals controller. Symington disagreed and argued that the HEPC "would exercise a better and wiser control through being on the ground than would be possible from Ottawa." Rural "dissatisfaction" was growing, and "everything possible" needed to be done to dampen unrest. In this instance, Hydro's officials were better positioned than Ottawa's to determine the most deserving applicants. Within a few weeks, approximately 6,000 farmers applied for HEPC service. Then, on 28 October 1943, the maximum secondary extension was increased to 1,000 feet.24 This new situation represented a significant change, but unfortunately some of the benefits stemming from Bateman's gradual

187 The Rural System

relaxation of the metals controls were negated by the power controller's further tightening up on use of electricity for non-essential domestic and industrial purposes. In 1944 Symington called for a 2o-per-cent reduction in such usage.25 Meanwhile, on 18 March 1943, Commissioner Houck had maintained in the Ontario legislature that Ottawa should not have the right to tie the province's hands over rural distribution and to impose "class legislation" on it. His comments were ridiculed by Drew, who maintained that Hydro, with its immense authority, did not need "to hide behind the skirts of the Power and Metals Controllers." Drew also disputed Symington's suitability for the job he held because of his ties with International Power, which controlled several of the HEPC'S privately owned competitors. All further orders from the power controller, the leader of the opposition maintained, should be ignored "until such time as the control of power" were placed "in impartial hands." Even Gordon Conant, whose brief seven-month tenure as premier was soon to end, was not above posturing on the issue. Given that the HEPC was the largest organization of its kind in the country, he said, it was "much like the tail wagging the dog" for Hydro "to be subject to the control of a person appointed by Ottawa or any other jurisdiction."26 Rhetoric of this sort undoubtedly had its appeal to some Ontarians, but the province and its utility had no choice but to go along with the dominion authorities. And, like them or not, Hydro seems to have administered fairly the wartime controls that had been imposed. When James Oliver, a farmer in the London area, applied for a hook-up so that he might augment his livestock by twenty pigs and 150 hens, Jeffrey turned down the request on the basis that installations were restricted "to large farms" where the need was greatest.27 Even Hepburn was denied preferential treatment when he sought special permission in August 1942 to erect an 865-foot secondary line on a small farm he had recently purchased. Using his most diplomatic prose, Jeffrey informed Hepburn that the work could be undertaken only if the premier received a permit from the metals controller. In order to obtain the permit, Hepburn would first have to explain how the output of one milking machine, which was all that he wanted the hook-up for, would materially benefit the war effort. Hepburn proceeded no further with the request. His successor, Gordon Conant, was similarly rebuffed in 1943 when he urged the Commission to approve a friend's application. Jeffrey again cited chapter and verse of the metal controller's regulations and noted in particular the recent order limiting extensions to 600 feet. Since Conant's crony needed 2,600 feet of line, the request was rejected outright.28

i88 Power at Cost

After 1943 the pace of rural extensions picked up considerably, and during the final two years of the war Hydro added 2,142 miles of line and 22,516 customers to its Rural System in southern Ontario. The obvious reason for the increase was relaxation of the controllers' restrictions. But also important was growing awareness among farmers, faced suddenly with an acute labour shortage, that hydroelectricity could indeed reduce their work-load substantially, just as the HEPC'S marketing representatives had always claimed. Unfortunately for many of these recent converts, they would have to await the end of the war to receive their share of public power. When they did get the power they wanted, it was supplied, thanks to other wartime changes, according to a very different rate schedule from the one that had formerly applied. This latest round of rate revisions emerged from the findings of a 1936 study by the Stone and Webster Engineering Co. into the practicability of replacing the traditional two-tiered rural rate with a single-charge minimum bill. Although hired by Hydro merely to analyse the efficacy of the service charge, Stone and Webster conducted a thorough re-examination of the Rural System's administrative make-up, concluding that the rural network as a whole had become unnecessarily complex. Further adjustments to the rate schedule, the company reported, would be pointless unless southern Ontario's 165 RPDS were first consolidated into a handful of larger units, ideally one RPD for each of the three southern Ontario systems. There the matter rested until March 1937, when J.W. Freeborn (Lib., Middlesex North) pressed the HEPC to create new distribution areas "of a more suitable size for economical service." He wanted Hydro to decrease per capita costs in less lucrative RPDS through closer integration of urban and rural power loads. Although Freeborn thought that he had devised a means of "putting ... democracy into the distribution of Hydro," his idea had been at the centre of the Rural System's philosophy for almost twenty years. All the same, he was adamant that Hydro not be allowed to hang "a sort of halo" over itself. Thorough reorganization of RPDS was a prerequisite to eliminating the inequalities between urban and rural rates, and it was up to the government to ensure that Hydro implemented the necessary changes immediately.29 It was a complex question, and one the Commission tackled only after Freeborn's challenge had been echoed by several township officials throughout the province. Hydro's Rating Committee conducted two investigations into the implications of comprehensive amalgamation. Each of the reports, which were completed in January

189 The Rural System

and May 1939, identified the same fundamental problem - the established method of computing expenses resulted in many consumers paying rates either well below or substantially above the actual cost of the service. Of course this condition was as old as the rural distribution program itself, but far more ominous was the discovery that the spread in rates would broaden unless corrective action were taken immediately. One hundred and thirteen RPDS had incurred operating deficits totalling $125,846 in 1938, while sixtyfive others had earned aggregate surpluses of $189,047. As a result, the surplus balance in the Commission's RPD Rates Suspense Account - a microcosm of the Rural System's financial stability - had increased to $1,153,842. The Rating Committee discovered that the existing arrangement of RPDS perpetuated these disparities. By making all RPDS, no matter how small or isolated, solely responsible for their own finances, the HEPC had inadvertently condemned a large number of them to continuous deficits. Furthermore, as rural rates moved ever closer to uniformity, the financial problems of the less prosperous districts would intensify. By 1939, customers in the same class paid similar service charges and block energy rates and were eligible for the same discounts, regardless of where they lived in Old Ontario. But since no allowance had been made for the fact that each RPD had its own revenue requirements, several districts consistently incurred operating deficits. The Rating Committee's findings pointed to one unpleasant conclusion - barring discovery of a new way to reduce or redistribute costs, a rate hike would become unavoidable.30 The HEPC had traditionally regarded almost any alternative preferable to a rate increase, and its attitude in 1939 was no different. The Rating Committee was aware that if Hydro went ahead with the amalgamations, the sixty-five profitable RPDS would be reluctant to share their wealth with their less fortunate neighbours. The committee's investigators had shown, however, that practically every RPD earning an operating surplus did so only because of the savings provided by the government's grants-in-aid. No RPD that depended on taxpayers' largesse, the committee contended, could justify hoarding its surpluses. If moral suasion failed to subdue opposition to amalgamations, the Rating Committee was confident that the provincial government could impose any number of financial reprisals to whip dissident RPDS into line.31 The onset of war in 1939 forced the HEPC to concentrate on more pressing matters, but at no time did the Rating Committee waver from its conviction that "some very drastic" changes would have to be made "in the basic setup of the [RPDS]" if they were to be placed

190 Power at Cost on "a sound financial basis of operation." The first step was taken in 1942. After considering each RPD'S financial status, location, staff, and rates, Hydro reorganized 177 districts into 120. The advantages were immediate; in addition to absorbing accumulated deficits totalling $93,330, amalgamations enabled the Commission to grant rate reductions of $10,256. At the end of one year, the Rural System reported surplus earnings of $373,719 and deficits totalling $240,327, for a net surplus of $133,392.32 Hydro waited until 1943 and completion of yet another investigation before taking the second step. This latest report confirmed that since rural electrification in Ontario had reached "a more or less stable condition," the Rural System would not be "materially disturbed" by another round of amalgamations. In the half-dozen years since introduction of the one-dollar service charge and the two-farmper-mile density requirement, Hydro's investment per rural customer had risen to only $148.50 from $145.00, a very encouraging sign. With over 20,000 miles of transmission lines in service, it had become possible to add new customers to the distribution network without incurring a corresponding rise in construction expenses. The report concluded that while the high concentration of transmission lines in some areas had helped to offset losses stemming from the lower density requirement, the one-dollar service charge remained the principal reason why many RPDS, as currently constituted, would never balance their books. Comprehensive amalgamation of RPDS would therefore be more effective if undertaken in conjunction with revisions to the rate schedule.33 Osborne Mitchell suggested to Jeffrey in June 1943 that this overhaul should include general simplification of an admittedly "rather complicated" rate structure, complete elimination of the service charge, and reduction in the first energy block from six cents to approximately four cents per horsepower. Mitchell made no apologies for the current state of affairs. Rural rates had always been "scientifically devised," and despite their complexity they had not impeded the Rural System's growth. Nevertheless, "it would be advantageous from a public relations standpoint" if the entire approach to rural costing were simplified. Mitchell recommended that to begin with the service charge should be replaced by a minimum monthly bill.34 At issue in any reform effort, of course, was the perennial problem of how to increase per-capita power consumption. Hydro's engineers had long been aware that farmers in the remoter and less populous RPDS paid disproportionately more for each kilowatt-hour of energy consumed, particularly if they made only minimal use of

igi

The Rural System

the service. The result was what Mitchell called "a pyramiding of disadvantages." He doubted whether reducing the first energy rate alone would raise consumption, since the majority of six-cent rates were found in "less favorable" farming areas. Moreover, dropping the first energy rate from six cents to four cents would only perpetuate existing differences without bringing the rural network any closer to its ultimate goal of the "utmost uniformity equitably possible." For these reasons, Mitchell favoured replacing the service charge ("for which the consumer receives nothing that will give him light and power") with a minimum bill. The minimum bill would fulfil the original purpose of the service charge, namely, the raising of sufficient revenue to cover fixed costs. But it would also allow the customer to use a predetermined amount of energy - Mitchell suggested an amount equivalent to operating one 6o-watt and one 4o-watt light for three hours daily - before a consumption charge was added. He was confident that a minimum bill would help Hydro to sign up the many rural residents who lived near an existing transmission line but who had hitherto spurned the Commission's overtures because they were opposed to the service charge.35 Mitchell's memorandum turned next to the business of amalgamating the RPDS. The changes contemplated would have to be but one step in a much larger reorganization of the Commission's operations. The HEPC had been contemplating amalgamation of its three southern Ontario systems for several years, but by 1943, with war industries pushing its load to a record 11,730,000,000 kilowatthours, it could hesitate no longer. Conservation measures, both voluntary ones and those imposed by the power controller, had alleviated some of the strain. But the Commission needed to be certain that every spare kilowatt of energy, regardless of where it was produced, was available to any customer anywhere; arbitrary system boundaries could not be allowed to interfere. Put simply, Toronto must have ready access to Kingston's or Owen Sound's excess power, and vice versa. The solution was to tie together in one interconnected power grid all of Hydro's southern Ontario generating and distribution facilities, thereby completing the process begun in the 19203 when the Georgian Bay and Eastern Ontario systems were created out of several smaller units. Amalgamation would also facilitate development of large-scale generating sites on the St Lawrence and Ottawa rivers, something the Georgian Bay and Eastern Ontario systems would never have the financial means, or the markets, to support on their own.36 In the Rural System, Mitchell proposed combining the 113 southern Ontario RPDS into one Southern Ontario District (SOD). Five of

192 Power at Cost

the seven RPDS in northern Ontario would be joined together as the Northern Ontario Properties (NOP), with the two remaining RPDS becoming the Thunder Bay System. The original district boundaries would be retained for billing purposes and any minor administrative functions best left under local management. All other operations would be centralized, and all revenues and expenses pooled, much as McCrimmon had envisioned and partially implemented in 1937. The changes would alter the entire scope of policy-making on rural electrification, since decisions could be made on the basis of the strengths and weaknesses of the entire system, instead of the particular requirements of each of 113 disparate RPDs.37 Mitchell's plan had its detractors. Another Hydro engineer, G.F. Drewry, warned that eliminating the one-dollar service charge, which provided almost one-third of all rural revenues, would force a "drastic" rate increase. He agreed that a simplified rate schedule was desirable but thought that it could be achieved by retaining the traditional two-tiered structure and by reducing the number of customer classifications from eleven to three. In Drewry's view, only by adhering to the same basic principle of "power at cost" - which had sustained the HEPC through its formative years, the Depression, and now four years of wartime restrictions - could the Rural System avoid financial chaos.38 Mitchell's recommendations ultimately prevailed. George Drew, who at the time had been premier for only three months, announced a three-part program of rural electrification on 15 November 1943 that was to take effect at the beginning of the new year. Drew presented the program as his government's own, even though the basic idea in it had been sketched out as early as 1937 by T.B. McQuesten, a previous Hydro commissioner. As announced, Drew's scheme promised uniform rural rates, RPD amalgamations, and elimination of the service charge. Together these changes were intended to fulfil the Conservatives' recent election promise of cheaper hydroelectricity for rural areas.39 The new rates, which the HEPC later boasted were the lowest in the world "for service supplied under similar conditions," would be of special benefit to rural residents who worked marginal lands and lived in what were previously high-cost RPDS. The first energy block would be lowered, as Mitchell had suggested, to 4 cents per kilowatthour, the second block would fall to 1.6 cents, and the third would remain unchanged, at 0.75 cents. What made the new rates unique, however, and enabled the Commission to dub them "the greatest step forward" since introduction of RPDS and grants-in-aid over twenty years earlier, was the fact that they would be applied uni-

193 The Rural System

formly across the entire Rural System. All customers of the same class who consumed identical quantities of power would be billed exactly the same amount, regardless of where they lived in the SOD. Almost 98 per cent of all rural power users would be paying less for their energy than previously. Revenues were expected to fall by over $500,000 annually as a result, but the provincial government promised to reimburse the HEPC for all deficits.40 Unification of the 113 RPDS within the SOD (they had been consolidated from 120 the year before) was expected to facilitate introduction of uniform rates. Once again, Mitchell's memorandum pointed the way forward. All RPD revenues and expenses were to be pooled, and most accounting and organizational duties centralized, but individual district offices would continue to look after local maintenance and administrative matters. Nor were Drewry's ideas ignored completely; the rate schedule would at last be made intelligible to the "average farmer" by reducing the number of customer classifications from eleven to four - farm, hamlet, commercial, and summer.41 Elimination of the service charge closed a long and complicated chapter in the history of the Rural System. The succession of reductions in service charges since 1924 had failed to assuage the suspicions that many rural residents harboured toward the fee. Consumption charges they could accept - one paid for what one used. But the service charge went into a confusing amalgam of contingencies and reserve funds, the purposes of which few people understood. The government therefore replaced the one-dollar service charge with a minimum bill of 75 cents monthly for every kilowatt of energy a customer was contracted to receive. For example, since all farm contracts were for three kilowatt-hours, the "minimum bill" would be $2.25. Hamlet customers would continue to pay service charges, but the amount was reduced to only 55 cents per month.42 To a degree, the changes were purely semantic; the HEPC had long felt that the term "service charge" was a misnomer and should be replaced. But more important, the minimum bill represented a generally accepted compromise. It would enable Hydro to meet its fixed costs and at the same time allow consumers to receive some energy, albeit a small amount, in return for their monthly payments. The press applauded the measures as a major step toward increasing wartime food production. The Rural Co-operator, which had itself been silent on the issue, considered the new rates and amalgamations something "for which farm organizations should have pressed more actively long ago." The Globe, which often reminded its readers that there never had been "power-at-cost for the farm,"

194 Power at Cost

was pleased that the initiatives represented an "extension and simplification" of, rather than a "departure" from, Hydro's most sacred principle. In London, the Free Press seemed unaware of the government's commitment to making up any deficits that the uniform rates created, but it delivered a favourable verdict all the same. Even the Toronto Telegram, rarely an advocate of special assistance for rural electrification, congratulated the premier for "keeping faith" with Ontario's farmers. The Telegram tempered its enthusiasm all the same by complaining that even though power costs were now low in Ontario, provincial governments in the past had passed up far too many opportunities to achieve "more economy and efficiency."43 No doubt the 2 or 3 per cent of Hydro's rural clientele whose power costs would either stay the same, or increase slightly, as a result of the changes were less enthused about the move to uniform rates. Customers with a standard class 3 farm contract who used 100 kilowatt-hours of power per month previously paid between $2.92 and $4.31, depending on their location. Under the new schedule, everyone would pay $2.74, a substantial saving for many. But there were rare instances when the uniform rates actually cost a consumer more. Ray Clarke, a farmer in the Sarnia RPD, was upset that the new schedule was costing him an extra $4.15 every three months, an increase of 11 per cent. "One ceases to wonder," he wrote in February 1944, "at the smiles raised when the government sponsored slogan 'Use Hydro its yours' is mentioned." Some hamlet customers as well were adversely affected. Whereas those who used 60 kilowatt-hours per month had previously paid between $2.21 and $3.16, the cost under the new schedule was $2.23, a minuscule increase for most.44 Still, the number who gained from Drew's reform vastly outnumbered those who lost. H.C. Nixon, now leader of the opposition, tried to mobilize those customers who had been excluded from the recent round of rate reductions into a force to topple the government. In an address to a by-election rally at Simcoe on 14 March 1944, he spoke of the "wave of protest" that was spreading across Ontario in response to the "exorbitant" hydroelectric rates that some rural communities were still paying. The Progressive Conservatives had promised rate reductions, he said, but "what they gave with the right hand they took away with the other hand." Although Nixon claimed that he knew of at least 1,200 rural customers who were enraged over the revised rate schedule, his "wave of protest" never materialized. Demurring voices were infrequent and mild-mannered. When the Commission explained to a delegation from the Lincoln County council in April 1944 that the only farmers in Lincoln paying more

195 The Rural System

for their electricity than previously were those who had already been enjoying the $2.25 minimum rate, the councillors returned home satisfied. Other complainers did likewise.45 Nixon and the Liberals had backed the wrong horse. The new rates proved more remunerative than Hydro had imagined possible. In the first year alone, an anticipated deficit turned into a $300,000 surplus. Admittedly, one-third of this amount was attributable to a labour shortage that prevented Hydro from completing all of its scheduled maintenance projects, but the surplus represented an encouraging beginning all the same. When the trend continued, the first consumption rate was reduced to 3.5 cents per kilowatt-hour on i May 1945, which provided the rural clientele with an additional $305,000 in savings annually.1*6 Drew had good reason to be satisfied, and the success of his rural electrification policy must be counted a contributing factor in the smashing electoral victory he won in June 1945. When the HEPC was made subordinate to the dominion government's WICB during the Second World War, the implications were especially great for the Rural System. Hydro resented the form that Ottawa's intervention took - the domestic consumption tax and the moratorium on construction of rural transmission lines - but it showed remarkable restraint nonetheless. Recognizing the overriding need of the war, the Commission kept its criticisms of dominion policy to a minimum. To their credit, the WICB controllers lifted the restrictions at the earliest possible moment. Indeed, many of the prohibitions were removed well before the hostilities ended. Furthermore, Symington made a concerted effort to gain the HEPC'S confidence by including it whenever possible in the decision-making process. Hydro responded in turn by dutifully performing its assigned tasks. On the whole, the Commission maintained a delicate balance; it continually urged the controllers to relax their tight grip on the rural program, but it never attempted to take advantage of public resentment against the dominion regulations. Moreover, if construction was held back in the Rural System during the war, the Commission was able to improve its service to rural customers in other respects. By adopting uniform rates and amalgamating the RPDS, Hydro achieved in the rural network a degree of centralization and simplification that would be essential to efficient operation in the post-war era. Widespread confusion over operating procedures and rate schedules had fostered suspicions among its rural clientele in the past, but the measures proposed by the Commission and implemented by the Drew government in Jan-

196 Power at Cost uary 1944 smoothed the way for future growth. Drew's actions revealed that he, like many of his predecessors in the premier's office, had little regard for "power at cost," but they also indicated an expansive future for rural electrification in Ontario. Paradoxically, Drew's initiative, which heralded a sharp break with the past, was preceded in 1943 by another popular uprising along the lines of the Ontario Hydro Power Uniform Rate Association. In a sense, this last round in an old battle rang down the curtain on Hydro's pioneer age in rural Ontario.

CHAPTER TEN

Sarnia and the Uniform Rate Revisited An old and discarded idea Editorial, Toronto Globe and Mail, 12 October 1943

Modest growth was achieved in the Rural System during both the Depression and the Second World War, though for different reasons. In both periods the HEPC and successive provincial governments laboured under severe restraints - financial, political, and attitudinal - which limited their ability to act in relation to rural electrification. Furthermore, both parties came to accept, by implication at least, that the major expansion program first envisaged in the 19205 would have to await the return of peace and normal economic conditions. At the same time, it remained the conventional wisdom that success in the rural program had to be measured in relation to the quality and price of service available to urban customers. Hydro's rural task would not be finished until every resident of the countryside had access to hydroelectricity at prices which, if not exactly the same as city rates, did not deter energy consumption. Not surprisingly, the slow pace of the movement toward this admirable goal bred frustration and, by the early 19403, revival of the cause first espoused by the Ontario Hydro Power Uniform Rate Association. As in 1919, the campaign would pit a self-conscious power hinterland against the large and influential cities of the TorontoHamilton-Niagara Falls corridor. This latter favoured region was again perceived as using hydroelectricity purchased at nominal prices to steal away the businesses and population of less fortunate communities. A new and more recent irritant as far as the power hinterland was concerned was to be found in the various financial concessions made to rural customers, beginning with the provincial government's grant-in-aid program of 1921. In effect, the municipalities of the power hinterland felt squeezed between the low-price urban centres and the subsidized Rural System. Ironically, the special privileges granted Hydro's rural customers as compensation for

ig8 Power at Cost their disadvantaged position vis-a-vis municipal partners were now cited by some of the latter as justification for a radical measure of their own, namely a uniform municipal rate. In sum, inter-war developments had given an old argument a new twist. Harry Nixon, the provincial secretary, reopened the uniform-rate debate in Toronto on 20 March 1941, in the course of an address to a convention of tourism promoters. He referred to the massive hydroelectric development that Canada and the United States were planning for the St Lawrence River and predicted that once the site added an additional 1,100,000 horsepower to the Hydro grid there would be ample energy available to enable the utility to equalize its rates. He emphasized, however, that this was his personal opinion and did not necessarily reflect government policy. Nixon's speech focused on the implications of a uniform rate for industrial power users, but a few days later A.H. Acres, the Conservatives' evervigilant Hydro watchdog, spoke out for rural interests. He berated the government in the legislature for failing to provide every farm in the province with electrical service at a uniform rate. Acres claimed that the government could easily afford such an undertaking but instead chose to pour the vast sums collected from gasoline and liquor taxes into building "four-lane highways to take the members of the Cabinet home from Toronto." George H. Challies (PC, Grenville-Dundas), who would have noticeably less to say on the subject after he became a Hydro commissioner in 1943, agreed. He blamed HEPC exports to New York state for creating severe power shortages in eastern Ontario, where rates were $10 per horsepower higher than in counties to the southwest. Intent on making "lots of converts in Eastern Ontario," Challies promised to "press unceasingly for a universal or flat rate over the entire Province."1 These opening salvos succeeded in reviving many of the old antagonisms that had characterized the earlier uniform-rate debate of 1918-20. Appropriately, Goderich, birthplace of the original movement, was among the first of many communities and interest groups to declare support for a new-flat rate inquiry. Nor had its reasoning changed much over two decades; town council still believed that a flat rate would encourage industrial decentralization and hinterland revitalization.2 Huron County council likewise quickly took up arms again. In June it passed a resolution urging the Hepburn government to introduce a province-wide flat rate, so "that healthy growth and industrial prosperity" might be enjoyed by all. Several other county councils, this time including many from eastern Ontario, followed Huron's lead as a steady stream of petitions flowed into Queen's Park for the remainder of the year. 3

199 Sarnia and the Uniform Rate Revisited

Agnes MacPhail, who had been contributing a weekly series on "Farm Betterment" to the Globe, spurred on the campaign by devoting a column to the uniform rate. She believed that once the proposed Canadian-us power project on the St Lawrence River was completed, Hydro would have access to a vast new supply of inexpensive electricity, and a uniform rate would become practicable. Cheap power, she stressed, would not only lessen the drudgery of farm life and help to stem the tide of rural depopulation; it would also benefit the agricultural industry as a whole by enabling more goods to be processed locally, reducing transportation costs, and improving product quality. Thus, in the final accounting the urban consumer stood to gain as well. MacPhail also anticipated a postwar exodus to Canada by British industries, which had "suffered bitterly" in large centres and would "emerge from this terrible conflict with a prejudice against congestion of population." If the Ontario countryside hoped to share in this influx, steps needed to be taken at once to equalize city and rural power costs.4 MacPhail's column evoked an immediate response from opponents of the uniform rate. Oddly enough, one of the first persons to react was not an urbanite jealously defending his low energy bills but a resident of Sparrow Lake, a tiny hamlet eighteen miles north of Orillia. He wrote in the Globe that "in our out-of-the-way rural community, after a household consumes a certain number of kilowatt hours per month the rate becomes the same as the Toronto minimum." Only the "freight" expense of transmitting the current to Sparrow Lake was extra, "and who but we," he asked, "should pay that?" The Globe joined in and reminded the flat-raters that quantity, distance, and economies of scale could not be overlooked when calculating power costs. The three were intertwined and guaranteed that urban rates would always be lower. Besides, and here the Globe resurrected one of the Lethbridge Committee's principal objections, Hydro would lose all control over new extensions if a uniform rate were implemented. Any industry or individual, regardless of location or power requirements, could demand service at rates identical to those paid by customers situated directly beside Niagara Falls. Before long the distribution network would be a maze of underused and unprofitable lines, run largely at the taxpayers' expense.5 The Alliston Herald also advised against tampering with a proven formula for success. It argued that rural living offered certain intrinsic advantages that easily compensated for the greater cost of hydroelectricity. Thus, while the cost of living was generally much lower in smaller centres, no one advocated "a uniform cost of living throughout the Province."6

2oo Power at Cost As the nation's war effort intensified during 1942, and the HEPC fell increasingly under the sway of the WICB, the rate question lost its immediacy. But unlike what had happened on other occasions in the 1920S and 1930S when debate on it had momentarily revived, the uniform rate was not this time quickly forgotten. Within a year George A. Reid, who chaired the Belleville Public Utilities Commission, put the issue back into the public spotlight in no uncertain terms. Speaking at the OMEA'S annual meeting in February 1943, Reid recommended the flat rate as a post-war rehabilitation measure. The starting-point of his argument was the old claim that equal rates would mean more rural-based industries, which in turn would mean better agricultural markets. But Reid saw an even greater benefit: by keeping jobs in the countryside and hairing the rural exodus to the cities, Hydro would be nurturing "a bunch of loyal young Canadians not under the sway of ... highly unionized organizations." Whatever the truth of his claims, the OMEA asked him to present a brief on the subject to its Committee on Post-War Problems.7 Reid squandered his opportunity when he met with the committee the following month. Rather than producing any compelling new evidence, he repeated several well-known generalizations about the various ways to absorb the anticipated post-war power surplus. Beyond that he confined himself to a fanciful description of how idyllic rural life would be under a uniform rate. Small manufacturing centres would pop up at farmers' doorsteps and provide ready markets for their produce, labour strife would diminish as every worker became a homeowner, families raised in "free open space" would become "contented British subjects," and regional economic inequalities would disappear in Ontario. In the event, the committee gave Reid's presentation short shrift; it had requested hard empirical data but had received wistful predictions. The whole matter might have ended then and there but for a copy of Reid's report turning up at HEPC headquarters.8 R.T. Jeffrey, who knew at first hand how easily a notion like Reid's could develop into a full-blown fracas, issued a strongly worded denunciation of the uniform rate. This underscored the inviolability of the municipal contracts, and not just on the matter of principle alone. If these agreements were overruled by a flat rate, he wrote, the large-load municipalities on which Hydro's financial well-being depended might withdraw their support altogether. Now that steam-fired generating plants with capacity of 50,000 to 100,000 horsepower could be built and operated at rates comparable to Hydro's, there was little to prevent cities like Toronto and Hamilton from shunning public power in favour of self-sufficiency. In addi-

201 Sarnia and the Uniform Rate Revisited

tion, major industries whose competitive edge relied on enormous quantities of cheap energy, such as those in the electro-chemical and electro-metallurgical fields, were certain to relocate in the United States if subjected to a uniform rate. Nor could Jeffrey concur with Reid's unqualified endorsement of industrial decentralization. Like the Globe, he saw only a financial quagmire should the HEPC be stripped of its authority over extensions. As an alternative to altering the rate schedule, Jeffrey advocated amalgamating the transmission and generating facilities of the Niagara, Georgian Bay, and Eastern Ontario systems. This would provide greater efficiency and lower costs without incurring the risks associated with a uniform rate.9 Jeffrey's attempt to forestall another public confrontation over rates received a setback less than two weeks later when Colonel Thomas Laird Kennedy (PC, Peel) tabled in the legislature a motion favouring the uniform rate. Kennedy, a former agriculture minister and future premier, had tangled often with the HEPC in the past. Speaking on 13 April 1943, he recalled how his neighbours in Toronto Township had "damned hydro [sic]" when it had first arrived in 1909. Nor had their opinions softened very much since. Their difficulties had begun when the Commission ran transmission lines across their farms and offered compensation of only $30 per tower for a thirty-year period, regardless of the quality of the land affected. Later, when meters were introduced to record power consumption, residents had been appalled to discover that two buildings on the same property were occasionally supplied at two very different rates. After repeated appeals to Sir Adam Beck for more equitable rates had been ignored, the farmers had erected their own transmission lines. This they had accomplished, Kennedy gloated, at an average cost of $1,400 a mile, or $600 less than the Commission charged. In a final show of defiance, they had "evened up" their rates. In sum, they had acted "against the desire of the Hydro," and unless other areas followed suit the HEPC would never agree to a uniform rate.I0 Hydro's vice-chairman, William L. Houck (Lib., Niagara Falls), then proposed an amendment to Kennedy's motion. Houck's amendment, which was carried, provided for a committee of MLAS and OMEA representatives to study urban and rural rate structures and to consider the implications of reducing or abolishing the rural service charge. Attacking the flat rate as "one of the finest things we could adopt in order to drive industry from the Province," Houck endorsed Jeffrey's proposed amalgamation of the three southern Ontario systems as the best means of bringing about "a worthwhile reduction" in power costs. George Drew, still leader of the opposition, denounced the government for putting the uniform rate pro-

2O2 Power at Cost

posal in "cold storage" by referring it to yet another committee. A fellow Tory, George Challies, whose persistent calls for a uniform rate had been a source of embarrassment to the party establishment for years, zeroed in on Houck's contention that Hydro remained firmly committed to "power at cost." He cited the Commission's rapid accumulation of reserves - $156 million was collected in 1941 alone - as proof that electricity was actually being sold at a tremendous profit. Even Toronto, infamous throughout the hinterland for its low rates, had a surplus of $885,000 in 1941. "Power rates could be cut," Challies submitted, "with nothing but the surplus being affected."11 Houck's diversion muzzled the flat-raters until the legislature dissolved on 30 June 1943. In the end the investigating committee was not formed; the government simply instructed the HEPC to conduct a "preliminary study" of the rate question. But public discussion of the issue began afresh when an election was called for 4 August. Speaking at Wingham on 6 July, Nixon, who had become premier only two months earlier, made rural Hydro extensions and equalized power costs central planks in the Liberal platform. He promised to draw on the provincial treasury, and Hydro's reserves if necessary, in order to extend service to any rural homes situated "within a reasonable distance of existing facilities." Unfortunately, Nixon neglected to define "a reasonable distance" - a crucial oversight, since he also erroneously estimated that only 20 per cent of the homes in this category were still without hydroelectricity. His speech at a Barrie-area rally the following day only added to the confusion. The Liberal government, he pronounced, would eradicate the "terrible disparity" in rates by using "the strong to help the weak," but without in any way penalizing the HEPC'S high-consumption customers. When pressed for further explanation, Nixon would only say that "I do not know the exact way this will be done."12 Drew's Conservatives also adopted the flat-rate proposal. Along with pledges to "free the Commission" from political interference, and to abolish the rural service charge, "an equitable readjustment of power rates" was prominently featured in the celebrated TwentyTwo Point program on which the party ran. Sharing the limelight with such an illustrious cast of promises - all part of the Conservatives' sweeping commitment to "economic and social security from the cradle to the grave" - may actually have worked to the flat rate's detriment, for few of the party's candidates had an opportunity to emphasize it in their campaigning. The Co-operative Commonwealth Federation (CCF), under Edward B. Jolliffe, remained noncommittal. It promised to assist farmers with co-operative and

203 Sarnia and the Uniform Rate Revisited

marketing agencies, lower interest rates, and a stepped-up program of rural electrification but did not comment on the uniform rate.13 In Commissioner Houck's riding of Niagara Falls, where traditionally "power at cost" had been considered sacred, it soon became clear how divisive the rate issue could be to party unity. Houck refused to endorse Nixon's position and instead argued the case that the uniform rate would be disastrous for Niagara Falls and the entire province. Houck was prepared to accept "a tendency toward" more uniform rates, but any move in this direction would have to be many years in the making. The Conservative candidate, George R. Inglis, was equally loath to abandon "power at cost." He admitted that the low level of power consumption on farms seemed to indicate a degree of "unfair discrimination." Nevertheless, before agreeing to a schedule of equalized rates he would have to be assured that everyone would benefit, "without taking undue advantage of the heritage and rights of others." The CCF candidate, Cyril A.G. Overall, strayed from his party's official position merely by expressing a viewpoint. He questioned the present practicability of a flat rate but thought that introduction of a $4o-per-horsepower ceiling might be "a worthwhile concession" in lieu of it.14 Overall's suggestion was largely ignored when he made it, but as will be seen it showed a great deal of foresight. Polling day was a disaster for the Liberals. Their fifteen seats placed them a dismal third behind the Conservatives' thirty-eight seats and the CCF'S thirty-four. Now it remained to be seen how rural electrification generally, and the uniform rate in particular, would fare once Drew, at the head of a minority government, converted his extensive list of campaign promises into actual programs. Barely a month after the election, the new government assembled over 400 representatives from the province's agricultural organizations to discuss the problems facing rural Ontario. One result of this meeting was the formation of a twenty-three-member Ontario Agricultural Committee of Inquiry, which Drew instructed to make an "exhaustive investigation into the organization of production and the needs of the farming industry generally." Not unlike the Jamieson Committee of 1924, its mandate encompassed an impossibly broad spectrum of concerns, but this time the committee was instructed specifically to consider ways of completing the rural electrification of southern Ontario and "the possibility of uniform hydro rates to the borders of all municipalities."15 It had not taken Drew long to grasp the advantages of government by committee. Only five months earlier he had derided his Liberal predecessors for resorting to a similar expedient and had proclaimed

204 Power at Cost that "there was nothing in equalizing power rates that would raise the cost to any municipality by one copper."16 Now he too had acted to delay a decision on the same highly complex and divisive question. What he had not counted on, however, was an attempt by a handful of public utility commissioners in the city of Sarnia attempting to re-establish the OHPURA. Sarnia in 1943 was in some ways an unlikely candidate to assume the role first played by Goderich in 1919 when it created the OHPURA. The county seat of Lambton, Sarnia is situated at the convergence of the St Clair River and Lake Huron. A port and railhead, it shared an agricultural hinterland of thirty to forty miles in radius with Goderich to the north, London to the east, and Windsor to the south. Sarnia was somewhat unique to southern Ontario by virtue of its nascent oil-refining industry, although there was as yet no hint of the tremendous growth that would be under way in the city following the arrival in 1942 of the synthetic rubber producer, Polymer Corp. As a result of this development and the opening of a host of other petrochemical plants, Sarnia's population swelled from 18,734 in 1941 to 43,447 just fifteen years later. But none of this was foreseen by the Sarnia Hydro-Electric Commission (SHEC) in the late summer of 1943, when it decided that the reasons long given for rejecting a uniform rate no longer applied. Sarnia's own partnership with the HEPC had been a success. It had joined the provincial network in December 1916, when it had contracted for 268 horsepower at $38.00 per horsepower. By 1943, the load had grown to 11,087 horsepower, rates were down to $28.50 per horsepower, and the distribution system boasted a $769,360 surplus. Few of Hydro's comparably sized municipal partners were on so sound a footing. However, Sarnia's neighbours within a radius of twenty to thirty miles were hard pressed to make a go of it within the Hydro system. Centres such as Forest ($38.00 per horsepower), Brigden ($48.00), and Courtright ($52.00) were struggling to overcome the same obstacles of small populations, low loads, and relatively remote locations that had plagued their forerunners in the original flat-rate movement. And like their predecessors, they questioned why those cities that needed the assistance least appeared to be benefiting the most from public power. Thus Sarnia was reacting to two influences in its bid to renew the public debate over uniform rates. The first was its own sense of economic inferiority, relative to the larger centres of Ontario's cheap-power metropolitan core; the second was the obvious burden that high electrical costs placed on the municipalities of its own hinterland.

205 Sarnia and the Uniform Rate Revisited

On 10 September 1943 the SHEC passed a uniform-rate resolution that repeated many of the arguments that had appeared sporadically during the 1920S and 1930S. It claimed anew that all Ontarians were co-owners of the province's waterpowers and, as taxpayers, joint guarantors of the HEPC'S debt. The existing rate structure engendered industrial centralization which not only created "congestion and problems of health and transportation" but placed the smaller communities at a disadvantage and caused "a backward trend in the life and growth of our country." Furthermore, and perhaps most significant, the Hydro network had now reached a level of maturity that made a uniform rate feasible. Traditional criticisms of the proposal had been rendered invalid by the massive economies of scale, financial strength, and technological expertise that the HEPC had acquired over the preceding fifteen to twenty years. In view of all this, the Sarnia Commission argued that the flat rate warranted serious reconsideration, both as a post-war rehabilitation measure and as a means of promoting a "balanced economy." Sarnia's city council endorsed a similar resolution three days later and circulated copies to Hydro's municipal partners across the province. Twentythree years after the uniform rate had been dealt what seemed a mortal blow, the campaign was on again in earnest.17 Richard M. Durnford, vice-chairman of the SHEC, elaborated on his commission's position during an interview with Sarnia's Canadian Observer. He noted that Queen's Park and the HEPC had each set a precedent for straying from "power at cost." The first and most obvious deviation from Hydro's founding principle had been the provincial government's RPD construction bonus. Less blatant, but equally relevant to the current debate, was Hydro's practice of selling power directly to "large industrial customers at highly favorable rates" when these clients were located outside urban districts. In both instances, Durnford contended, concessions made were possible only because the municipal partners had built and paid for the infrastructure of the distribution system. The SHEC did not disapprove of lower rates for Hydro's rural or industrial users. Rather, it merely wanted to ensure that any future changes included "a coincident reduction to many of the urban municipalities at present paying high rates owing to their peculiar situation remote from power sources."18 Durnford further maintained that the HEPC needed to revise its rate structure to take account of the fact that its lines now blanketed all of southern Ontario and carried power from forty-six separate generating stations. "Powershuttling" was now common and had made the task of calculating individual power costs nothing short

206 Power at Cost of "fantastic." Although Durnford recognized that these new conditions had a built-in tendency "to promote partial equalization of rates to some," he none the less believed that direct action in favour of fairer rates was also needed. The SHEC wanted Hydro to acknowledge that transmission was "ancilliary to generation" and to pool all costs in a general account, thereby yielding rate reductions for urban municipalities and "the contiguous rural districts" alike. Durnford concluded his interview with the Canadian Observer on an imaginative note. Some way, he mused, must be found for Ontarians to discharge the debt of gratitude they owed the HEPC for its "mighty" contributions to the war effort. How better than with a "sufficient subsidy from the general treasury of the province to provide equalization of rates?"19 The Globe, traditional champion of the Hydro status quo, promptly criticized the SHEC for resurrecting an "old and discarded idea" and for failing to demonstrate how a flat rate was any more viable in 1943 than it had been in 1921. It dismissed as "rubbish" the suggestion that Hydro's rate structure was somehow responsible for the province's industrial centralization; the imbalance clearly antedated the HEPC. If power costs were as significant as the SHEC maintained, how did Toronto, Hamilton, and Windsor come to have larger populations and industrial sectors than Niagara Falls, which paid significantly less for hydroelectricity? The Globe described the Sarnia proposal as the first of two steps leading to inevitable destruction of the Hydro organization, for after transmission charges were equalized the flat-raters would certainly go on to eliminate whatever differences remained between the rates of individual municipalities. The only way to accomplish the latter goal, the Globe shuddered, would be for the HEPC rather than locally elected commissions to control every municipal system, thereby making Hydro a "political football." Observers more objective than the Globe could no doubt have argued that the utility had already reached that stage. But the paper was nevertheless convinced that if politicians became involved in the HEPC'S daily operations, all expenses, and not just 50 per cent of the capital cost of rural lines, would soon be coming out of taxpayers' pockets.20 Just as in 1918, when the Goderich flat-raters tested the public mood by initially seeking the support of their neighbours in the Western Ontario Associated Boards of Trade, the SHEC turned first to its fellow members in the OMEA'S Western Ontario District No. 8. The district meeting, held at Windsor on 10 November 1943, seemed a relatively safe forum. Of the thirty-eight municipalities represented, only Windsor used more hydroelectricity (48,889 horse-

2O7 Sarnia and the Uniform Rate Revisited

power) and paid lower rates ($26.00 per horsepower) than Sarnia. Indeed, the average rate over the entire district was $37.11 per horsepower. In their presentation to the gathering, Durnford and his fellow commissioner, John T. Barnes, re-emphasized the tremendous physical, financial, and technological changes that had marked the HEPC'S growth since 1921 and restated the argument that these changes made a uniform rate feasible as well as essential. They also spoke of the "strong sense of national ownership ... amongst the people at large" and the public's belief that all Ontarians were entitled to "share and share alike" in whatever Hydro had to offer. But so long as the Commission permitted the enormous gulf between municipal rates to persist - the two extremes were Rosseau (Muskoka County), Holstein (Grey), Ripley (Bruce), and Tottenham (Simcoe), at $62.00 per horsepower, and Stanford Township (Weiland), at $17.50 - hydroelectricity would remain a luxury instead of "an essential necessity for the economical administration of home and factory alike." Durnford likened Hydro's rate structure to asking someone to climb onto a high roof, with the promise that the ladder would be raised once they were there. Customers were expected to maximize consumption on their own; only then would Hydro reciprocate with affordable rates. Electricity was as vital to modern life as food, air, and water, he said, yet the HEPC was not assisting the municipalities and RPDS to use it to their fullest advantage.21 The SHEC calculated that the average price of HEPC power in 1942 was $23.54 Per horsepower. If a uniform rate of $23.00 per horsepower were implemented, 277 partner municipalities, representing a total population of over one million, would experience an immediate reduction in costs. The scheme also involved freezing temporarily the rates of the sixteen municipalities, with an aggregate population of approximately 1.1 million, which were paying below $23.00 per horsepower. Initially only the 277 uniform-rate municipalities would share in subsequent price reductions. As electrical consumption increased and the distribution network became more efficient, the uniform rate would gradually fall and encompass each of the sixteen "cheap power" communities in turn. At the end of this "transition period" of indeterminate length, every partner municipality would be paying the HEPC an identical rate for its energy and sharing in future savings. Although absolute uniformity would obviously be a long time in coming, the SHEC thought that the "average rate," if introduced without delay, would act as a "shock absorber" in the immediate post-war period. Finally, not to be ignored were those 1.1 million persons either currently served by, or within easy access of, Hydro's Rural System. Neither Barnes nor

208 Power at Cost

Durnford estimated the potential savings, but they were adamant that equalizing municipal rates would trigger a subsequent reduction in rural expenses as well.22 The SHEC was confident of the flat rate's financial viability. Lowering the 277 municipalities' power charges to $23.00 per horsepower would reduce HEPC revenues by "the comparatively small" amount of $1,296,750, or less than 5 per cent. The Sarnia delegation considered this sum so inconsequential that it neglected to contrive a means of making up the difference; if the HEPC were concerned, it could devise a solution. The principal obstacles to a uniform rate, the SHEC insisted, were to be found not in the realm of finance but in the parochial and self-seeking attitudes of its opponents. Such attitudes were regressive and would deny Hydro the "free hand" that it needed if it were to make optimum use of future technological advances in order to innovate "for the common good." The "individual cost" method of charging had been "absolutely necessary" in Hydro's pioneering era, but the utility's future growth and prosperity depended on a uniform rate.23 Barnes and Durnford had made their case well, but the guest speaker that evening was none other than R.T. Jeffrey. Although Jeffrey began by announcing that he would not be issuing a public statement on rate equalization until the HEPC completed its review for the government, he promptly launched into a vigorous defence of the current rate structure. Claiming to be tired of the high-sounding rhetoric that flat-raters invariably employed, Jeffrey countered with hard economic facts. He focused in particular on the phenomenon known as "diversity" to disprove the supposed correlation between a municipality's wholesale Hydro costs and its ability to attract industries. Because many communities had a diversified power load, the price that they paid for electricity was reflected only marginally in the rates that they in turn charged their industrial customers. To benefit from diversity, a municipality needed to sell a volume of power exceeding its contracted load. For example, if a town agreed to purchase 100 horsepower daily to service its industrial customers, this load would become available for other uses, mainly domestic and street lighting, when the factories closed in the evening. Since capital costs of the distribution system had already been subsumed within the rates charged for the original 100horsepower allotment, any excess energy distributed could be sold at a discounted rate. In short, a diversified load gave the local commission extra leeway in allocating costs among its different classes of customers. The diversity factor enabled Guelph and Belleville, which paid $23.79 and $24-96 per horsepower respectively, to sell

209 Sarnia and the Uniform Rate Revisited

power to their industrial customers for between $14.00 and $15.00 per horsepower. Most of the HEPC'S municipal partners operated similarly. The list included Sarnia, where power that cost the SHEC $27.15 per horsepower occasionally was sold to local industries for only $19.00. According to Jeffrey, not even Toronto offered its industrial customers rates that low. As a result of diversity, no fewer than twenty-seven Niagara System municipalities, large and small, tempted industries with power rates of between $19.00 and $21.00 per horsepower. ^ Jeffrey next explained that if a community lacked a diverse power market, adding a large new industry to its distribution system - the dream of most towns and villages in the province — could increase rates. In most instances a community's distribution facilities would need to be upgraded in order to accommodate the additional load. Where a small domestic market existed, and opportunities for diversity were limited, established customers would be saddled with the cost of serving the new arrival. Jeffrey also wondered aloud why, with so much competitively priced power available, industries continued to congregate in a few major cities. To find the answer he suggested looking at a central flaw of the flat-rate argument the tendency to overestimate the importance of energy costs in the manufacturing process. Jeffrey claimed that because fuel and electricity usually accounted for less than 3 per cent of manufacturers' expenses, a uniform rate could not possibly accomplish all that its adherents expected. There were, of course, exceptions not mentioned by Jeffrey, like the pulp and paper, electro-chemical, and metallurgical industries, all of which depended on vast quantities of cheap electricity.25 Jeffrey had made a cogent point none the less - in deciding where to locate, businesses were interested primarily in availability of raw materials, markets, transportation facilities, suitable buildings, water-supply, and a reliable work-force. While inexpensive energy could certainly act as an enticement, it was by no means the only, or in some cases even a crucial consideration. Jeffrey therefore thought it unfair of the SHEC to criticize the HEPC'S rate structure. Hydro had fulfilled its responsibilities by ensuring that municipalities in southern Ontario had access to what was arguably the cheapest hydroelectricity in the world. Just because some communities were incapable of providing the other essential prerequisites for industrial development was no reason to "abandon those sound principles" on which the HEPC'S success was based.z6 The Windsor meeting resolved nothing, and the battle continued on several fronts thereafter. While the SHEC remained the leader

2io Power at Cost

of the uniform-rate forces, the opposition rallied around the St Catharines PUC and city council, which in early December passed morions supporting the status quo. Expanding on Jeffrey's Windsor arguments, the St Catharines resolutions stressed that equalization of opportunity among municipalities depended less on power costs than on "local freight rates, prevailing labour rates, cost of living, and social, educational and other advantages." The resolutions also highlighted the fact that the HEPC was not currently a burden on Ontario's taxpayers, aside from the rural construction grants. Yet as the SHEC had freely admitted, a flat rate would necessitate finding almost $1.3 million in additional subsidies. If the provincial government paid this charge, and Hydro were allowed to invalidate its municipal contracts, there would be no ridding the HEPC of political interference. This in turn would bring to "a very definite end ... the successful and self-sustaining operation of the greatest municipal ownership system."27 The municipalities that climbed aboard the St Catharines bandwagon cited various reasons for challenging the SHEC. The Niagara Falls city council refused to believe that charging municipal partners a uniform rate would result in any advantages for the discontented. Equipment costs, it argued, not energy charges, represented the major deterrent to rural electrification, a comment that unwittingly harked back to Hydro's promotional difficulties of the 19305. Nor were opponents of the flat rate prepared to accept the SHEC'S assurances that the favoured sixteen municipalities would be protected against future rate increases; contracts once broken were easier to infringe on a second time.28 In Welland, the local manufacturers' association warned that a flat rate would "tend to the creation of political pressure from various sections of the province." Besides, industry would have problems enough coping with the inevitable post-war recession without needless worries about energy costs. Guelph's Board of Light and Heat Commissioners feared that a uniform rate might encourage local utilities to be less efficient if they knew that "extravagances" would "be borne by all." And in Port Arthur, city council provided a distinctly northern perspective when it accused the SHEC of attempting to subsidize one section of the province at the expense of the other. A uniform rate could only lead to the breakdown of "the harmonious relations now existing between members of the great Hydro family" and inaugurate a "new era of distrust and discord."29 For its part, the HEPC was anxious to prevent further division in its municipal ranks. Speaking to the OMEA on 9 December 1943, Hydro chairman Hogg declared that this latest round of flat-rate

an

Sarnia and the Uniform Rate Revisited

agitation was, like its predecessors, based on a "fundamental misconception" of the Commission's financial arrangements. Moreover, by raising the issue in wartime, when Hydro's load and revenues were exceptionally high and new capital outlays abnormally low, flat-raters were misrepresenting the feasibility of their idea. The Commission's finances might currently appear able to support a uniform rate, but that would change once hostilities ceased and demand for hydroelectricity declined. Adding the complication of a uniform rate to the plethora of economic ills that many believed would appear at war's end seemed to Hogg a formula for disaster. New customers would be instant liabilities rather than assets, and in short order Hydro's established clientele would become saddled with an "indefinite sum of losses," the SHEC'S promises notwithstanding. 3° According to Hogg, only twice in Hydro's history had exceptions to the principle of "power at cost" been thought "justified by considerations of general Provincial economic welfare." The first was the government grant-in-aid for rural construction, although Hogg hastened to add that, because this assistance was applied at the RPD level and did not alter the wholesale price of the power, there was still an element of service at cost involved. Besides, "a strong agricultural industry" was so essential to the province's prosperity that the policy in question had "the sympathy and endorsement of the urban communities" which one way or another bore "most of the cost differential." The second exception involved those small urban municipalities which, for reasons often beyond their control, had fallen on hard economic times and ended up with electrical rates that tended "to discourage the greater use of Hydro service." The Commission had spared a handful of these communities financial embarrassment with the special bail-out legislation introduced in 1935.3* Given these precedents, Hogg thought it only fair that some type of assistance should be extended to communities that were not in dire financial straits but were also not likely to increase power consumption appreciably on their own. What he offered the two quarrelling factions was a compromise of sorts - in lieu of a uniform rate, a maximum municipal wholesale rate of between $40 and $45 per horsepower should be introduced. Because this maximum rate would be significantly higher than the $23.00 per horsepower "average," it would be self-financing after only a few years, once consumption and revenue patterns adjusted correspondingly. In the interim, any deficits could be covered with a surcharge of five or ten cents per horsepower levied on municipalities paying less than

212 Power at Cost

the maximum rate. Without saying as much, Hogg intimated that this was as generous a concession as he was prepared to grant.32 The flat-raters, incensed that the Commission would dismiss their cause so summarily, demanded a proper hearing when the OMEA met again six weeks hence. During the month and a half preceding the January showdown, the two camps each staged carefully orchestrated petition campaigns. Town and county councils, municipal utility commissions, and numerous manufacturers' associations from across southern Ontario wrote to Hydro and the OMEA expressing their support for either the Sarnia or the Si Catharines viewpoint. Of the eighty-four known submissions, those favouring a uniform rate outnumbered the "antis" by almost three to one.33 While the petitioning war was in progress, the Sarnia press took one final stab at the HEPC, which it now portrayed as a doddering, retrograde institution whose aversion to change was stifling the province's development. Many municipalities, the Canadian Observer alleged, felt betrayed by Hydro. Had they known from the outset that "they were going to be forever condemned to pay a rate for electric power so much higher than others," most would never have signed a contract. Instead of becoming self-sufficient in energy, or finding an alternative supplier, they had been duped into believing that Hydro "would always be prepared to adjust its business to ... changing times." There was but one way remaining for the HEPC to retain the municipalities' confidence, the paper concluded, and that was by implementing a uniform rate.34 Forty-nine representatives from twenty-seven communities assembled at Hydro's Toronto offices on 19 January 1944, to hear submissions by the principal participants in the debate. Barnes spoke first. Although he embellished his presentation with elaborate charts and graphs, the underlying message remained unchanged: a uniform rate was the best way to guarantee balanced economic development across the province. Furthermore, if a flat rate was deemed acceptable for the Rural System, it was highly discriminatory to deny the privilege to urban areas. After all, the rural network was fed by generating and transmission facilities built initially to serve urban consumers. Therefore it was only logical that "provincial wide uniformity, regardless of location, should be enjoyed by the urban places as well as the rural."35 Any revenue shortfalls stemming from a uniform rate, Barnes suggested, should be absorbed by the Rate Stabilization Fund which had been growing rapidly during the war and could easily sustain the rate structure for three or four years. By that time power consumption should have increased sufficiently to restore revenues and

213 Sarnia and the Uniform Rate Revisited

expenses to an even keel. Instead of ending his presentation there, Barnes unfortunately went on to argue that because railways averaged their rates, then so should the HEPC. Such an approach had always been among the flat-rate movement's greatest weaknesses attempting to justify its own program on the basis of other industries' experiences. Now at a critical moment Barnes rambled off into a discussion of train fares on the Brantford-Hamilton line. When he finally returned to his seat, the relationship between rail service and hydroelectric distribution remained as elusive as ever. Accordingly, his opponents had every reason to feel confident as they took their places at the podium.36 The first speaker for the "antis" was EM. Ashworth, general manager of the Toronto Hydro-Electric System. He wanted to make it clear that distribution costs in the larger and supposedly advantaged centres were much higher than most people realized. Toronto's highly complex transmission network encompassed thousands of miles of lines, many buried underground at great expense. Consequently, the capital cost of the city's distribution system was $119.35 per horsepower, compared to an average of only $77.86 per horsepower in other Ontario communities. Ashworth next took one of the flat-raters' favourite arguments - all residents of the province were joint owners of its water resources, and therefore all had a right to benefit from those resources equally - and turned it against them. He contended that in order for everyone to share the "natural advantage," each user must pay exactly the same rate at the point of generation. But since transformers and transmission lines were not natural resources, they should be paid for only by those customers who used them. Any other approach "would be to introduce unfair discrimination rather than to remove it."37 Next on the agenda was a brief by manufacturers from Hamilton and Brantford that raised three principal objections to the flat rate. First, the Sarnia proposal failed to differentiate between relatively expensive power generated at a 4oo-horsepower plant in the Eastern Ontario System and the much cheaper energy produced at the 5oo,ooo-horsepower Chippawa-Niagara Falls site. If the tremendous variation in production costs for hydroelectritiry were to be subsumed within one equalized charge, then why not extend the same dispensation to coal, fuel oil, and other energy alternatives? Second, the subsidies associated with a uniform rate depended on "the pleasure of the government," yet governments and their spending priorities were susceptible to change. Third, the Rate Stabilization Fund was being used inappropriately to cover deficits. All HEPC municipalities had been contributing to the fund since 1940, in preparation

214 Power at Cost

for the day when the war ended and Hydro's load plummeted, sending rates skyward. This was money that they had "prudently set aside ... to protect their future position," and they did not want it appropriated for defraying losses "incident to supplying some municipalities with power at less than cost."38 Appropriately enough, it was the St Catharines PUC that issued one of the most convincing rebuttals of the uniform rate. It revealed that the number of Hydro municipalities paying over $50 per horsepower had fallen from eighty-one in 1925 to forty-seven in 1935. By 1942 there were only ten. The message could not have been dearer: extensive overhaul of the rate structure was unnecessary, since existing procedures already promoted equalization.39 The Sarnia delegation virtually conceded defeat when it reported in the hometown press on the 19 January meeting. The OMEA'S Post-War Problems Committee had still to distribute among the association's membership a summary of the proceedings for final consideration at February's annual meeting, but there was no denying that the "antis" had gained the upper hand. Indeed, the proceedings of 8 and 9 February seemed anticlimactic. The hopelessness of the flat-raters' position was typified by the address given just moments before the crucial vote by a delegate from Rosseau. This representative reported that even though his village of two hundred residents, situated twenty miles southeast of Parry Sound, paid $62 per horsepower for Hydro service, it remained opposed to the SHEC'S proposition. Rosseau's rates had fallen steadily since 1931, when it had first contracted for power at $90 per horsepower (the inaugural rate was actually much higher - $127), and the community fully expected the downward trend to continue. Surely if the existing rate structure, in conjunction with market forces, could work to Rosseau's benefit, then a city with Sarnia's natural advantages should be able to cope. Municipalities everywhere should therefore continue to pay their respective shares of generating and transmission costs, so that the HEPC would be spared unnecessary financial risk. The Rosseau testimonial could not have come at a worse time for the flat-raters. Minutes later the convention voted down their plan by 154 to 70.40 Hogg meanwhile had been busy refining his alternative to the uniform rate. The day before the OMEA voted, he announced two innovations that Hydro hoped to implement forthwith in an attempt to lessen energy costs across the entire public-power network. One was amalgamation of the Niagara, Georgian Bay, and Eastern Ontario systems into a single Southern Ontario system. The second involved a variation of the "maximum rate" concept which he had

215 Sarnia and the Uniform Rate Revisited

outlined in December. Henceforth, no municipal partner would be charged more than $39.00 per horsepower, a move that would mean immediate reductions for sixty-five communities. To pay for this subsidy, Hogg asked the OMEA to approve an assessment of up to ten cents per horsepower on each municipality's contracted load. Collecting the surcharge directly from the municipal commissions would safeguard domestic consumption levels, since the extra fee would be broken down "into almost microscopic proportions" by the time it reached the individual customer. The end result, Hogg explained, would be to "bring the maximum cost to those exceptional cases more in line with the cost obtaining in the majority of smaller municipalities," yet without imposing an undue burden on anyone. The OMEA agreed to study the chairman's proposals and to reconvene in a few weeks. The push for a uniform rate had ended.41 The Sarnia delegates professed to be satisfied with the outcome. Their motion was defeated so convincingly, they claimed, because almost every city paying low electrical rates was represented at the meeting. By contrast, many of the smaller, high-rate centres which earlier had expressed their support for a flat rate had either failed to send a delegate or else were not members of the OMEA. Had every Hydro municipality been polled, there would have been "a decided majority" in favour of the proposal. As it was, the Sarnia commissioners were content to take credit for the amalgamations and rate ceiling announced by Hogg. Both measures, Durnford insisted, turned the HEPC "immediately in the direction which our proposal advocated" and represented "great gains" for the local cause. Equally encouraging was the promise that Premier Drew had made to the gathering to work for balanced power costs across the Hydro network and to encourage industrial decentralization. Everything considered, the SHEC concluded, its own interests would henceforth be served best by defending Hogg's recommendations against the "anticipated opposition by certain sections of the OMEA, largely the same elements that ... [had] opposed the Sarnia resolution."42 The Toronto Telegram, that staunch defender of urban interests, applauded the results of the OMEA meeting. It considered Hogg's proposed subsidy - which it dubbed "a sort of cost-of-living bonus" to municipalities that found "their power rates burdensome" - to be infinitely fairer and more affordable than a flat rate. Best of all, here was a truly "co-operative" initiative in the finest Hydro tradition. But the Telegram was not entirely pleased with what had developed. The paper thought it "mildly disturbing" that the maximum-rate idea had not originated with the municipalities. Ever since Beck's days, "premiers had felt free to initiate or vary Hydro Commission

2i6 Power at Cost policies and announce accordingly." Now Drew had joined in the process; Hogg had merely been the messenger. In the Telegram's view, the whole affair had been neatly stage-managed to enable the government to fulfil its election promise of a wholesale adjustment of Hydro rates.43 Before the OMEA met again, the HEPC released on 6 March 1944 the results of its investigations into urban and rural rate discrepancies. The inquiry, which emanated from the Kennedy-Houck motion of the preceding April, evidently was the basis of Hogg's recent speech to the OMEA, since the two presentations were strikingly similar. The HEPC'S report began by reaffirming "power at cost" as the incontrovertible foundation of Hydro's operations and pointing out that so long as that basic philosophy prevailed, differences in wholesale energy rates could never be eliminated entirely. But two measures - system amalgamations and a maximum rate - might ameliorate existing conditions while preserving the principle of "power at cost." The remainder of the report expanded on Hogg's OMEA statement and paid particular attention to a rate subsidy for the "most needful municipalities." Especially promising was Hydro's discovery that the proposed surcharge could be much lower than the ten cents per horsepower originally anticipated, because of the relatively small aggregate horsepower consumed by those municipalities needing the subsidy. On the basis of 1942 revenues, a levy of 4.5 cents per horsepower would be sufficient to ensure that no municipality paid more than $39 per horsepower. In addition, only if the Commission's overall load declined drastically would the maximum rate ever need to be raised. The report concluded by noting that despite the urban focus of the plan, the Rural System stood to benefit as well. If a maximum rate permitted the "outlying small urban centres" - the heart of the rural distribution network - to consume more electricity, more power would pass over the system's lines, and transmission costs would "be more fully shared by the rural areas."44 The OMEA assembled to pass judgment on the two proposals on 14 March 1944. The association's executive immediately went on record as favouring the proposed system amalgamation, but the special rate subsidy proved more contentious. Dr W.J. Chapman, a representative of the St Catharines PUC, stated that the municipalities in his district were strongly opposed to the extra levy and regarded it as "the thin edge of the wedge into a flat rate." Other executive members disapproved of the wording of the motion; although Hydro had indicated that a 4_5-cent surcharge would be adequate, the motion called for a levy of up to 10 cents per horse-

aiy Sarnia and the Uniform Rate Revisited

power. Toronto's K.A. Christie, a past president of the OMEA, persuaded the executive to agree to an alternative formula that limited the assessment to a 5-cent maximum and stipulated that the funds could be used to reduce municipal power costs to $39 per horsepower, but no lower. Once a community's rates fell below that level, all assistance would have to cease. Conversely, if the 5-cent levy were insufficient to reduce rates to $39, they would "have to remain at the higher level." Finally, if, as seemed likely, the full 5-cent levy were not required, only the requisite proportion was to be collected. 45 During the course of the deliberations, some executive members acknowledged that in the final analysis the OMEA'S opinions counted for very little with the HEPC. F.H. May, a delegate from St Mary's, reminded his colleagues that the government had already subsidized the Rural System and that it "was quite within their power to do the same thing in urban centres." He therefore thought that the executive should agree to a voluntary levy "and thus keep the Government out of the issue." If the OMEA could not prevent political interference in Hydro, it might at least delay the inevitable. The association's president, W. Ross Strike, a representative from Bowmanville and future HEPC commissioner, added that the HEPC likewise was not obliged to confer with the OMEA over the amalgamations; the Power Commission Act entitled Hydro to allocate municipalities to whichever operating district it pleased. Since the Commission had been considerate enough to solicit the OMEA'S opinion, Strike thought that the organization should reply in the affirmative. The rank and file added little to this issue but when the vote was taken heartily approved the amalgamation by 553 to 105.46 Strike, who turned out to be the HEPC'S most valuable ally that day, next rallied the membership behind the special municipal levy. No business was "worth a hoot" he argued, unless it could "absorb some losses with its profits." He personally favoured "power at cost" but explained that cost was "a very flexible term" and must not be allowed "to become a fetish." Blind adherence to Hydro's founding principle would "retard progress." Strike could think of no better way to demonstrate the Commission's readiness "to march along in step with the economic and social advances in this province" than to lower the rates of the sixty-three municipalities paying above $39 per horsepower for public power. Toronto's Christie backed up Strike by announcing that his city, "as a gesture of good will in a co-operative society," was prepared to shed its "Hog-Town" image and accept the levy. It was a significant concession. Toronto, with a peak load greater than the Eastern Ontario and Georgian Bay

218 Power at Cost

systems combined, could anticipate paying well over $18,000 annually in additional energy costs if the full five-cent levy were imposed. If Toronto had no objection to helping less fortunate members of the great Hydro family, why should any of the lesser siblings?47 Few objected, and those who did resorted to the same tired arguments recently employed against the uniform rate. They considered an additional levy, even one of only five cents per horsepower, an infringement on "power at cost" and a violation of contract. Some members were concerned that once a $39-per-horsepower maximum rate failed to produce the much-anticipated surge of prosperity, the OMEA would be asked to approve increasingly higher levies and progressively lower rates. Hence, the current campaign was nothing other than a circuitous route to the objectionable goal of rate equalization. But few shared these fears, if the small turnout for the lateafternoon vote on the levy was any indication. The motion passed by sixty to twenty-one and finally laid the uniform-rate issue to rest. 48 In fact, the suspicions of the twenty-one dissenters proved unfounded. Contrary to predictions, power consumption did not nosedive at war's end, and the number of municipalities requiring rate assistance fell from sixty-three in 1943, to only thirty by the end of 1945, and twenty-one in 1946. As a result, the levy was much smaller than its staunchest advocates dreamed possible - just two cents per horsepower during 1944 and 1945. The total sums involved were certainly not a drain on the finances of the contributing municipalities. They handed over $9,231.29 in 1944 and $7,151.52 in 1945. By 1946 the contribution was a mere pittance - $2,337.94. Although the levy rose again in the 19505 in response to a massive construction effort by Hydro - over $19,000 was collected in the fourteen months ending 31 December 1950 - the maximum rate had fallen to $34.72 per horsepower by 1957. Thus, the added assessment still represented an insignificant proportion of the municipalities' overall obligations and evidently alarmed no one.49 The SHEC had little difficulty resurrecting the uniform rate among its fellow municipalities of the power hinterland in 1943. It helped, of course, that the idea had never completely disappeared after the Lethbridge Committee delivered its negative verdict late in 1919. Every few years, and most recently in 1941, adherents of a flat rate popped up, albeit briefly, to trumpet the virtues of "equalized power," before quietly fading away again. Their arguments were invariably the same; only the faces changed. In certain respects the Sarnia commission's campaign of 1943-4 was no different. The im-

219 Sarnia and the Uniform Rate Revisited

portance of cheap hydroelectricity for rapid urbanization was still overemphasized, and the "disadvantaged" continued to harbour intense resentment against Toronto, Niagara Falls, and any other cities that they felt were hogging the benefits of public power. The latter in turn defended the status quo as vigorously as ever. They insisted that inexpensive energy was the key to their competitiveness, and since their prosperity and that of Ontario as a whole were unquestionably linked, the rate structure must not be altered. But if the similarities between the Sarnia campaign and its predecessors seemed striking, the contrasts were even more so. The most obvious difference was the SHEC'S emphasis on the HEPC'S dramatic transformation of late. Hydro had expanded many times over since 1919. It was an experienced and technologically advanced utility with interconnected facilities spanning the length and breadth of Old Ontario. The Sarnia commissioners were determined that the uniform rate should be re-examined in light of these new circumstances. In addition, rates seemed so critical in 1919 because it was generally believed that they ultimately would determine the fledgling Commission's outermost limits. Yet by 1943 there no longer was any question but that the HEPC was destined to be the energy source for the vast majority of city dwellers and farmers in southern Ontario. Affordability might still be a problem in some areas, but it now appeared that physical accessibility would not be for long. The 1943-4 debate was also marked by the virtual exclusion of the farming community from the proceedings. The major beneficiary of the 1919 agitation, the rural network, still depended on its urban connections to keep loads high and rates moderate. The Sarnia camp occasionally referred to the ways in which Hydro's rural customers would profit from a municipal flat rate - predictions that the "antis" adamantly refuted - but this time around, the small urban centres of the power hinterland clearly placed their own interests foremost. It was difficult for a small village or hamlet, with Hydro rates of $40 to $60 per horsepower still calculated at "cost," to feel much sympathy for a Rural System built on government bonuses and which had recently been granted a uniform rate of its own. The uniform-rate issue departed centre stage in 1944 as quickly as it had entered the year before. Because the HEPC wanted desperately to avoid a repetition of the public confrontation of the OHPURA years, Jeffrey and Hogg were quick not only to rebut the SHEC'S claims but also to devise an alternative solution deemed acceptable to all sides. The Telegram and the OMEA might fret about growing political interference in the HEPC'S affairs, but this time the initiative clearly belonged to Hydro. Drew belatedly promised "more

220 Power at Cost balanced" power costs only after his attempt to pigeonhole the uniform rate with the Agricultural Committee of Inquiry failed. Thus the maximum rate represented a clever compromise. It provided assistance to the hardest hit yet cost the remainder of the Hydro network very little, and taxpayers nothing at all. As for Sarnia and other communities with rates between the "average" and the "maximum," the latest flat-rate episode revealed the extent to which "power at cost" was already leading to equalization. The gap between high- and low-rate municipalities had narrowed significantly over the preceding two decades, and the trend promised to persist so long as the HEPC continued to interconnect its generation and transmission facilities and thereby distribute its costs over the entire network. Provincial power was still relatively expensive in a handful of localities, but nowhere was its price absolutely prohibitive. When the war ended in August 1945, the way was clear at last for the HEPC to forge ahead with rural electrification plans that had been impeded by either Depression or war for sixteen years. The Rural System had certainly not stagnated during these difficult times. In a sense it had benefited, for instead of building new transmission lines at will in order to reach the most accessible customers, it had been forced to increase the customer density of existing lines and to learn how to maximize its power load while minimizing capital expenditures - valuable lessons for any utility. But whereas most urban centres, no matter how small or remote, had HEPC service by 1945, slightly less than half of the farms in southern Ontario were still without electrical conveniences. Sustained by a new uniform rate, a recently amalgamated administrative system, and a government pledge of support, Hydro was anxious to venture forth to complete the job. Drew's professed enthusiasm for rural electrification was not unique; every premier since Whitney had expressed similar sentiments. What set Drew apart, however, was that his government was the first in sixteen years actually to be in a position to deliver on the promise. An efficient, technologically mature, but only partially completed rural network was already in place. It remained to be seen if Drew would be the one to realize Adam Beck's dream of an electrified Ontario countryside.

CHAPTER ELEVEN

The Five Year Plan The boldest move Hydro has seen Hydro Commissioner George Challies quoted in the Toronto Globe and Mail, 1 March 1945

The HEPC began planning for post-war rural electrification in January 1944. Even though the Commission's engineers could only guess at the probable size of farm incomes, or the availability of appliances and construction materials, they insisted that the Rural System must undertake a record-breaking construction program the moment the WICB'S constraints were lifted. They suggested, for instance, that during the first few years following the war, 1,500 miles of primary transmission lines, to serve 6,000 customers, should be built annually. In addition, 4,000 consumers should be added to existing lines. The total cost of this ambitious undertaking was estimated at $6,440,000 per year, almost $340,000 more than the HEPC hitherto had spent on rural electrification in any single year.1 These were bold projections, but the task before the Commission was correspondingly great. The rural network, after almost four decades of effort, was still confined primarily to the most populous and prosperous sections of the Southern Ontario System (sos). Much of the untapped market consisted of sparsely populated districts far removed from the Rural System's existing lines or of individuals who lived near a Hydro facility but could not afford the service or refused to believe that it represented a worthwhile investment. Another obstacle was the rapidly changing character of the rural market. The Rural System had always been oriented toward a primarily agrarian and hamlet clientele. In the twenty years following the war, however, suburban domestic customers with power requirements virtually indistinguishable from those of urban users would come to represent a significant portion of the rural network. Completing the task of rural electrification first begun in 1911 would therefore involve balancing two largely conflicting aims - constructing expensive extensions into remote, low-customer-density areas,

222 Power at Cost and minimizing the rates paid by customers in high-density areas. To be successful, Hydro would need to marshal its resources, and secure the support of the provincial government, in ways that it had never done before. Premier Drew and George Challies released the first sketchy details of a comprehensive scheme for post-war rural electrification when they attended the annual convention of the Ontario Association of Rural Municipalities (OARM) on 28 February 1945. Drew began by outlining a number of post-war initiatives that his government believed would benefit all rural Ontarians - conservation measures, better educational facilities, lower power rates, and greater emphasis on industrial decentralization. Challies, who had been appointed to the HEPC in August 1943, next announced an intensive five-year construction program that would leave the HEPC with the "best rural Hydro system in North America." This program, which he dubbed "the boldest move" in Hydro's history, would ultimately extend electrical services to 85 per cent of the farms in the province. Challies and Drew declined to release any further details, other than to promise that the scheme would be accompanied by an intensive promotional campaign.2 In fact, the rural community did not have to wait long to hear the rest of the particulars. Within a month of the OARM meeting, the Liberals and the CCF banded together to defeat Drew's minority government, thereby thrusting the province into an election campaign for the second time in nineteen months. In the course of this campaign, the Conservatives gave their rural electrification initiative top billing. Challies unveiled the government's Five Year Plan for Post-War Rural Hydro Development on 30 March 1945. Since 1921, he noted, the HEPC and a succession of provincial governments had resorted to a wide array of financial incentives in an attempt to encourage rural dwellers to equip their homes and outbuildings with hydroelectricity. Yet of the 111,877 farms that the HEPC thought that it could feasibly serve, only 61,486 (55 per cent) had signed contracts by 1945, and "relatively few" of these used electricity to its maximum potential. Challies estimated that under present conditions "ultimate development" on the Rural System would consist of 35,080 miles of transmission lines and 241,205 customers of all classes. This objective had been only 60 per cent accomplished, and unless immediate action were taken to rectify the situation, the entire provincial economy would suffer. A vibrant agricultural industry was essential to Ontario's well-being, and hydroelectricity was "the key to farming as a successful business." It was with this concern in mind that the government had recently instructed the HEPC to make rural electri-

223 The Five Year Plan

fication its highest priority in the immediate post-war period. In response to this directive, a work schedule had been devised that would see construction of 7,329 miles of transmission lines in just five years, to serve 57,904 rural customers (32,167 farm; 25,737 nonfarm). This would represent the most ambitious undertaking by the Rural System to that time.3 Most of the construction announced by Challies (6,006 miles, or 82 per cent) was planned for the sos, with the remaining 1,323 miles of line being divided between the Thunder Bay District (330 miles or 4.5 per cent) and the Northern Ontario Properties (NOP) (993 miles or 13.5 per cent). Similarly, 89 per cent (51,579) of the new customers were expected to be from southern Ontario, with the Thunder Bay District accounting for 3.3 per cent (1,891) and the NOP 7.7 per cent (4,434). Within the sos, the large and densely populated Niagara division was scheduled to take on 27,453 new users (47.4 per cent), while the remainder would be divided between the Eastern Ontario (13,499; 23.3 per cent) and Georgian Bay (10,627; 18.3 per cent) divisions. The Five Year Plan would also increase customer densities on existing lines; almost 63 per cent (36,168) of those signing HEPC contracts would be added to transmission lines built prior to 1945. The total cost of construction was estimated at $44,879,750, half of which would be covered by the provincial grantin-aid. Challies also predicted that the customers themselves would purchase wiring and electrical equipment worth $43 million during the five years of the plan.4 Challies insisted that the plan would benefit more than the farming community alone, as over 2,000 person-years of labour would be needed to erect transmission lines. An additional 24,513 personyears would be required to manufacture the 18,800 electric ranges, 58,500 washing machines, 6,950 water heaters, 90,000 irons, 24,600 refrigerators, 95,500 radios, 5,450 grain grinders, 3,150 milking machines, 7,400 water pumps, and 2,300 milk coolers for which the plan was expected to create demand. Hence, the plan was touted as a major defence against the severe economic slump that the Conservatives, and many others, predicted would occur at the end of the war. Should farmers experience difficulty borrowing from traditional lenders to finance these purchases of electrical equipment, the government promised to help them out by using its powers under the Rural Power District Loans Act, which had been inoperative since October 1940. Challies further promised that the Five Year Plan would involve a promotional drive of unprecedented scope. The campaign would include visits by HEPC sales staff to prospective customers, revival of the travelling hydroelectric dis-

224 Power at Cost

play, creation and distribution of motion pictures demonstrating the many applications of electricity to rural living, and an intensive advertising campaign in farm newspapers and magazines. None of this, of course, was very new; only the scale of the effort was different. By the same token, neither Hydro nor the government had ceased to believe that some areas would always remain beyond the range of the Rural System. In effect, the purpose of the plan was to reach the limit of what was practicable and possible sooner than would have been the case under normal growth conditions.5 If this objective was less sweeping than it was claimed to be, the opposition parties offered the electorate nothing comparable. The Liberals, who had brought Hepburn back as their leader, largely ignored electrification. In contrast, E.B. Jolliffe and the CCF at least tried to link rural electrification to their "welfarist" Five-Star Program of job, home, health, national, and farm security. Jolliffe promised to set up crown corporations which would manufacture goods in high demand, such as building materials, household appliances, farm implements, and electrical equipment. These companies, besides hastening reconversion of wartime industries to peacetime pursuits, would in turn sell their products directly to the farmers at wholesale prices. In the event, neither this nor the Five-Star Program generally captured the electorate's imagination. When the votes were counted, the CCF was relegated to a rump of eight seats, for a loss of twenty-six. The Liberals fared little better and elected only eleven members, four fewer than in 1943. Drew, by contrast, won sixty-six seats and faced the new legislature at the head of a majority government.6 Within days of the election, his government renewed its promise "to blanket rural Ontario with electric service" the moment that labour and materials became available. The Globe, obviously delighted by the outcome of the election, chose 9 July 1945, the second anniversary of the Twenty-Two Point program, to applaud the Drew government for its commitment to so noble a cause. The premier had pledged in 1943 to make public power more affordable in rural areas and had kept his word; "just and equitable" power rates had been introduced. The promises of previous governments had been "like piecrust - made to be broken," but the Five Year Plan would prove that the public had been wise to place its trust in Drew. Unfortunately, even the Globe's enthusiasm could not relieve the shortage of materials that was delaying implementation of the plan. As one appliance manufacturer noted, only patience would get householders the electrical services and appliances they wanted. It would be 1947 before the situation improved.7

225 The Five Year Plan

Behind the rhetoric of the Five Year Plan lay something else, namely HEPC self-interest. The Commission feared being saddled once again with a large power surplus once wartime industries shut down, and expansion of the Rural System's load seemed one way of alleviating the problem. Such concerns would prove unwarranted. Municipal and domestic loads expanded so quickly after the war that they more than compensated for the decline in industrial power usage. Hydro was taken completely by surprise by this development but none the less earmarked one-quarter of its planned $i8-million annual construction and maintenance budget for the Rural System.8 For its part, the government regarded widespread rural electrification as essential not only for improving the efficiency of Ontario's agricultural industry but also for preserving the rural way of life. As Ken Rea has shown, the problem facing farmers after 1945 was "less a matter of promoting output to meet wartime food requirements" than of "finding ways to restrict output to maintain prices." Unless farmers began to "rationalize" their operations, they would soon be put out of business by either their neighbours or foreign competitors. Even the minister of agriculture, Thomas L. Kennedy, stated in December 1945 that given existing markets and technologies Ontario already had too many farmers. As proof he pointed to the fact that only 50 per cent of the farms were responsible for almost 90 per cent of all produce marketed in the province. This meant that an equal number of farmers were doing little more than supplying their family needs. Farming was not a part-time job but a business requiring "expert management, training, skill and toil," and Kennedy was adamant that only those who understood this should be encouraged to stay on the land. At the same time, the minister regretted the rural exodus into "urban pursuits." Many of the farmsteads that were being abandoned had belonged to the same families for several generations. For that reason, to emphasize agricultural efficiency above all other considerations was to risk tearing the very social fabric of the province.9 With construction materials still in short supply, the HEPC spent most of 1945 laying the promotional groundwork for the Five Year Plan. The updated hydroelectric caravans once again travelled along the back concessions of the province, stopping in at farms and fairs to demonstrate electrical wares for home and barn. Hydro also inundated the agricultural press with advertisements proclaiming the multitude of ways in which hydroelectricity could improve rural living. The advertisements promised that the long drought in new rural extensions would soon end and cited as evidence the gradual increase in construction activity since 1943. Farmers were told that

226 Power at Cost

if they remained patient just a little longer they too would soon have "a hired man who would pump and carry water for about 3 cents a day ... milk cows at about 5 cents to 7 cents each per month ... or hoist hay for about one cent a ton." Major appliance manufacturers such as Canadian General Electric and Canadian Fairbanks-Morse assisted Hydro's promotional efforts by running extensive advertising campaigns of their own. The Royal Bank joined in and encouraged farmers to use a "Farm Improvement Loan" to wire their premises in preparation for the day when the transmission lines finally arrived. The HEPC also worked in conjunction with agricultural colleges, farm equipment manufacturers, and the Department of Agriculture, in designing electrical appliances specifically suited to the Ontario agricultural market.10 The Five Year Plan was an immediate success after it was officially launched in 1946. In the first year, new-line construction (1,188 miles) exceeded the predicted total (1,135 miles) by only 4.7 per cent, but the addition thereby of 16,802 new rural customers represented a 23-5-per-cent increase over original expectations. Despite this encouraging beginning, the Rural System's planners suddenly feared that an energy shortage might soon get in their way. Demand for power across the entire Hydro network had jumped by an unexpected 17 per cent in 1946. If that rate of expansion continued, demand would certainly outstrip supply long before new generating sources could be added to the Hydro grid. In these circumstances, the HEPC postponed momentarily its rural promotions in order to concentrate on reducing the sos's peak load by 300,000 horsepower. The possibility of augmenting the power available to the rural distribution system with portable diesel generators was contemplated, but the capital costs of a diesel service were deemed prohibitive except in the most remote localities. With no choice but to proceed "in the normal manner," the Commission had to acknowledge publicly that the carrying out of the Five Year Plan might have to be delayed somewhat." The Commission's view was disputed by the Ontario Federation of Agriculture (OFA), which had come into existence in 1935. The OFA argued that the threat of a power shortage was no reason for delay. Hydro could prevent shortages from developing, the OFA maintained in January 1947, simply by ordering its urban customers to cease squandering energy on illuminated signs and a host of other frivolous uses. The energy thus saved could then be diverted to "handicapped" rural districts.12 Farmers in Grey County were likeminded. A poll taken in 1946 had revealed that while only 15 per cent of that county's farms had access to a central-station power

227 The Five Year plan supply, fully 90 per cent of the farmers surveyed ranked such a service foremost among their needs. Many were bitter that although the HEPC had promised to deliver power to their doorsteps the moment the war ended, almost two years had passed without the transmission lines moving any closer. Stressing the shortage of farm labourers, several of Grey's agricultural organizations petitioned Drew to appoint a Hydro chairman more "sympathetic" to rural electrification. If the government would only concentrate on providing cheap power, they wrote, it could cease relying on "European farmers with their low standard of living" to populate the province's agricultural lands.13 Challies sprang to the HEPC'S defence. The slow progress in Grey was the result of recent strikes in the steel, coal, and base metals industries, which had disrupted the supply of meters, transformers, and breakers. Moreover, scarce construction materials had been used for betterments - reinforcing existing transmission lines to carry heavier power loads. But neither Grey County council, nor its counterpart in Huron County, found this explanation acceptable. They were incensed that the HEPC would continue to erect lines into summer cottage areas at the same time that farmers were being told to wait their turn patiently. The two councils demanded a moratorium on all betterments and non-rural construction "until such time as assurance based on actual investigation" had demonstrated that farmers' needs had been "amply provided for." Challies rejected their demand on the grounds that few of the materials used in a summer cottage hook-up were suitable for a farm service.14 The Carleton Place PUC (Lanark County) presented the executive of the OMEA with an altogether different viewpoint in March 1948. Although they supported rural electrification in principle, the Carleton Place representatives thought that it would be "detrimental to the economic well-being of the province as a whole" if persons or businesses that currently depended on a reliable supply of electrical power were forced to cut back on consumption because new customers had been added to the system. Anyone who had not already "built their life around" electricity could easily wait until sufficient power became available to serve old and new consumers alike. In the event, the association's executive, fearing a backlash from its rural membership, refused to endorse so discriminatory a point of view.15 Happily for all concerned, and despite imposition of a moderate form of power rationing in 1947, rural line crews surpassed the annual construction objectives of the Five Year Plan both that year and the next. Nonetheless, the government continued to be attacked

228 Power at Cost

in the legislature over its handling of rural electrification. Farquhar Oliver, who succeeded Mitchell Hepburn as Liberal leader in July 1945 (after Hepburn's brief return to lead the party in the provincial election), joined Harry Nixon in badgering the Conservatives over every lapse in rural service, no matter how insignificant, that was brought to their attention. They demanded that the HEPC be prevented from embarking on any new capital projects, with the exception of generating stations, until every farm in the province had electricity. The inveterate Hydro critic A. Holland Acres (Cons., Carleton) asked why over 3,000 new homes built on Ottawa's outskirts during the preceding three years had been given "a full load of power," while farmers in Carleton County "could not get any transformers or meters." Challies replied, quite inaccurately, that all rural applications were acted on in the order that they were received. Alfred W. Downer (Cons., Dufferin-Simcoe) and Ross A. McEwing (Lib., Wellington North) flogged a dead horse in 1947 by suggesting that rural services could be improved if the rates were "a little more equalized," while F. Oliver Robinson (CCF, Port Arthur) urged the government to intensify its efforts in northern Ontario, where "good sized villages, standing in the shadow of the transmission lines," frequently were without hydroelectricity. Victor Martin (Lib., Nipissing) asserted that the pace of rural construction could be quickened if Hydro were not so parsimonious toward its labourers. Robert Hood Saunders, a former mayor of Toronto who had been appointed to chair the HEPC the previous month, admitted in April 1948 that the rural program had encountered "considerable difficulty ... in obtaining local labour for post-hole digging and pole erection operations." But he was firm in the view that Hydro could not pay wages "higher than rates prevailing in private industry."16 Concern was also voiced in the legislature that Hydro's proposed "frequency standardization" project would slow rural electrification. Whereas the majority of the HEPC'S electrical equipment had originally been designed to operate on a 25-cycle frequency, most generating plants in the United States and Quebec, as well as some of Hydro's own facilities in eastern Ontario, were running on a 60cycle frequency by the 19403. The Commission had in the past contemplated changing its equipment to the higher frequency, thereby simplifying power transfers with other utilities and eliminating the annoying flicker that was common to 25-cycle lighting. Each time, however, conversion had been dismissed as too costly and disruptive. Not until January 1949 did Hydro embark on the monumental task of switching all 25-cycle electrical equipment in the province over to a 6o-cycle frequency. The project eventually would take ten

229 The Five Year Plan

years and $352.3 million to complete and involved rewiring or replacement of over seven million pieces of electrical equipment.1? Farquhar Oliver disputed the necessity of standardization and warned in March 1948 that the changeover would inhibit the progress of rural electrification in 25-cycle areas. Drew replied that farmers had been reluctant to install 25-cycle equipment because they rightly feared that it would soon become obsolete. The premier was certain that once the "greater flexibility" of a 6o-cycle service became available, farmers would rush to sign HEPC contracts. The Ontario Federation of Labour (OFL) shared Oliver's scepticism. This was somewhat surprising, given that the switch-over promised to be an extremely labour-intensive project. The OFL nevertheless vigorously denounced frequency standardization as a "dissipation of $200 million in Hydro reserves" that would "leave substantial profits in the pockets of large electrical manufacturing corporations." In the estimation of the OFL, greater emphasis on rural electrification was "much to be preferred over removing the flicker from electric lights in a few large cities." The Globe, true to form, rushed to Drew's side. It dismissed the OFL'S stance as a "CCF inspired partisan attack" designed not to further the cause of labour "but to achieve political capital through criticism of the Administration."18 The government, realizing that its critics were grasping at straws, went on the offensive. The Conservatives took considerable delight in referring to the Liberal's own wartime construction record, especially the mere forty-one miles of line built in 1943. Drew reminded the public in March 1947 that many of the same WICB restrictions that the Liberals had laboured under in 1943 were still in effect in 1944 and 1945, when his government had erected 1,400 miles of line. Oliver could only reply that the Conservatives "happened to be sitting alongside the fence when the opportunity came." Although both leaders' assessments were too simplistic, there was some truth in Oliver's contention that the Liberals, by reducing the minimum density requirement and service charge, had cleared the way for the Drew government's successful Five Year Plan.19 Having thus ridiculed his opponents on an important issue, Drew called a general election for 7 June 1948. The purpose of the election, he explained, was to seek public approval for a mammoth $600million provincial development program. Half of this money would go to the HEPC for use on a variety of projects, including development of at least five major hydroelectric sites and a i6o,ooo-horsepower thermal facility at Windsor. The latter, to be built at an estimated cost of $21 million, would be the utility's first steamoperated plant. More money would also be spent in northern On-

230 Power at Cost tario, where industrial development depended on securing new sources of hydro power. But none of these projects would be viable, the premier warned, unless Hydro went ahead with the frequency changeover. A standard frequency would give the Commission freedom to dispose of its temporary power surpluses whenever necessary in outside markets. Without this outlet, the government could never justify proceeding with construction "on so vast a scale." In any case, standardization would require a large public offering of government-backed HEPC securities, and investors would be easier to attract if the scheme were endorsed by the electorate.20 Drew also hoped to cash in at the polls on the success of the Five Year Plan. Hydro was poised to break construction records for the third year in a row, both in miles of transmission line built (3,556) and in number of customers added (26,036). In just three years, 5,752 miles of line had been erected, exceeding the plan's objective by 934 miles (19.4 per cent). In the same period, 63,529 rural contracts were signed, 24,783 (64 per cent) more than originally anticipated. Yet even at this rate of progress, it would require an additional 5,300 miles of transmission line to handle the backlog of applications. These were impressive numbers to use on the hustings, where Drew could also point to his government's continuing efforts to improve the administrative efficiency of the Rural System. The number of Rural Operating Areas (ROAS) - Hydro's new designation for RFDS by the late 19405 - had been reduced from 121 to 97 between 1945 and 1948, while the number of townships served had grown from 435 to 497. This reorganization had been part of an effort to reduce duplication and to compensate for the loss of ROA facilities that had been annexed by urban centres.21 The opposition denounced Drew for calling the election under false pretences. Andrew F. Brewin, president of the Ontario CCF, insisted during a radio broadcast on 20 April that expansion of hydroelectric facilities could hardly be considered a legitimate election issue because everyone clearly was in favour of the idea. Hydro should be debated, he said, but in the context of the government's negligence in permitting a power shortage to develop. This time the CCF had its own version of a five-year rural electrification program that promised not only to speed up the pace of new extensions but to reduce power rates as well. It proposed also an added incentive: consumers would be able to purchase electrical and plumbing equipment directly from the Commission at wholesale prices. Farmers had been demanding access to affordable hydroelectric service for years, and the CCF hoped to prove that only a government truly committed to the cause of public ownership could provide such a service.22

231 The Five Year Plan

Farquhar Oliver likewise criticized Drew for raising a "phony issue" when the real bone of contention "was the grave shortage of power and the Conservative bungling which had brought it about." The Liberals also struck up the old chorus - a perennial favourite of whichever party happened to be out of office - that they would "take Hydro out of politics." Oliver complained to a Port Arthur audience that the HEPC had been "Tory dominated and manipulated" in the past but that affairs had deteriorated in March 1948 with the appointment as chairman of Robert Saunders, "the Tory mayor of Tory Toronto." Saunders had replaced Thomas Hogg, whose thirty-five-year career at the HEPC had ended abruptly in February 1947 when Drew, desperate for a scapegoat to take the blame for the power shortages, had allegedly pressured the veteran administrator into retirement. Oliver vowed to reappoint Hogg as the first step in freeing Hydro from politics. The Globe promptly accused him of contradicting himself; if Oliver carried out his promise, he would simply be reviving "the unwholesome practice of a former Government which [had] dismissed civil servants for political reasons in order that their places might be filled with those who had earned the gratitude of the Ontario Liberal Party." On rural electrification, Oliver promised to "act immediately to catch up on the tremendous backlog of ... applications." The highest priority would be given to the "hundreds" of farmers who had already wired their buildings, some as long as four years earlier, and who were still awaiting an HEPC hook-up. The Liberals would also abolish the minimum-density requirement of two subscribers per mile of line. In short, "every applicant" who could be "economically served" would definitely receive Hydro service. The promise sounded magnanimous, but Oliver carefully avoided defining "economically."23 The Conservatives succeeded on 7 June, although their fifty-three seats represented a loss of thirteen from 1945. The CCF and the Liberals finished well back, returning just twenty-one and thirteen members, respectively. One of the casualties on the Tory side was Drew himself, who lost in Toronto High Park, where the government's liberalization of the liquor trade worked to the CCF'S advantage. In the wake of the election, George Grube wrote in the Canadian Forum that "everybody agreed on the need for development" and the Conservatives appeared best suited for guiding Ontario through the post-war recovery. In a similar vein, the Globe claimed that the voters had been "impressed by the Government's vigorous plans for developing Ontario's wealth and raising its standards of efficiency and comfort."24 Unquestionably the Conservative government had been given a strong mandate to get on with the business of development, but

232 Power at Cost Table 1 Progress of the Five Year Plan

Miles of Line Five Year Plan Actually constructed Customers Five Year Plan Actually served

2946

2947

1948

1949

1950

Total

1,135 1,188

2,151 1,008

1,532 3,556

1,357 4,738

1,154 2,733

7,329 13,223

13,602 16,802

13,964 20,691

11,180 26,036

10,102 35,206

9,056 57,904 37,516 136,251

Drew himself decided that the moment had come for him to depart provincial politics. In October 1948 he assumed leadership of the Progressive Conservative party of Canada. He left Queen's Park knowing that he had kept his promise to the rural community. Rural electrification had progressed farther and faster during his five years as premier than at any other time in the HEPC'S history, and the provincial government was well placed to complete the job. It remained to be seen whether a new Conservative leader would give the task at hand the same high priority as had Drew. When Drew's successor, Thomas Laird Kennedy, was chosen in October 1948, the Five Year Plan was a proven success (see Table i). Consequently, George Challies was not making an idle boast when he told the legislature on 17 February 1949 that the Conservative government had "supplied 65 percent of the rural consumers," whereas it had taken "21 years to supply the other 35." For whatever reason, the Liberal record paled beside that of the Tories. A handful of opposition members, including Ross A. McEwing and Agnes MacPhail (CCF, York East), braved the issue and taunted the government over the fact that in a few districts poles had been erected without wires being strung. But most of their colleagues simply avoided the topic altogether, while a few others set partisanship aside long enough to proclaim how much their constituents appreciated the long-awaited Hydro service. T. Kenzie Foster (Lib., Bruce), speaking in March 1949, put the case as succinctly and honestly as any: "I must say this in all fairness, that hydro, which is not supposed to be a political issue, has been a godsend to the County of Bruce."25 It had taken the HEPC slightly less than four years to accomplish the objectives of the Five Year Plan, yet the flood of applications for

233 The Five Year Plan

service continued. While its line crews struggled to keep up with demand, Hydro's engineers began seriously to consider a question that they and their predecessors had pondered intermittently over the preceding forty years: what percentage of the rural population could the Commission expect to serve under the existing financial and customer-density guidelines? Or, to use their own terminology, what was the Rural System's "optimum saturation"? The question was not easily answered. By 1950, several areas that had been connected to the provincial network during the recent construction frenzy were incurring substantial deficits. It was not uncommon for new ROAS to experience financial difficulties during their first few years of operation, but with only the remotest corners of the sos remaining to be served, the Commission was concerned that deficits might not be so short-lived in the future. Before it could make a decision regarding saturation, Hydro needed to determine the root cause of these arrears. Ultimately, Hydro's engineers placed the blame on two old culprits - the uniform-rate structure and the minimum-density requirement. The HEPC had always promised its clientele that rates would continue to fall so long as the number of customers and the overall load on the distribution system steadily expanded. Indeed, this correlation had by and large held true until 1946, when rising labour and material costs caused Hogg to predict that rate reductions, which had been "almost a yearly event in Hydro's history," would soon become a rare occurrence. Three years later his fears were realized. Despite a threefold increase in energy consumption since 1939, expenses on the Rural System periodically outpaced revenues. In 1949, when 26,405 new customers and 2,616 miles of rural transmission line were added in southern Ontario, the peak load rose by over 18 per cent to a record 170,569 kilowatts. But costs continued to bound upward as well - by 11.4 per cent in 1949 alone - as the HEPC undertook as many as 442 different construction projects at once, including nine hydroelectric and two steam generating stations. By the end of 1949, expenditures by Hydro on new plant and equipment had topped $141 million, of which the Rural System accounted for $21,580,000 (15.2 per cent). Yet the impressive growth in rural load had not prevented the sos from incurring an operating deficit of $1,670,062. Rural operations in the Thunder Bay System and NOP had fared proportionately worse, experiencing losses of $59,611 and $247,122 respectively.26 An immediate rate increase seemed unavoidable if the Rural System were to retain any semblance of financial responsibility. It would be a momentous decision, for it would mean ending the long list of rate reductions that reached back to 1921, on which Hydro had

234 Power at Cost proudly staked its reputation. Saunders explained the Commission's predicament to the OMEA on i March 1949. Whereas some consumers' power costs had fallen by as much as 45 per cent over the past decade, wages had jumped by 71 per cent, and the cost of construction materials by no per cent. As a result, a primary transmission line that could be erected for $1,135 Per mile in 1939 nowmission line that could be erected for $1,135 Per mile in 1939 now cost $2,350. Maintenance and betterments work, which had fallen so far behind schedule in some localities that safety was being compromised, had experienced comparable price increases. By conducting a "record-breaking program ... during this period of exceedingly high costs," Hydro had allowed capital investment per rural customer to swell from $286 to $349 in just five years. At the same time, average monthly farm consumption had increased from 167 kilowatt-hours to 244 kilowatt-hours (46.1 per cent), whereas most monthly bills had risen by only 12.8 per cent, from $3.53 to $3.98. On top of everything else, the government grant-in-aid had reduced rates paid by individuals by at least 14 per cent. In short, Saunders thought that Hydro's rural customers should not object to contributing a greater share of their system's operating expenses, since their rates had obviously been well below the actual cost of the service for quite some time.27 The revised uniform-rate schedule took effect on i May 1950. The price of the first energy block rose 25.7 per cent to 4.4 cents per kilowatt-hour, the second by 31.3 per cent to 2.1 cents, and the third by 46.7 per cent to 1.1 cents. The HEPC tried to play down the significance of such hefty increases by reminding its farm and hamlet customers that they would still be paying less for energy than they had prior to the Second World War. Farmers would pay approximately 1.85 cents per kilowatt-hour under the new schedule, compared to 2.11 cents in 1944 and 2.55 cents in 1940, a reduction of over 27 per cent in ten years. The higher rates quickly produced the desired results in the sos, which amassed a surplus of over $148,000 in 1950. The Thunder Bay System and the NOP were less fortunate and incurred deficits of $55,417 and $302,124, respectively. In a bid to economize through less duplication, the HEPC merged the two northern systems on i January 1952. Unfortunately, the new Northern Ontario Properties, as the amalgamated system was officially called, proved no more successful at balancing its books than its two predecessors had been.28 Northern losses, combined with soaring expenditures on the sos, forced Saunders to announce yet another rate increase on 29 October 1952. Taking to the airwaves, he updated the litany of excuses that had been offered two years earlier. Labour costs, which now com-

235 The Five Year Plan

prised 44 per cent of all operating expenses, had more than doubled since 1939; wage rates and skyrocketing prices of materials together had driven up the cost of a mile of primary transmission line to $3,402. Betterments now accounted for one-third of the Rural System's budget, as increasing customer densities made it necessary to rebuild and reinsulate the original 4,ooo-volt lines to accommodate a i2,ooo-volt load. Maintenance expenditures had continued to grow as well. The tree-trimming budget, for example, which had amounted to $19,059 in 1945, had reached $1,356,500 by 1952. Under the circumstances, the HEPC had no choice but to raise the threeblock rate schedule to 4.5 cents, 2.6 cents, and 1.5 cents per kilowatthour, commencing on i January 1953. Once again the rate hike proved successful in the sos, where surpluses totalling $1,548,279 were accumulated between 1954 and 1959. The NOP continued to struggle, however, and incurred deficits of $4,493,169 in the same period. Despite the widening disparity between the two systems, the Commission was reluctant to penalize the sos with a further rate increase simply because the NOP, which had too few customers spread over too vast a territory, could not make ends meet. The 1953 rate schedule therefore was little changed for the remainder of the decade.29 The minimum-density requirement also received renewed attention in this period. When the minimum density was lowered from three to two farm contracts per mile of line in May 1938, Hydro had felt confident that increased power consumption would improve revenues sufficiently to compensate for the loss in service charges. This was a reasonable supposition at the time, but once the big rural construction program began after the war, it soon became apparent that a two-farm-per-mile density bore no relation whatever to the revenue requirements of many RPDS. The Commission estimated in 1950 that at least ten farm contracts, each generating an "average" revenue, were needed to meet the fixed costs on one mile of transmission line. By contrast, the actual customer density was 8.22 per mile on the sos and only 6.76 per mile in the NOP. Worse still, most of the territory waiting to be served could be expected to yield only two or three customers per mile of line. Clearly, the only alternative was to increase the user density of the existing facilities. Remembering the discontent that had given rise to the two-per-mile requirement twelve years earlier, the HEPC quietly reinstated the threeper-mile minimum on 22 November 1950.3° Opponents of the change surfaced slowly, largely because the more stringent guidelines failed initially to slow the continuing rapid pace of rural construction. In 1950, the final year that the two-

236 Power at Cost

contract-per-mile requirement was in effect, 1,795 miles of line and 29,927 customers were added to the sos, which represented an average density of 16.7 per mile. A large proportion of these new users had obviously been tied into existing lines. Nor did the trend alter significantly over the next four years; the sos grew by 78,045 customers and 4,852 miles of transmission line, an average density of 16.1 customers per mile. Some observers nevertheless felt that the density requirement presented an insurmountable obstacle in certain districts. Charles E. Janes (PC, Lambton East) urged the government in March 1955 to abolish immediately the three-per-mile standard. Hydro had "grown up," he said, and it should be forced to serve every rural resident in the province, regardless of cost. The Federated Women's Institute of Ontario decided in January 1958 that if Hydro must impose a minimum, then the two-per-mile requirement should be reinstated. But the HEPC remained resolute in the face of these and all other related criticisms. A more liberalized extension policy, it maintained, would be "completely impractical/^1 Having settled the rural rate and density issues, Hydro was at last ready to address the question of saturation. To that end its engineers conducted three studies during 1956 and 1957, in an attempt to unravel the complex relationship among customer density, maximum saturation, and the rural network's financial viability. I.K. Sitzer, the HEPC'S director of consumer service, tabled the first report in August 1956. It was a detailed analysis of the implications of a 95-per-cent saturation level and revealed that almost 89 per cent of the farms in the sos were receiving public power at the beginning of 1956. Three of the seven regions in the sos (Western, Niagara, and Toronto) had already attained 95-per-cent saturation and were not included in the study. In the four remaining regions, 5,098 farms were within reach of existing transmission lines and could be connected to the Rural System at a total cost of $2,044,370. Another 5,127 farms could be served only if Hydro waived the minimumdensity requirement and erected an additional 2,988 miles of line at a staggering cost of $16,218,679. Even if all 5,127 farms produced an average sos revenue of $87 annually, Hydro could expect to lose $670,000 a year on those customers alone. This was a worst-case forecast of course, and Sitzer predicted that "a large number" of these farms would never ask for a hook-up because they were chronically unproductive and unlikely to appreciate the merits of an HEPC contract. His sole recommendation was that Hydro not tamper with its existing distribution policies, but simply allow market forces to prevail. If the 1951-5 growth rate persisted through to 1960, and he

237 The Five Year Plan

could think of no reason why it should not, a 95-per-cent saturation level would be achieved automatically.32 The second study, completed in March 1957, was equally insistent that the two-per-mile guideline not be reintroduced. "All electrical utilities," it stated, would eventually reach a point where it would become necessary "to place a limit on the capital expenditure required to serve a new customer." For the Rural System, that limit was closely tied to the three-contract-per-mile minimum. Reducing rural revenues by one-third and increasing individuals' capital costs by 50 per cent, which would be the result of a two-per-mile density in many areas, might be of little consequence in the "more settled parts" of the sos. But in the Georgian Bay and Eastern Ontario regions, and especially in the NOP, the repercussions would be drastic. In 1955, fifty-nine of the ninety ROAS in the sos had accrued deficits totalling $2,235,000, while the other thirty-one had earned an aggregate surplus of $2,276,000, resulting in a net surplus of only $41,000. Accordingly, Hydro must avoid relying on a handful of profitable ROAS to offset losses incurred by the majority. Only seven ROAS had contributed 60 per cent ($1,360,000) of the sos surplus, and if any of these were ever absorbed by a municipal distribution system their revenues would be lost to the Rural System forever. In the NOP, a lower density was absolutely out of the question. Two northern ROAS had yielded a surplus of $70,225 in 1955, while the remaining thirteen chalked up losses of $919,600, producing a net deficit of $849,375.33 The third study, completed in May 1957, went further still. It concluded that even a three-customer-per-mile density bore no "direct relationship to the cost of service." Now that hydroelectricity was adaptable to a wide variety of farm chores, and no longer was used primarily for lighting, consumption patterns had begun to vary dramatically among different classes of rural power users. Average revenue per customer, not number of contracts per mile of line, should therefore be the principal consideration when determining the viability of new extensions. Yet even this criterion would not rescue the Rural System from the dilemma it would have to face in years to come: "In areas having low average revenue per customer, an excessively large number of customers per mile are required to meet present day costs, and in the more thinly settled parts of the Province such customer densities cannot be realized."34 The three studies, by agreeing that any relaxation of the guidelines governing new extensions would spark dire financial consequences, implied that the Rural System was rapidly approaching its outermost limits of growth. This outlook struck a raw nerve among a handful

238 Power at Cost of provincial politicians who insisted that Hydro's task would not be completed until its lines reached the 19,246 farmers who were still without public power in December 1956. James A. Maloney (PC, Renfrew South), dubbed "two-to-the-mile Maloney" by his colleagues, led the attack on the issue in the legislature during 1957. A Renfrew lawyer, Maloney applauded the recent growth of the rural network but argued that it would be irresponsible of a publicly owned utility to deny its services to any rural residents on the basis of financial considerations alone. Between 10 per cent and 15 per cent of the farmers in his riding were awaiting public power but would be denied it so long as the existing "rigid regulations set down by the commission" were retained. In Maloney's opinion, everyone in the province was entitled to, and must receive, HEPC service, even if everyone else had "to contribute to the cost of their receiving it."35 Maloney knew of at least one instance in Renfrew County when the density requirement had been quietly waived, and he wanted the HEPC to deal similarly with numerous other applications. The man to whom Maloney looked for satisfaction was James S. Duncan, who had chaired the HEPC since November 1956. Previously president and chairman of the board of Massey-Harris, the farm machinery manufacturer, Duncan presided over the final two years of the government-subsidized programs of rural-line construction in southern Ontario. In response to Maloney's request, Duncan replied publicly in 1957 that Hydro "could not, and would not, deal with the situation piecemeal." Privately, however, he suggested to W. Ross Strike, now a commissioner, that the occasional low-keyed dispensation might help to "get rid of this ever-recurring complaint.'^6 What concerned Duncan even more was the fact that the three engineering studies had suggested that the rural network was fast approaching its optimum saturation, yet there were obviously many people scattered across southern Ontario who still wanted a hookup. Unless the government could be persuaded to boost its financial support of rural electrification, much of this demand would never be met. In the past, a Hydro chairman finding himself in a similar predicament would simply have requested the extra funding outright. But ever since October 1955, when Dana Porter, the provincial treasurer, had notified the Commission that the provincial grantsin-aid might be cancelled at any moment, Hydro officials had been wary of drawing undue attention to the bonuses. Duncan therefore resolved to achieve his goal by less direct means. The HEPC would propose that an extension be built to every farm

239 The Five Year Plan

situated within one mile of an existing transmission line, with the cost being dispersed over the entire rural network in the form of higher rates. Duncan was gambling that the government, which had been under the firm hand of Leslie Miscampbell Frost since May 1949, would share its predecessors' aversion to rate increases. As he explained to E.H. Banks, Hydro's executive general manager and comptroller, if the government were in favour of rural electrification, but anxious to avoid a jump in rates, it would agree to "accept the full cost" of future extensions as a matter of "political expediency," if not "sound economics."37 While waiting for Frost to respond, Duncan was briefed by J. Mervin Hambley, Hydro's assistant general manager for administration. Hambley explained on 6 June 1957 that the sos would be able to finance the one-mile extensions without altering its rates or running up a deficit. The NOP, by contrast, which had lost over $1 million on its rural operations in 1956 alone, would be devastated by the change. Hambley declined even to speculate how high rates would need to rise in order for the NOP to cover the costs of the one-mile extensions. Duncan now realized that he could not possibly treat the two systems identically without "incurring an increasing volume of criticism." Although reluctant to recommend a scheme that might be perceived as favouring one region over another, he realized that if Hydro liberalized its extension policies in southern Ontario, an even more generous concession would have to be made to northern Ontario. One possibility was a "differential bonus arrangement," whereby the provincial government would pay 100 per cent of the rural construction costs in some areas and withdraw its support altogether in others. Duncan, like his predecessor, well understood the importance of designing policies that not only fulfilled the mandate of the utility but in addition accommodated the ambitions of its political masters. That being the case, here was a compromise with obvious political appeal. The government had already indicated that it was anxious to do away with the grants in the sos, where the assistance was needed the least. If it could then turn around and double its financial support to the NOP, surely this would be regarded as "a popular gesture towards helping open up the country."38 The problem of determining the optimum level of saturation on the Rural System was further complicated by the fact that the most densely populated and lucrative sections of many ROAS were either being converted into township electrical systems or annexed by urban municipalities. By the mid-igsos, it was clear that the uniform rates could cover the cost of service only where customer density

240 Power at Cost was at least ten or twelve per mile of line. This meant that electricity users in low-density areas were being subsidized by customers in high-density suburban areas, who were in turn paying almost twice as much for power as their neighbours in the adjacent town or city. In 1954, rural hamlet customers paid an average of 2.16 cents per kilowatt-hour, while most urban dwellers with a domestic service contract paid between 1.12 cents and 1.47 cents per kilowatt-hour. As a result, a few townships with an abnormally high proportion of suburban residents had purchased the local distribution system from the HEPC and set up their own township electrical system. As such, they assumed full responsibility for power distribution within their boundaries (or as much as the Power Commission Act allowed) just as urban municipalities did. Townships such as East Sandwich and West Sandwich (Essex County), Nelson (Halton County), and Brantford (Brant County) were discovering that by dissociating themselves from the less efficient sectors of the ROA they could provide their own residents with much lower rates than hitherto, despite having forfeited the provincial grant-in-aid. What concerned the HEPC was that this practice only increased the cost of energy to the ROA'S remaining customers. Although not yet a widespread problem, this trend would only increase unless the wide gap between urban and rural residential rates were somehow narrowed.39 Urban annexations posed a similar problem. Each time a town or city expanded into the surrounding countryside, an ROA lost more of its most profitable clientele. As Robert Saunders explained in 1953, Hydro was "losing the cream and being left with the milk." Its saturation was "being cut appreciably," with "consequent hardship" on those who were left. For instance, when Oshawa annexed 50.4 miles of line serving 2,365 customers in 1952, the density in the local ROA fell from 20.2 to 14.8 customers per mile. Similar situations had arisen outside Ottawa, Hamilton, Sarnia, Guelph, and several other cities in the sos.4° By the 19605, urban sprawl would be robbing the Rural System of thousands of customers annually. Duncan waited five months, until October 1957, for Frost to respond to his proposed one-mile limit on rural extensions, but to no avail. Now believing a more forthright approach to be in order, the chairman handed the premier a second set of recommendations. Duncan proposed that Hydro limit all future extensions in the sos to two-thirds of a mile of primary line per farm. Lines could be built beyond the two-thirds-of-a-mile maximum only if they were paid for by the customer at the time of construction; guarantee contracts would no longer be available. All of these lines, regardless of who financed them, would be maintained and operated by the HEPC. In

241 The Five Year Plan

the NOP, where annual operating losses had climbed to 28 per cent of revenues, Hydro recommended implementing the two-thirds-ofa-mile maximum, as well as increasing the grant-in-aid to 100 per cent.41 This time the government did not hesitate to reply but did not offer the news that Duncan had anticipated. Instead, Frost announced in the last week of October that the amount Hydro paid to the province in water rentals would be increased in the new year. A quick calculation by the Commission revealed that rates in the sos would have to be raised by at least $2.55 per kilowatt as a result. Frost made no secret of why the leases were being altered: the government wanted the extra revenues as partial compensation for all that it had expended on rural grants-in-aid.42 Duncan was momentarily taken aback that any politician would knowingly instigate another unpopular round of Hydro rate increases. Hopeful that something positive might yet be salvaged from this unexpected turn in events, he promptly assembled a number of counterproposals collectively dubbed the Package Deal. Duncan and Banks, along with Hydro's general manager, A.W. Manby, and the chief engineer, Otto Holden, met with Frost, Dana Porter, and the minister of highways, James N. Allan, on 29 October 1957. The HEPC representatives urged the government to replace the proposed higher water rentals with a base rate of $1.25 per horsepower per year, which would fluctuate with the retail price index. Hydro would in return agree to cancellation of the grants-inaid in the sos, and their continuation at the 5o-per-cent level in the NOP. Concern over its shifting suburban clientele also led Hydro to ask that the government no longer demand repayment of the grants whenever parts of an RO A transferred into a municipal system. Thus, the $95,521,089 in grant monies received since 1921 would remain with the HEPC "for the benefit of the entire sos rural area."43 The Package Deal also included significant changes to the traditional rural rate schedule. A four-tiered rate, with a third energy block of 500 kilowatt-hours at 1.1 cents per kilowatt-hour and a fourth block at 1.5 cents per kilowatt-hour for all remaining consumption, would provide some relief to suburban customers. The revisions were expected initially to reduce rural revenues by $753,000 annually, but the Commission, as usual, was confident that increased power consumption would eventually offset the losses. The two sides also agreed that rural lines would no longer be built into cottage areas unless the Commission were certain that revenues would be adequate to cover all costs. In addition, Hydro would build new extensions of up to two-thirds of a mile in length, free of charge,

242 Power at Cost

to "bona fide farm applicants" in the sos and NOP. Although there were still at least 10,300 farms more than one-third of a mile removed from one of the HEPC'S existing lines, this latest offer would make it possible for 2,650 farms (2,200 in the sos) to be served from 1,325 miles of line at a cost of $7,287,500.44 Duncan's final stipulation was that the HEPC'S offer must be accepted in its entirety. No part of the Package Deal was to be altered at any time. The opportunistic Frost agreed on the spot. The deal provided his government with an avenue for abandoning the grantsin-aid in southern Ontario, thereby saving more than $17 million in the next two years alone. Better still, since the HEPC had not only proposed the scheme but agreed to assume any unforeseen expenses that might arise out of it, there was little risk that the government would be perceived as abandoning needy farmers. Hydro considered itself a winner as well. The most obvious benefit arising from the Package Deal was that electrical rates would rise by only 36 cents per kilowatt, well below the $2.55-per-kilowatt increase originally anticipated. In addition, the agreement provided the HEPC with a set of guidelines for achieving optimum saturation in the Rural System, something for which it had been searching for years.45 Duncan announced the new policies on 12 November 1957. "Notwithstanding the financial sacrifices involved," he told his radio audience, the HEPC had decided "to broaden the present density requirements for line extensions ... to any soundly established farm situated two-thirds of a mile distant from presently existing lines." He stressed that since the Commission would be paying the full cost of the extensions, no exceptions to this rule would be entertained. Anyone requiring more than two-thirds of a mile of line would simply have to pay for the additional construction costs from out of his or her own pocket. Duncan estimated that within two years of the new regulations taking effect on i January 1958, only 7,500 farms in Ontario would be without Hydro power. At that point, the provincial utility would consider saturation to have been achieved in southern Ontario.46 Cancellation of grants-in-aid in the sos marked the end of almost four decades of joint effort by the HEPC and the provincial government to carry hydroelectricity to the hamlets and farms of Ontario. At the end of 1957, the sos consisted of 39,502 miles of primary transmission lines and 402,154 customers, of whom 130,298 were farmers. This latter group represented 91 per cent of the farms in Old Ontario. Approximately 2,370 others purchased their power from private utilities. Although 7,500 farms might seem like a substantial number of residences to be deprived of so basic an amenity of modern living, the HEPC professed that there was little it could

243 The Five Year Plan do to reach these property owners. Because of their location and/or marginal productivity, few were expected to be able to afford the service, even with the help of the grant-in-aid. Hence, there seemed little purpose in struggling to preserve the grants in southern Ontario when Queen's Park was so clearly in favour of their abolition.4? Although construction activity in the sos was slowing, there was still much work to be done in northern Ontario, where low population density and long transmission distances had long made domestic power service a financially questionable proposition. The HEPC and the provincial government had realized by the late 1920S that the only way to prevent the north's vast hydroelectric potential from falling into private hands was for Hydro to harness it. The Commission's initial purpose in entering New Ontario was therefore to produce and sell power to mining and pulp and paper companies. If area residents were able to tap onto the transmission lines, so much the better, but the north's small rural market otherwise received little encouragement from the HEPC.48 Consequently, it was 1938 before amendments to the Power Commission Act extended to northern residents the same construction subsidies for transmission lines that had been available in southern Ontario for seventeen years. Under the circumstances, it was not surprising that by June 1940 Hydro's rural distribution system in the north consisted of a mere 190 customers and twenty-three miles of transmission lines. Not until 1947 did the provincial utility launch a concerted campaign to serve the northern farming community.49 Even then, the northern and southern operations were administered separately. Only in 1952, when the Otto Holden generating station on the Ottawa River went into operation, were the power grids of New and Old Ontario permanently connected.50 Thus rural electrification in northern Ontario had for the most part been peripheral to the larger story that unfolded in the southern sections of the province. Although the HEPC'S distribution system grew slowly, it grew nonetheless. Between 1958 and 1970, 1,537 miles of line were added to the NOP, bringing the total to 7,788 miles, while the number of customers of all classes increased by 17,432 to 75,187. Despite steady growth, Hydro was frequently accused of slowing rural electrification in the north by insisting on too rigid an interpretation of the regulations governing extensions. Such criticisms were as old as the HEPC itself and had seldom created much of a stir when applied to construction activities in the sos51. Hydro had every reason to be more cautious in the NOP. Construction costs were higher, power loads lower, and distances between pockets of settlement greater than in most areas of the sos.

244 Power at Cost Furthermore, the NOP had been burdened by operating deficits ever since its beginnings. Therefore, when John B. Chapman (Lib., Fort William) stated in the legislature in 1961 that Hydro and the government were not doing enough to make electricity more available and affordable in the north, he encountered stout opposition from Robert W. Macaulay, minister of energy resources and an HEPC commissioner. Hydro was not, Macaulay told Chapman, "a fountain pouring out electricity from a bottomless and unlimited well ... guarded by niggardly men who refused to share their wealth because of some whim." Rather, it was a "public enterprise" based on "sound economic principles" that under no circumstances could "discriminate regarding requirements." Unless the NOP'S rural operations were based on "power at cost," enormous subsidies would become necessary, and "who," Macaulay asked, would "pay that staggering account?"?2 Macaulay's statement set the tone for the government's approach to northern rural electrification throughout the 19603. By December 1963, however, Hydro's vice-chairman, Robert J. Boyer (PC, Muskoka), began to argue that so penurious an attitude had become self-defeating. He warned that unless the grant-in-aid were raised to "not less than 75% of capital," the majority of northern extensions would for ever remain "beyond the realm of economic feasibility." Unless the province increased its level of support, customers in the high-density areas of the sos would have to continue to subsidize northern operations, a practice that was already causing "severe customer relations problems," as well as seriously impairing Hydro's ability to fend off its aggressive new competitors, the natural gas companies. The government of John Robarts obviously did not share Boyer's concerns, because six years later it still had not acted on his request.53 Yet the provincial government did not ignore entirely the future of rural electrification in northern Ontario. In the fall of 1969, an interdepartmental committee of public servants prepared a "Background Paper on Northern Development" which examined the question of how much responsibility the province should take in providing services, including electricity, to remote areas. The paper concluded that in certain remote districts the job of power distribution should be left with "interested parties" who could operate "either on a private basis or as a community project." The HEPC'S involvement would be limited to providing technical assistance. Although the Robarts government did not react to this idea, favourably or otherwise, the seed had been planted. After sixty years of doggedly pursuing one single-minded objective - monopolization

245 The Five Year Plan

of hydroelectric generation and distribution in Ontario - the HEPC was suddenly hearing from sources other than itself that this ambition had become prohibitively expensive in some corners of the province.54 Matters rapidly came to a head when consultants for the Treasury Board recommended in February 1970 that the grant-in-aid be eliminated. "Feasible electrification in the North," they wrote, was "virtually complete," and the grants no longer acted as an incentive "in deciding individual electrification projects." Approximately 766 miles of line were still needed to serve seventeen communities and 761 customers, but at an average cost of $9,000 per mile it was unlikely that many of these lines would be built. The consultants suggested that unless the HEPC could "demonstrate the need of the grant in very specific terms," the assistance should be terminated. Hydro's chairman, George Gathercole, concurred with many of the consultants' observations, but he argued for retention of the grants on the grounds that the north was by no means fully settled. The consultants had judged the grants' worth on the basis of present population distribution. Gathercole, by contrast, believed that the grants would become increasingly important as the north continued to develop. The grants had enabled the rural network in the sos to reach the point "where it could stand on its own feet," and they would do likewise in the north if only the government would retain them as "the backbone of its assistance to rural electrification."55 Gathercole's petition won the northern grants a temporary reprieve, but William Davis's Conservative government pulled the plug a year later. In the future, the government explained, provincial support for northern electrification would be considered not as a separate entity but as part of a much broader development package. As a result, Darcy McKeough announced in his budget address of 28 March 1972 that all grants-in-aid would be cancelled forthwith.56 A long and successful episode in the history of the HEPC had ended. Meanwhile, rural construction in the sos had tapered off rapidly in the period 1958-69. Only 4,030 miles of primary lines had been built, although the total number of customers jumped by 99,712 to 501,866. More significant, almost 50,000 of these new hook-ups had been for summer cottages, while the number of farm customers fell by 7,703 to 122,595. The decline in farm contracts, which began in 1961, was the result largely of municipal annexations, although some farms had been abandoned, while others were amalgamated into larger units.57 As the pace of construction slowed, rates once again occupied the centre of attention - in particular, the wide gap separating urban

246 Power at Cost

residential from suburban domestic rates. It was clear to J.S. Duncan as early as October 1959 that the fastest way to redress the imbalance would be to abandon uniform rates and revert back to area rates. He opted for the status quo, however, because he also realized that such a change would "create immense embarrassment from a political point of view" if farm rates had to "go up quite fantastically" in order to lower suburban rates "substantially." But as the 19605 went on, it became increasingly impolitic to rely on suburban customers to subsidize the rest of the Rural System. A 1965 rate study warned that the HE PC would soon be unable to compete with natural gas distributors for the suburban domestic market unless electrical rates were cut. Nor could the "shift in the relative economic influence of the various classes of rural customers" be ignored; suburban dwellers had become "much more articulate and better represented politically," which had made it "more and more difficult to have them support any other classes." Conversely, as the number and economic importance of small farms declined, governments would find that "justifiably moderate" rate increases could be imposed "with less difficulty than would formerly have been encountered."58 Hydro made its move several months later. In April 1966, all suburban, hamlet, and rural residential customers were reassigned to one of two categories depending on the density of their area. Henceforth, preferential suburban rates would apply wherever one hundred customers were found in concentrations of at least twentyfive per mile of line.59 This proved to be the final time that the HEPC was allowed to overhaul its rural rate structure without first justifying its actions to an outside authority. Since 1974, all rate revisions have been reviewed by the government-appointed Ontario Energy Board. Although the Board has been widely perceived as wielding little real influence over Hydro, the mere act of opening up ratesetting to public scrutiny represented a dramatic break from past practice and signified yet another way in which the Rural System had passed into a new era.60 The HEPC'S post-war rural electrification campaign had been a resounding success. With the enthusiastic support of the Drew and Kennedy governments, and to a lesser extent the Frost government, the Commission had finished at last the task first undertaken in 1911. This time around, not even shortages of power or materials could slow the march of transmission lines across southern Ontario. The long years of privation during the Depression and the Second World War had taught the utility how to use its resources, and its influence at Queen's Park, to greatest advantage.

247 The Five Year Plan

The most notable feature of the post-war period was the speed at which the rural network was completed. After it had taken only four years to meet the objectives of the Five Year Plan, the HEPC realized that it had grossly underestimated the demand for its services. But so long as applications continued to pour in, and the province was willing to contribute half of the construction costs, Hydro's line crews kept up their frenetic pace. In the period 194660, the Rural System grew by 19,639 miles of primary transmission lines, to 41,279 miles, and by 287,351 customers (all classes), to 441,263. When the grants-in-aid were cancelled in 1958, every district in the sos could boast at least go-per-cent saturation, and in many of the most densely populated areas the coverage approached 100 per cent. The other striking feature of the period was the rapid transformation that had taken place within the rural network. This was best symbolized by the HEPC'S decision in 1966 to rename the ROAS as Areas (for example, the Markham ROA became the Markham Area). Fewer than one-third of the Rural System's customers were farmers in 1966, and the Commission wanted to signify that its Areas were "responsible for a wide range of other activities in providing electrical service."61 Since the end of the Second World War, the rural network had evolved into a complex amalgam of farm, commercial, industrial, cottage, and suburban domestic power users, and it now bore little resemblance to the essentially agrarian service that Beck had initially envisaged. As the rate revision of 1966 had demonstrated, the administrators of the Rural System would henceforth be occupied with a very different set of issues. The first item on their agenda would now be to keep order among the rural network's many disparate parts, rather than to build transmission lines into remote sections of the sos. Ontario had been recast, and Ontario Hydro had been recast with it.

CHAPTER TWELVE

Conclusion

One important step in any society's advance to modernization is the moment at which it secures a reliable and affordable supply of electrical energy. No society, regardless of its other political, economic, or technological attainments, can be deemed fully modern without possessing this essential service. A useful index for measuring the modernization of rural southern Ontario, therefore, is to be found in the pace at which it adopted the electrical services of the HydroElectric Power Commission of Ontario. A tiny minority of the province's rural residents began to avail themselves of electricity's labour-saving amenities soon after the publicly owned HEPC began erecting transmission lines in the decade before the First World War. For the majority of rural Ontarians, however, the wait would be considerably longer - for many, until the decade following the end of the Second World War. Not until 1958, when at last 95 per cent of the farms in Old Ontario were connected to the public power network, was the job of rural electrification considered complete. Even after rural Ontario had become a fully-fledged partner in the Hydro enterprise and had taken to heart Hydro's entreaty to "Live Better Electrically," most urban dwellers continued to enjoy modern comforts not yet available to their rural counterparts. What the HEPC had accomplished, by extending its Rural System across southern Ontario, was to ensure that never again would the differences between rural and urban living standards be so pronounced. Providing electrical service to a rural clientele presented utilities everywhere with a unique set of problems, but in Ontario the HEPC proved especially adept at devising workable solutions. Thomas Hughes, an American scholar, has noted that before 1930 privately and publicly owned utilities in the United States, the United King-

249 Conclusion

dom, and Germany seldom subsidized the "small rural consumer." Only those individuals "who could afford to pay" were given a supply of power, for any other approach was considered "uneconomical and irrational."1 Although Hughes makes only passing reference to the Canadian experience, his findings by implication highlight just how unusual the HEPC and a succession of Ontario governments were in their approach to rural electrification. Utility owners and managers elsewhere were loath to enter rural markets characterized by low loads, uncertain revenues, and high overheads. Hydro, in contrast, began as early as 1921 to offer special incentives to farm and hamlet residents. Although Hydro and the provincial government recognized that a program of rural electrification would require more assistance than that traditionally accorded urban areas, neither was prepared to expand the Rural System as rapidly as to risk its financial solvency. This cautious expansionism was in marked contrast to their toleration of massive cost overruns in the construction of the utility's generating stations. External factors, most notably the Depression and the Second World War, also hindered progress of the rural program. Another obstacle was the stubborn scepticism toward the new technology that persisted in some rural quarters. Long after the financial viability of electrical appliances had been demonstrated in urban settings, many farm and hamlet residents remained doubtful that the benefits of an HEPC contract would ever justify the expense. Moreover, the HEPC, having mastered the urban power market, had to develop special marketing, construction, and administrative techniques to meet the province's rural needs. This took time. Yet for all its efforts in the countryside, the utility was continually accused of ignoring rural electrification and of pandering to the more profitable urban market. What its critics tended to overlook was that, for every rural resident with a grievance against the HEPC, thousands of others applied for, and received, the public 'juice' with little difficulty or delay. The HEPC regarded the Rural System as integral to its larger objective - an interconnected grid of generating and distributing facilities criss-crossing southern Ontario, as first envisioned by Adam Beck and continued by subsequent Hydro chairmen. When Beck told an American audience in 1918 that "all public service undertakings should be essentially monopolistic in character," he was referring to rural as well as urban electrification.2 Only northern Ontario's rural power needs would initially be excluded from this grand design. Hydro and the provincial government agreed, largely for reasons of financial expedience, that the utility should leave the

250 Power at Cost

small and remote northern rural market to private entrepreneurs. In southern Ontario, by contrast, as W.B. Foshay for one would undoubtedly have attested, Hydro's objective was to monopolize. Few were prepared to contest Hydro's claim, and by 1930 it was indisputably the principal supplier of hydroelectricity to the farms and hamlets of Old Ontario. This quest for monopoly was ubiquitous. In Kemptville, for instance, Hydro showed that it might choose not to extend its lines into areas where financial returns were in doubt, especially if there was no risk of a competitor forcing it to act. The utility also understood that successful municipally owned utilities that had expanded into neighbouring rural communities - the Orillia Water, Light, and Power Commission was the outstanding example - had to be handled with special care. In Orillia the HEPC chose to co-operate with the local commission rather than risk the adverse publicity of an expropriation battle. Hydro would patiently bide its time until the opportunity for an amicable takeover appeared. In other situations, the HEPC could prove a relentless adversary. Its "victory at all costs" approach in Bruce was defensible on the grounds that the greater part of the county's power market would otherwise have fallen into private hands, but elsewhere Hydro clearly over-reacted to the threat of competition. One such instance was its refusal to approve a grant-in-aid to eastern Ontario's M.W. Beach, even though his company supplied only a handful of rural customers and appeared unlikely ever to pose a serious challenge to Hydro's operations in the surrounding area. On that occasion, and there were others as well, the HEPC appeared to be less concerned with furthering rural electrification than with fostering a reputation as the only reliable distributor of hydroelectricity in the province. On the whole, however, confrontations between Hydro and its competitors were rare. There were relatively few privately or municipally owned utilities actively cultivating a rural market; those that did often discovered that the profits were small, too small certainly to warrant resisting Hydro's monopolistic ambitions. The HEPC thereby hastened the growth of its rural network by negotiating with other utilities for the purchase of their existing distribution systems, instead of erecting costly duplicate facilities of its own. The importance of these acquisitions should not be overemphasized. Rather than infringing on territory that other distributors previously had claimed, Hydro mainly ventured into areas without service. This fact is important in explaining why the HEPC was so readily accepted by those farm and hamlet residents who were prepared to give the new technology a chance to prove itself. Many of these folk were independent businesspeople and had reason to be

251 Conclusion suspicious of a public utility bent on monopoly. Yet they realized like the "socially prominent bourgeoisie" of business people and small manufacturers identified by H.V. Nelles as the driving force of the original public power movement - that in most instances the HEPC represented the fastest way to obtain a supply of hydroelectricity.3 Their enthusiasm for the Commission, however, should not be mistaken for devotion to the ideals of public ownership. Each time Hydro rejected a service application on the grounds of insufficient customer density, or disagreed with individuals over the amount of service charge to be paid, the utility was invariably labelled doctrinaire, unsympathetic, and unworthy of the province's trust. The standard reaction of anyone who had been rebuffed by the HEPC was to demand that responsibility for rural electrification be returned immediately to private interests. Hydro and the provincial government suffered no illusions: both knew that rural Ontarians tended not to care whether their electricity was provided by a publicly or a privately owned distributor. They only wanted it delivered as cheaply and as expeditiously as possible. That was what the Jamieson Committee was told in 1924, and it was a message that would be heard again and again until the rural network neared completion in the 1950S. Rural Ontarians as a group lacked effective means of voicing their concerns about the HEPC. Without an influential champion to advance their cause, individuals who had a dispute with Hydro often complained of feeling isolated and at the mercy of Toronto-based bureaucrats who neither knew nor cared about the needs of rural power users. The UFO seemed the logical vehicle for promoting the rural viewpoint, but it proved surprisingly ill-informed about Hydro in general and about the applications of hydroelectricity to farming in particular. So intent was the UFO on re-creating an illusory golden past that it failed to serve as a reliable guide to the future. In any event, the party was largely a spent force by 1930, while the most active period of rural electrification still lay ahead. The Farmers' Sun was unquestionably the most influential purveyor of rural opinion in the province and made a point of scrutinizing Hydro's every move. Unfortunately, after the paper ceased operations in 1934 a comparable journal never appeared. Even the HEPC'S decision to centralize administration of the Rural System discouraged a fruitful exchange of opinions. Hydro's control over the operations of its municipal partners was already extensive, covering everything from rates and capital expenditures to accounting practices. But on the Rural System centralization was taken even farther. By serving its rural customers directly, the HEPC eliminated

252 Power at Cost

the need for local commissions, which in the municipalities doubled as sounding boards for grievances and suggestions. Whereas urban power users had a mouthpiece in the OMEA - albeit one of doubtful influence at times - Hydro's rural clientele had no such lobby to act on its behalf. Rural residents with complaints frequently looked to their township council or local ML A to plead their case at Queen's Park, but if the government failed to respond, or if the HEPC remained resolute, there were no formal avenues of appeal. In short, the rural community could experience considerable difficulty making itself heard if the HEPC chose not to listen. The HEPC further consolidated its hold on the farm and hamlet market by circumventing the township, the traditional unit of local government in rural Ontario, in favour of a unique structure of its own, the Rural Power District. Engineering studies had shown by 1920 that maximum cost effectiveness could not be achieved if the rural distribution system were based on township boundaries, which seldom bore any relation to customer demand or available generating and distributing facilties. By setting up the RPDS so that they comprised sections of two or more townships, the HEPC not only met the engineering need but in the process diminished the importance of local officials in the matter of rural electrification. In circumstances where every township forming part of an RPD had to agree to a proposed change in Hydro policy - such as reducing the term of rural contracts from twenty to five years - before that policy could be implemented throughout the district, councillors were placed under tremendous pressure to comply with the HEPC'S wishes. If they resisted, and as a result the progress of rural electrification in their township was delayed, they and not Hydro would be answerable to an irate electorate. During the nearly five decades that it took to complete the rural electrification of southern Ontario, Hydro worked closely with each provincial government in turn, frequently displaying acute awareness of the political ramifications of its actions. Indeed, Commission bureaucrats like R.T. Jeffrey became as proficient as the professional politicians at forecasting the political fallout caused by changes to policies on rural electrification. For example, when contemplating changes to the rate schedule, Hydro's officials not only calculated how the Commission's finances would be affected but genuinely tried to predict the political consequences for the government as well. The potential for a political rebuff was not to be taken lightly, since at any given moment other political parties, the press, the OMEA, and urban power users in general might join with rural residents in arguing that Hydro's distribution system should be ex-

253 Conclusion tended with all due haste into the countryside. Certainly much of Hydro's concern with reading the political tea-leaves can be attributed to self-preservation. If the public perceived either Hydro or the provincial government to be failing in their responsibilities for rural electrification, Hydro could in turn expect to be brought under closer scrutiny. Carried to an extreme, this caution occasionally resulted in Hydro's placing the government's interests before those of the Rural System. A case in point was Lyon's recommendation in 1937 that the grant-in-aid not be increased beyond 50 per cent for fear of sparking an urban backlash. At other times Hydro's relationship with Queen's Park was not so open and co-operative - Duncan's attempt in 1957 to force Frost's hand regarding the government grants was one of the more blatant examples - but these were rare. The Commission's well-developed political instincts helped it to avoid unnecessary public confrontations, either with individual customers or with compering power companies. This desire for peaceful relations did not translate automatically into readiness to negotiate a mutually acceptable settlement in every dispute. While it was not unknown for Hydro to relax its rural regulations in order to avert a squabble, such instances were infrequent and seldom publicized for fear of prompting a deluge of requests for similar favours. In most cases, Hydro simply dismissed outright requests for special concessions, regardless of the origin. Customers who challenged Hydro's authority quickly discovered the futility of doing so. When Professor Sissons and his neighbours in Clarke Township were told to sign an HEPC contract or lose their service, they were appalled to discover not only that such a diktat was legal but that they were without any form of recourse. For many rural residents, a Hydro contract represented their first encounter with the impersonal world of "big business." If all did not go smoothly, this could prove a rough introduction indeed. To be fair, it must be said that Hydro seldom wielded its extensive legislative authority openly; then again, just knowing about Hydro's aptitude for retribution would discourage many potential opponents. Hydro preferred to win support for its own actions by depicting them as essential for protecting the financial underpinnings of the Rural System against the selfish demands of a few unreasonable individuals. The HEPC was expected to manage the province's waterpower to enable the greatest good to be enjoyed by the largest number, and it jealously guarded its right to define the "greatest good." Despite the HEPC'S fascination with its own public persona, it was inevitable that over the course of four or five decades it would alienate some of its customers and competitors. Hydro was, after all,

254 Power at Cost

intent on winning a monopoly, and few tactics were considered unworthy of that goal. Hydro's authority was so far-reaching that the utility could easily be depicted as riding roughshod, and with complete impunity, over companies, municipalities, or individuals unfortunate enough to have interests that conflicted with its own. But characterizing the HEPC as authoritarian and intolerant is of little help in explaining why, unlike most utilities, it made a concerted effort to extend its services into sparsely populated and financially unappealing rural districts. Much of the territory eventually incorporated into the Rural System in southern Ontario had not previously attracted the attention of private power companies and could just as easily have been neglected by Hydro as well. The fact that farm and hamlet residents were not left to their own devices, but were brought into the public power network, was in large measure a result of the importance that Hydro's political masters assigned to rural electrification. Ontarians, H.V. Nelles has explained, expected Queen's Park, through Hydro, to guarantee that their power needs would be fulfilled by the "most inexpensive methods possible." As a result, each provincial government after 1906 readily gave the Commission, with its "expert technical and business knowledge," free rein to undertake the task. One unfortunate consequence, noted by Nelles, was the undermining of the basic tenets of responsible government. By making Hydro "independent" and "non-accountable," politicians also "prevented the accommodation of this new responsibility of state to the parliamentary system of government."4 One need not look far to find substantiating evidence. By the end of the First World War, Hydro's extensive liberties under the Power Commission Act, when combined with the indomitable personality of Adam Beck, had led the utility into massive capital expenditures on generating facilities. Hydro thereafter was widely regarded, and rightly so, as a financial profligate and reckless user of the public purse. Henceforth, members of the public, the press, and political parties would repeatedly urge the government to tighten the utility's reins. Thus, when the Farmers' Sun advocated appointing a minister of power in 1922, it was not the first, nor would it be the last, to advocate bringing the HEPC under closer political control. The concerns being expressed were widely held and entirely justified, but they do not tell the entire story of Hydro's relationship with the province. The government, far from being relegated to the sidelines, frequently was actively involved in formulating policies for rural electrification during Hydro's first half-century of service to the farming and hamlet communities. More often than not, it was

255 Conclusion

the government that listened to Hydro, but at crucial moments and on certain key issues it was the utility that followed the government's lead. Politicians were limited in their ability to influence the HEPC, as they depended on its officials to make comprehensible the highly complex and technical business of rural electrification. If the government ordered Hydro to predict the impact that a lower density requirement, or a higher grant-in-aid, would have on rates, it had little choice but to take the engineers at their word. Information is power, yet Hydro seems not to have taken full advantage of its opportunities for independent action. Rather, it was the politicians who assumed more of the initiative for devising the programs that were intended to quicken the growth of the Rural System, especially once they began to see in rural electrification an electoral talisman. The longer the rural construction program dragged on, the more impatient politicians became with the Commission's cautious approach to rural extensions. Other interest groups in Ontario society, most notably the business community, continued to wield tremendous influence over Hydro policy, but vote-conscious politicians became less inclined to wait for the HEPC to deliver the goods along the back concessions. If, as the saying goes, war is too important to be left to generals, by the same token rural electrification was too important to be left to engineers and cost accountants. On the matter of rural electrification, the government of Ontario was an independent actor rather than a puppet controlled by bureaucratic plutocrats. The HEPC may not have welcomed governmental interference in the rural program, but neither did it put up spirited resistance. The grants-in-aid exemplified, and were largely responsible for, the unusually high degree of interaction between Hydro and the government on rural issues. Magrath bluntly informed Ferguson in 1929 that since the HEPC was not "a branch of the Civil Service," the government should not interfere in its "business activities" as long as Hydro fulfilled its "obligations" and acted within "the conditions of the law." But even Magrath conceded that a different rule should apply in the Rural System, where Queen's Park was paying half of all the costs of constructing rural transmission lines.5 Magrath and his successors were well aware that the grants gave Hydro a significant advantage over its competitors and were vital to the utility's monopolistic ambitions. From the perspective of the individual consumer, the grant-in-aid represented a tangible benefit of public ownership that was unavailable to customers of privately owned utilities. The government could have used its share of construction costs as

256 Power at Cost

leverage, to regulate where, when, and how much the HEPC spent on rural electrification. Instead, it gave Hydro a blank cheque every year between 1921 and 1958, the war years excepted, so that as many miles of transmission lines as possible might be erected in southern Ontario. It mattered not whether the government of the day were Farmer-Labour, Conservative, or Liberal; in this respect the rural electrification issue wore no political colours. Hydro's close working relationship with Queen's Park could hardly have been otherwise. Throughout most of the Rural System's formative years, two of the three Hydro commissioners were also members of the governing party in the legislature and usually cabinet members. Under this arrangement, the government could not avoid being well informed about Hydro's activities. On balance, the HEPC fed Queen's Park more information than it received in return. These communications often took the form of memoranda explaining the feasibility of the government's latest proposal. Invariably, a complex matter had been condensed into a few salient points, and much of the technical jargon had been excised for the convenience of readers not versed in the engineering sciences. Ease of communication was manifest, yet both sides sometimes acted as though effective discourse were impossible. Ferguson tried to deflect his critics more than once by insisting that the HEPC was an "independent organization acting for the Municipalities." The government could "make representations" to the Commission, he said, but could not "control" it.6 The HEPC also might behave as though it enjoyed no influence over the government of the day. If Hydro's officials were challenged over their refusal to build a transmission line, or to reclassify a customer, they often portrayed themselves as helpless instruments of the Power Commission Act, or whichever piece of legislation was at issue, and unable to make changes in policy. While "passing the buck" had obvious advantages in foiling critics, Hydro and the government could in fact do far more than "make representations" to one another. The elected politicians on the Commission were the conduit linking Hydro's headquarters to the cabinet chamber, and they were the principal means by which Queen's Park could impose its will on the HEPC. Nor were the various provincial governments reluctant to use this influence when circumstances warranted. This was seen when the Henry government decided in 1934 to shorten the term of rural contracts. Conversely, when Hydro officials sought legislative or other policy changes, the politician-commissioners could carry their requests quickly forward, as was the case with the 1937 municipal bail-out legislation.

257 Conclusion

This two-way relationship clearly did not prevent the government from losing control of Hydro's expenditures on generating facilities, but the outcome was altogether different on the Rural System, where the economic stakes were not so high. One can only speculate as to whether Hydro's compliant behaviour in rural matters was intended as a means of winning additional leeway in its handling of the more costly and controversial areas of its program. What can be stated unequivocally, however, is that Queen's Park maintained a tight but not suffocating grip on the rural construction program from beginning to end and that the HEPC reciprocated with efficient and relatively inexpensive service. Of all the issues on which Hydro and the government interacted, none had more consequences than that of rates. Given that both sides believed that nothing would facilitate the spread of rural electrification like affordable rates, it is not surprising that "power at cost" was so readily abandoned. Hydro continued to insist, even after the grants-in-aid had been introduced in 1921, that "power at cost" was, and would remain, its guiding principle. In truth, the Commission continually altered the rural rate schedule, seeking to increase loads and revenues by redistributing costs among the various classes of customers. The 1924 reallocation of costs between farm users and hamlet users was one of the more extreme yet least publicized instances of this practice. The Commission's willingness to use rates as a negotiating tool in Bruce County as early as 1928 was completely in keeping with this flexible attitude. The ploy became even more obvious after 1930, when a series of service-charge reductions resulted in several RPDS incurring operating deficits. By 1948, despite the success of the Five Year Plan in adding record numbers of new customers to the Rural System, and in increasing the average customer density per mile of transmission line, over half of the ROAS in southern Ontario continued to spend more than they earned (see Map 3). The financial results were instructive, for they revealed that notwithstanding the shibboleth of "power at cost," Hydro seldom was more arbitrary than when rates were at issue. The truth of the matter was that the rate-setting process pursued one dearly defined objective, which Hydro's political masters also endorsed: rate increases were to be avoided as long as possible; otherwise all efforts to increase power loads and expand the rural network would be in vain. The government and the HEPC had a twofold motive for abandoning "power at cost" - to make public power affordable for the thousands of residents in rural southern Ontario who were still

258 Power at Cost

without the service and to increase consumption among Hydro's existing clientele. This approach proved advantageous to the rural power user but complicated matters for Hydro. Relaxing the financial burdens of one group of customers meant adding to the obligations of another group. Also to be considered was the fact that overhead expenses regularly accounted for at least 90 per cent of a hydroelectric company's total operating costs.7 Since there were no variable costs of any consequence, rate manipulation became one means of stimulating demand in selected sections of the distribution network. As a result, privately owned companies often lured large industrial customers with low rates subsidized by expensive domestic rates. The HEPC, which had to take public opinion into consideration, relied on "above cost" commercial and industrial rates to make its domestic service more affordable. In addition, it was widely believed, but never officially confirmed, that Hydro cross-subsidized the Rural System directly by imposing slightly higher rates on the municipal partners in order to make energy more affordable in rural areas. Despite Hydro's determination to establish a reputation for low domestic power costs, there were always some rural customers who believed their rates to be unduly high compared to those paid by urban customers. On the whole, these complaints became less pronounced as the rural network expanded. At times the rural community received welcome support from what were primarily urbanbased organizations in its quest for cheaper electricity. The OHPURA and the SHEC were two such groups that urged special rate concessions for Hydro's rural customers. The opposing viewpoint proclaimed "power at cost" as the only equitable formula for dividing the utility's expenses among the various classes of customers, urban and rural. Time and again the role of mediator fell to the provincial government, which began by implementing the grants-in-aid but soon was ordering arbitrary cuts in rural service charges. Two factors enabled the politicians to make these concessions without alienating the urban electorate. First, no matter how much the rural network was subsidized by taxpayers and Hydro's municipal partners, rates remained lower in urban centres than in RPDS. Consequently, it was difficult for urban power users to argue persuasively that the Rural System was receiving an unfair advantage. Second, the HEPC'S overall capital expenditures were so colossal that the government's 50per-cent share of the costs of constructing rural transmission lines appeared insignificant in comparison. As the public watched Hydro amass hundreds of millions of dollars of debt, for which the province

259 Conclusion

was guarantor, an additional one or two million dollars per year spent on the Rural System hardly seemed excessive. Every provincial government between 1921 and 1958 saw the grants as an opportunity to court the rural electorate. A small investment in rural electrification promised exceptionally rich political dividends, compared with what was being spent elsewhere on the Hydro system. The gradual lowering of rates between the 1920S and the 1950S was sufficient proof for most observers that the rural rate schedule really was designed with the customers' best interests in mind. By definition, it is extremely difficult to make accurate rate comparisons among utilities. Nevertheless, from the time that the grants-in-aid were introduced, Hydro's rural rates were widely recognized as among the lowest in the world. By 1948, when 85 per cent of the occupied farms in the United States could boast of electric service, compared to 57 per cent in Ontario, the HEPC'S rates were only half as expensive as those charged by most American utilities. The average cost per kilowatt-hour for farm service in the eastern half of the United States (where the rural power market most closely resembled that of Ontario) was 3.4 cents; in Ontario the average was only 1.6 cents. Hydro also far surpassed its American counterparts in annual consumption per customer. The Commission's average farm customer was using 2,916 kilowatt-hours annually in 1948, compared to 1,802 kilowatt-hours in the eastern half of the United States.8 A large segment of Ontario's rural community still awaited a Hydro hook-up, but those with the service were sending a clear message that rates were no longer a disincentive to consumption. Even after 1958, when the grants were cancelled in southern Ontario, the most disadvantaged farm and hamlet customers continued to receive rate assistance. The Rural System had expanded and diversified to the point where its own 'suburban' customers could, albeit begrudgingly, subsidize the others. This exemplified the success of rural electrification under public ownership. Ever since 1915, when Jeffrey and his Rate Committee had concluded that a rural program would never be viable without close ties to the urban power load, Hydro had been drawing on the financial strength of its municipal partners to make hydroelectricity more affordable in the countryside. Had it been the Commission's primary function to earn profits, considerable resistance to such a practice would no doubt have arisen. But because Hydro could dictate the rates charged by municipal commissions, and because it enjoyed the support, financial and otherwise, of a provincial government committed to rural electrification, the HEPC was able to expand its services at times and in places where private companies would not.

260 Power at Cost Despite these many advantages, Hydro expanded the rural network in response to market demand, which was determined largely by the prevailing economic climate. It did not regard expansion of the rural network as an end in itself or as a cure for hard times. When economic fortunes tumbled, dragging demand for hydroelectricity with them, the HEPC adjusted its rural spending accordingly. In good times and in bad, new transmission lines were erected only to the extent that the financial well-being of the rural community allowed. The Commission took great pains, frequently suffering much adverse publicity as a result, to ensure that only those individuals who could afford its services were permitted a hook-up. This accounts for the generally slow growth of the rural network in the years before 1946. Utilities everywhere in Canada and the United States made rural electrification a priority at the end of the Second World War, and most had managed by the late 19505 to achieve a level of rural saturation comparable to that of the HEPC. Consequently, one cannot argue conclusively that Ontarians have been any better or worse off since the war because the responsibility for rural electrification happened to rest with a publicly as opposed to a privately owned utility. For rural customers the primary consideration was almost exclusively one of cost, not accessibility, and in that regard Ontarians until the 19708 consistently paid less than the Canadian average price for their electricity. The era before the Five Year Plan presents a different matter altogether. Between 1909 and 1946, the HEPC was a pioneer in the field of rural electrification. Until the 1930S, no other utility anywhere in North America came close to matching the resources that Hydro poured into developing a rural market. Certainly there would be little doubt in the minds of the approximately 154,000 residents with rural service contracts at the end of 1945 that public ownership had paid off. Had it not been for Hydro's ground-breaking work in rural distribution techniques, and constant prodding by provincial politicians, it is conceivable that many of them would have waited decades longer to receive their share of the public power. As it was, the performance of the Rural System in southern Ontario would serve as an encouraging reminder that at particular times, and in certain places, public ownership accomplished all that Adam Beck ever claimed that it would.

APPENDIX A

Premiers of Ontario, 1905-1985

PREMIER

PERIOD IN OFFICE

Sir James P. Whitney (Cons.) 8 Feb. 1905-25 Sept. 1914 Sir William H. Hearst (Cons.) 2 Oct. 1914-14 Nov. 1919 Ernest C. Drury (uFO-Labour) 14 Nov. 1919-16 July 1923 G. Howard Ferguson (Cons.) 16 July 1923-15 Dec. 1930 George S. Henry (Cons.) 15 Dec. 1930-10 July 1934 Mitchell F. Hepburn (Lib.) 10 July 1934-21 Oct. 1942 Gordon D. Conant (Lib.) 21 Oct. 1942-18 May 1943 Harry C. Nixon (Lib.) 18 May 1943-17 Aug. 1943 George A. Drew (PC) 17 Aug. 1943-19 Oct. 1948 Thomas L. Kennedy (PC) 19 Oct. 1948-4 May 1949 Leslie M. Frost (PC) 4 May 1949-8 Nov. 1961 John P. Robarts (PC) 8 Nov. 1961-1 March 1971 William G. Davis (PC) 1 March 1971-8 Feb. 1985

APPENDIX B

Officials of the HEPC, 1906-1974

Dougall Carmichael (Nov. 1919June 1923) Adam Beck (June I9o6-Aug. 1925) Fred R. Miller (July 1921-Aug. 1922) Charles A. Magrath (Sept. 1925J.G. Ramsden (Jan. 1923-July 1923) Feb. 1931) John R. Cooke 0uly 1923-June 1931) John R. Cooke (June 1931-July 1934) C. Alfred Maguire (Sept. 1925T. Stewart Lyon (July 1934July 1934) Oct. 1937) Arthur Meighen (June 1931Thomas H. Hogg (Nov. 1937May 1934) Feb. 1947) Arthur Roebuck Quly 1934Robert H. Saunders (March 1948April 1937) Jan. 1955) Thomas B. McQuesten Quly 1934Richard L. Hearn (Jan. 1955Oct. 1937) Oct. 1956) William L. Houck (Nov. 1937James S. Duncan (Nov. 1956Aug. 1943) May 1961) J. Albert Smith (Nov. 1937W. Ross Strike (June 1961Aug. 1943) George H. Challies (Aug. 1943Sept. 1965) May 1955) George E. Gathercole (Sept. 1965W. Ross Strike (June 1944Dec. 1974) June 1961) William E. Hamilton (May 1955COMMISSIONERS Aug. 1955) A. A. Kennedy (May 1955John S. Hendrie (June 1906Oct. 1972) Sept. 1914) Cecil B. Smith (June I9o6-Feb. 1907) W. Kenneth Warrender (Aug. 1955Oct. 1956) William K. McNaught (Feb. 1907Thomas R. Connell (Nov. 1956Feb. 1919) May 1958) Isaac B. Lucas (Oct. 1914-July 1921) CHAIRMEN

263 Officials of the HEPC David P. Cliff (Nov. 1956June 1969) Robert W. Macaulay (May 1958Oct. 1963) William G. Davis (June 1961Nov. 1962) George E. Gathercole (June 1961Sept. 1965) Robert J. Boyer (Nov. 1962April 1971) Ian F. McRae (Feb. 1966-Oct. 1970) J.D. Fleming (Nov. 1970March 1974) SECRETARIES

E. Clarence Settell (Oct. 1906Sept. 1909) W.W. Pope (Oct. 1909-Jan. 1936)

A. Murray McCrimmon (Feb. 1936Nov. 1937) Osborne Mitchell (Nov. 1938Dec. 1947) Ernest B. Easson (Jan. 1948Dec. 1973) CHIEF ENGINEERS

P.W. Sothman (Aug. 1906July 1912) Frederick A. Gaby (Dec. 1912July 1934) Thomas H. Hogg (July 1934Feb. 1947) Richard L. Hearn (March 1947Jan. 1955) Otto Holden (Jan. 1955July 1960)

APPENDIX C

Rate Classifications for Rural Customers, 1909-1970

1909—16

Rural

1916-19 I Lighting II Light Power III Heavy Power 1920-22 Hamlet Lighting House Lighting Farm Lighting Lighting and Cooking Light Farm Service Medium Farm Service Heavy Farm Service Syndicate Outfits 1922-23 Hamlet Service (lighting) l-B Hamlet Service (lighting) 1-c Hamlet Service (range) 2-A House Lighting 2-B House Lighting 3 Light Farm Service 4 Medium Farm Service (single-phase) Medium Farm Service (threephase) Heavy Farm Service l-A

7 Special Farm Service 8 Syndicate Outfits 1-B 1-c 2-A 2-B 3 4 5 6 7 8

1924 Hamlet Service (lighting) Hamlet Service (range) House Lighting Small Farm Service (50 acres or less) Light Farm Service (over 50 acres) Medium Farm Service (single-phase) Medium Farm Service (threephase) Heavy Farm Service Special Farm Service Syndicate Outfits

1925-28 1-B Hamlet Service (lighting) 1-c Hamlet Service (range) 2-A House Lighting 2-B Small Farm Service (50 acres or less) 3 Light Farm Service (over 50 acres) 4 Medium Farm Service (single-phase)

265 Rate Classifications 5 Medium Farm Service (threephase) 6-A Heavy Farm Service (singlephase) 6-B Heavy Farm Service (threephase) 7-A Special Farm Service -(singlephase) 7-B Special Farm Service (threephase) 8 Syndicate Outfits 1-B 1-c 2-A 2-B 3 4 5 6-A 6-B 7-A 7-B

1929-43 Hamlet Service (lighting) Hamlet Service (range) House Lighting Small Farm Service (50 acres or less) Light Farm Service (over 50 acres) Medium Farm Service (single-phase) Medium Farm Service (threephase) Heavy Farm Service (singlephase) Heavy Farm Service (threephase) Special Farm Service (singlephase) Special Farm Service (threephase) 1944-55 Farm Hamlet Commercial Summer Industrial Power 1956-57 Farm

Hamlet Commercial Summer - Commercial Summer - Other Industrial Power 1958-61 Farm Residential - Rural Residential - Hamlet Commercial Summer - Commercial Summer - Other Industrial Power 1962-65 Farm Residential - Rural Residential - Hamlet Residential - Suburban Commercial Summer - Commercial Summer - Other Industrial Power

1966 Farm Residential - Low Density Residential - High Density Residential - Seasonal General Service - SinglePhase General Service - Seasonal General Service - ThreePhase 1967-70 Farm Residential - Year-Round Residential - Seasonal General - Year-Round General - Seasonal

APPENDIX D

Statistical Summary of the Rural System in Southern Ontario, 1912-1971

Year(*) pre-1921 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943

Total Miles of Primary Transmission Line* 305.5 1,058.6 1,205.2 1,525.2 2,276.6 3,131.7 4,099.0 5,256.2 7,150.0 8,384.0 8,832.0 9,044.7 9,328.5 9,839.8 10,665.3 12,952.2 15,536.5 17,796.1 18,915.7 19,479.7 19,451.5 19,497.8

Rural Customers

(Farm)

% of Total (Non-Farm)

1,652 3,822 5,003 5,155 7,345 9,765 12,991 16,134 21,349 25,362 27,097 27,881 28,641 30,552 33,749 42,736 51,968 59,820 65,344 69,433 70,181 70,844

18.8 27.3 24.3 20.4 22.7 38.8 42.0 43.4 45.9 45.9 46.0 45.6 45.4 45.7 46.5 50.3 52.8 54.2 54.9 54.8 53.9 53.9

7,117 10,188 15,602 20,162 25,020 15,408 17,930 21,045 25,176 29,947 31,824 33,218 34,378 36,333 38,849 42,283 46,385 50,541 53,755 57,357 60,065 60,552

Total Rural Customers 8,769 14,010 20,605 25,317 32,365 25,173 30,921 37,179 46,525 55,309 58,921 61,099 63,019 66,885 72,598 85,019 98,353 110,361 119,099 126,790 130,246 131,396

Average Number of Customers per Mile of line 28.7 13.2 17.1 16.6 14.2 8.0 7.5 7.1 6.5 6.6 6.7 6.8 6.8 6.8 6.8 6.6 6.3 6.2 6.3 6.5 6.7 6.7

267 Statistical Summary

Total Miles of Primary Transmission Year(*) Line

(Farm)

% of Total (Non-Farm)

1944 1945 1946 1947 1948 1949 1950§ 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971

60,577 67,141 73,572 78,711 92,209 101,816 109,564 116,120 120,743 123,961 125,959 128,411 128,977 130,298 129,985 130,463 130,484 129,826 129,058 128,488 127,813 126,862 125,837 125,137 123,247 122,595 122,022 120,958

42.9 43.6 43.1 41.7 42.2 41.5 40.1 39.3 38.6 37.0 35.8 34.2 33.6 32.4 31.3 30.4 29.6 30.6 29.5 28.7 28.7 28.1 27.3 26.4 25.5 24.4 23.5 22.5

20,375.0 21,639.9 22,827.7 23,491.8 27,909.3 30,527.4 32,463.8 35,263.9 36,012.4 36,610.1 37,316.1 38,372.0 38,811.3 39,501.9 40,187.1 40,835.7 41,279.1 41,338.4 41,694.6 42,032.0 42,062.8 42,268.0 42,580.2 42,932.0 43,049.0 43,531.9 44,002.0 44,508.0

Rural Customers

80,744 86,771 97,036 109,860 126,550 143,348 163,797 179,205 192,420 211,388 225,447 247,569 254,596 271,856 284,863 298,726 310,779 294,377 307,790 319,507 318,271 324,943 335,612 349,485 359,423 379,271 396,668 415,974

Average Number of Total Customers Rural per Mile of Customers line 141,321 153,912 170,608 188,571 218,759 245,164 273,361 295,325 313,163 335,349 351,406 375,980 383,573 402,154 414,848 429,189 441,263 424,203 436,848 447,995 446,084 451,805 461,449 474,622 482,670 501,866 518,690 536,932

6.9 7.1 7.5 8.0 7.8 8.0 8.4 8.4 8.7 9.2 9.4 9.8 9.9 10.2 10.3 10.5 10.7 10.3 10.5 10.7 10.6 10.7 10.8 11.1 11.2 11.5 11.8 12.1

Sources: Annual Report of the Hydro-Electric Power Commission of Ontario, 1923-72. * Annual tabulations as at 31 October, the end of the HEPC'S fiscal year. Prior to 1953 refers to lines constructed and under construction; thereafter, only to completed lines. Prior to 1953 refers to all customers, some not yet connected to the distribution system; thereafter, only to customers actually receiving electrical service. § For the period 31 October 1949 to 31 December 1950; all subsequent annual tabulations as at 31 December.

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Abbreviations

AMEU AO AR

Association of Municipal Electrical Utilities Archives of Ontario, Toronto Annual Report of the Hydro-Electric Power Commission of Ontario (Toronto), 1906-07, 1909-73 cc Canadian Countryman, Toronto co Canadian Observer, Sarnia CYB Canada Year Book DS Daily Star, Toronto ET Evening Telegram, Toronto FHWS Family Herald and Weekly Star, Montreal FP free Press, London FS Farmers' Sun, Toronto Journals Journals of the Legislative Assembly of the Province of Ontario, 1947-49, 1952-60 HEPC Hydro-Electric Power Commission of Ontario (Hydro; the Commission) HUA Hydro Users Association Minutes Minutes of the Hydro-Electric Power Commission of Ontario, 1906-58 MLA Member of Legislative Assembly (Ontario) NAC National Archives of Canada, Ottawa NELA National Electric Light Association NOP Northern Ontario Properties NOS Northern Ontario System NYT New York Times OHA Ontario Hydro Archives, Toronto OHPURA Ontario Hydro Power Uniform Rate Association

270 Abbreviations OMEA QUA Rc ROA RPD RT SELPC SHEC sos ST UFO WELPC WICB

Ontario Municipal Electric Association Queen's University Archives, Kingston Rural Co-operator, Toronto Rural Operating Area Rural Power District Recorder and Times, Brockville Saugeen Electric Light and Power Company Sarnia Hydro-Electric Commission Southern Ontario System Sun-Times, Owen Sound United Farmers of Ontario Walkerton Electric Light and Power Company Wartime Industries Control Board

Notes

CHAPTER ONE

1 2 3 4

FHWS, 2 January 1946. Galbraith, Life, 4. Leuchtenberg is quoted in Caro, Lyndon Johnson, 516. See especially Nelles, Politics of Development. Also useful are Armstrong, Politics of Federalism; Armstrong and Nelles, Monopoly's Moment; Denison, People's Power; Dewar, "State Ownership"; Morrissey, "Study"; and Plewman, Adam Beck. 5 For a discussion of Hydro's "guarantee of responsiveness" on environmental matters, see Roberts and Bluhm, Choices of Power, 333-4. 6 Rea, Prosperous Years, 30; CYB, 1937, 120, 127; CYB, 1975, 165. 7 The eight centres were Berlin, Guelph, Waterloo, Woodstock, Preston, London, Hamilton, and Stratford. See Denison, People's Power, 90. For an account of the pre-1914 proliferation of hydroelectric facilities in Ontario, see Drummond, Progress without Planning, 134-47. 8 AO, Ferguson Papers, MU 1028, HEPC, Gaby to Ferguson, 23 Oct. 1928. 9 Drummond reports that there were approximately 155 electric power plants in Ontario in 1915. See Progress without Planning, 409. 10 The name "Trent" was added in 1922 to signify that some partner municipalities in the Central Ontario System had established their own utilities commission in order that they, not the HEPC, might be responsible for administering local distribution of electricity. 11 AR, 1944, pp. 16-17. 12 After 1943, occasionally only one of the commissioners was also a government member. A fourth commissioner was added in 1955, a fifth in 1956, and a sixth in 1961. In 1973, the Power Commission Amendment Act changed the Commission into a crown corporation, Ontario Hydro, and established a thirteen-member board of directors.

272 Notes to pages 14-28 13 OHA, OR 901.01, Charles A. Magrath. 14 FS, 7 July 1923. 15 CYB, 1945, 238-9; CYB, 1947, 489.

16 FHWS, 18 April 1945. CHAPTER TWO

1 Statutes of Ontario, 6 Edw. 7, c. 15. 2 OHA, Jeffrey, History of Hydro Rates, I, 11, 40; AR, 1911, 301-2; 307-8; AR, 1912,

112.

3 Jeffrey, History of Hydro Rates, v, 19. 4 Ibid., I, 43-4, 51; II, 3; AR, 1912, 111; AR, 1913, 156; AR, 1914, 204; Minutes, 17 April 1912; Statutes of Ontario, 2 Geo. 5, c. 14. 5 AR, 1912, 111; AR, 1915, 217; Statutes of Ontario, 2 Geo. 5, c. 14. The HEPC'S strict control over the contracting municipalities was extended to technological matters as well. Robert Belfield has noted that municipalities could not "install equipment or make any changes without Hydro's knowledge, advice, consent and participation. This was deemed advisable in order that the whole system could be efficiently coordinated, and the various classes of equipment standardized." See Belfield, "Niagara Frontier," 194. 6 Dewar, "State Ownership," 293-4. 7 Globe, 30 Jan. 1936; 31 Jan. 1936. 8 AO, RG 35 Cooke Corresp., Bi-Brz-3, Pope to Cooke, 15 May 1925; Pope to Cooke, i June 1925; FS, 29 March 1924. 9 Jeffrey, Rural Power Supply, i; Dewar, "State Ownership," 245; Day, "Electric Power," 475. 10 OHA, Jeffrey, Rural Power Supply, I; AO, RG 35, Cooke Corresp., Misc. 1927, "Cheap Power for Ontario - 1911"; AR, 1911, 271. The first requests for rural service came from Baden (Waterloo County); East Nissouri and South Norwich townships, Otterville, and Beachville (Oxford); Beverly Township and Waterdown (Wentworth); Middleton Township and Courtland (Norfolk); Drumbo and Plattsville (Brant); Dublin (Perth); Guelph Township and Rockwood (Wellington); York Township, Mimico, Scarborough and New Toronto (York); Nelson Township (Halton); Port Credit (Peel); and St Thomas vicinity, Thorndale, and Springford (Middlesex). 11 OHA, Jeffrey, Rural Power Supply, i; AR, 1911, 271; Minutes, 9 Feb. 1911. 12 OHA, OR 102.2, 1907-20, Yates to Gaby, 23 May 1913; AR, 1911, 271. 13 OHA, OR 102.2, 1921, Lang to Gaby, 11 May 1921; OHA, OR 514, Wholesale General, 1914-19, Clement to Gaby, 16 July 1914; McBride to Gaby, 28 Oct. 1914; Globe, 1 June 1921. 14 AO, RG 35, Carmichael, 1921, 1-20, Dopking to Drury, 5 April 1921;

273 Notes to pages 28-33 Gaby to Dopking, 25 April 1921; AO, RG 35, Special Series, Rural Distribution, No. 2 Carmichael, Jeffrey to Carmichael, 3 March 1922; cc, 18 Oct. 1930; FS, 26 Feb. 1921; 2 March 1921; 20 June 1922. 15 OHA, Jeffrey, Rural Power Supply, I; AR, 1913, 187. The first rural rate, devised for farmers in North Norwich Township (Oxford County), consisted of a service charge of $24 per year and a flat consumption rate of $36 per horsepower per year. 16 OHA, Jeffrey, Rural Power Supply, I. 17 "Hydro-Electric Power for the Farm," Farm and Dairy, 19 Dec. 1919; Nelles, Politics of Development, 403-4; Hall, "Electrical Utilities," 245-6. 18 Dewar, "State Ownership," 82-3; Day, "Electric Power," 474; "HydroElectric Power for the Farm," Farm and Dairy, 18 Dec. 1919. 19 Owen, "Radial Railways," 180; Johnston, Drury, 103-24; Dewar, "State Ownership," 295-8. 20 Owen, "Radial Railways," 180. 21 OHA, Jeffrey, Rural Power Supply, II. 22 Among the sceptics was Reginald P. Bolton, one of the first to publish a scathing attack on the HEPC. "Only to a very restricted extent," he wrote, "can electricity be regarded as a necessity, whether public or private." Its farming applications were so limited as to be a "refinement in the nature of a convenience, rather than a practical necessity." See Bolton, Expensive Experiment, 209-12, 267. 23 OHA, Adam Beck Correspondence, 1911, Sothman to Beck, 14 March 1911; Bulletin, Toronto, I, 3. 24 OHA, Jeffrey, Rural Power Supply, I; Belfield, "Niagara Frontier," 224, 231. 25 Belfield, "Niagara Frontier," 231; OHA, Jeffrey, Rural Power Supply, i. 26 AR, 1912, 126-7; AR 1915/ 230; Belfield, "Niagara Frontier," 55. When large power loads were needed, as during threshing and silo filling, the HEPC recommended that individual farmers form a syndicate that would contract for a 2o-horsepower outfit to be run from a 2,2oo-volt service (the capacity of most primary transmission lines). The motor and transformer, each mounted in a separate wagon, could be drawn between farms as need arose. For a summation of the importance of load factor to efficient utility operation see McCraw, Prophets of Regulation, 241. 27 AR, 1912, 126. 28 Belfield, "Niagara Frontier", 231-7; AR, 1912, 158. 29 OHA, OR 102.2, 1907-20, Gaby to Beck, 31 Dec. 1912; Belfield, "Niagara Frontier," 228, 231-7; AR, 1912, 158. 30 AR, 1914, 231. 31 OHA, OR 102.2, 1907-20, "Memorandum to Commission" by J.W. Purcell, 25 Aug. 1917.

274 Notes to pages 34-43 32 OHA, OR 102.201, Rural Electrification, Agricultural Power Market, "Notes re: Market for Power," 14 July 1921; Drummond, Progress without Planning, 367. 33 OHA, Jeffrey, Rural Power Supply, II. 34 OHA, OR 102.2, 1907-20, Clement to Gaby, 6 April 1916. 35 OHA, Jeffrey, Rural Power Supply, II. 36 Ibid. 37 OHA, OR 125, Ontario Hydro Committees, Rural Rates and Rural Committee, Clement to Gaby, 26 March 1919; Jeffrey, Rural Power Supply, II. 38 ET, 6 Sept. 1919. 39 OHA, AMEU / OMEA, Box 5, Rural Power, Gaby to Hannigan, 19 Nov. 1928; AO, RG 35, Carmichael 1921-K-17, Ketchen to Pope, 15 Dec. 1919; Jeffrey to Ketchen, 23 Dec. 1919; AO, RG 35, Special Series, Rural Dist. No. 2, Pope to Hale, 27 Jan. 1921; AR, 1919, 259. 40 OHA, OR 514, 1914-19, McBride to Gaby, 5 Sept. 1918; News, 16 February 1917; AR, 1917, 179-80. The HEPC experienced farming at first hand for a few years after 1917. When acquiring the right-of-way for the Queenston-Chippawa power canal, it bought a number of complete farms, totalling over 600 acres. A department was set up to manage the farms, and Hydro strove "to do its part" to increase wartime agricultural production. In 1920 an auditor's report revealed the folly of the venture. Deficits of over $53,000 had accumulated, and Hydro was criticized for spending far more on improvements than was necessary to retain the resale value of the properties. See World, 8 April 1920. CHAPTER THREE

1 AR,

19l8.

2 Statutes of Ontario, 7 Edw. 7, c. 19. 3 AO, Ferguson Papers, MU 1027, Box 11, Hydro-Electric Power Commission, Ferguson to Dawsley, 30 March 1912; Ferguson to Dawsley, 14 June 1912; Dawsley to Ferguson, 21 June 1913; Gaby to Ferguson, 3 July 1913; Beck to Ferguson, 6 Nov. 1913. 4 Ibid., Gaby to Ferguson, 4 Dec. 1913; Gaby to Ferguson, 8 Dec. 1913. 5 Ibid., Ferguson to Langstaff, 9 Dec. 1913; Ferguson to Gaby, 5 Dec. 1913. 6 OHA, OR 510.001, Kemptville; AO, Ferguson Papers, MU 1027, Ferguson to Gaby, 10 Jan. 1914. 7 OHA, OR 510.001, Kemptville; AO, Ferguson Papers, MU 1027, Ferguson to Gaby, 10 Jan. 1914; AR, 1920, 294; AS, 1921, 290. 8 Globe, 16 May 1916; 23 May 1916. 9 For an account of the controversy see Packet, 10 June 1915; 17 June

275 Notes to pages 43-8 1915; 24 June 1915; 8 July 1915; 15 July 1915. The Gregory Commission, which completed its investigation of the HE PC'S administrative and financial practices in 1924, took a dim view of Hydro's attempts to displace Orillia as supplier of the Standard Chemical Co. and the Langford Quarry: "The Commission [HEPC] undoubtedly would find justification for their action in saying that, acting as the trustees for the municipalities, it was their duty to obtain the contracts with these companies so as to increase sales of power. On the other hand it is questionable if a Commission operating practically as a Department of the Government should go to such extreme limits in interfering with the interests of private companies and in this case the interest of a Municipal Corporation." See OHA, Gregory Commission, Wasdells System, 45-51, 60. 10 Packet, 20 April 1916; 27 April 1916. 11 Ibid. 12 Ibid., 4 May 1916. 13 Globe, 16 May 1916; ET, 15 May 1916; Statutes of Ontario, 6 Edw. 8, c. 15.; Denison, People's Power, 91. 14 Packet, 18 May 1916; Statutes of Ontario, 7 Edw. 7, c. 19. 15 Packet, 18 May 1916. 16 Ibid., 25 May 1916. 17 Ibid. 18 Globe, 23 May 1916; ET, 23 May 1916. 19 Packet, 25 May 1916; 1 June 1916; 15 June 1916; 3 Aug. 1916. 20 Statutes of Ontario, 1 Geo. 5, c. 14. 21 AR, 1919, 259; AR, 1923, 68; OHA, Jeffrey, Rural Power Supply, 1 and II; OHA, OR 102.2, 1921, "Hydro-Electric Power in Rural Districts, Province of Ontario." Initially the HEPC paid for primary lines only, while the townships financed all secondary lines, transformers, services, and meters. As the system expanded, it became increasingly difficult to keep respective costs separate, particularly where it was necessary to increase voltages on secondary lines to primary-line levels. Soon the accounting complications were monumental. Consequently, in 1916 Hydro assumed the cost of all transmission lines, primary and secondary. The townships continued to pay with twentyyear debentures for all services, meters, and transformers. 22 OHA, OR 125, Jeffrey to Gaby, 1 May 1919; Jeffrey to Gaby, 6 May 1919; OHA, OR 102.2, 1927-35, Gaby to Cooke, 26 Feb. 1930; OHA, Jeffrey, Rural Power Supply, II, Jeffrey memorandum to Commission, 16 Sept. 1919. 23 OHA, OR 125, Jeffrey to Gaby, 9 May 1919; AO, HEPC, Special Series No. 2, "Hydro-Electric Power for Rural Districts," n.d.; HEPC, Rural Electrical Service, 6. 24 OHA, OR 125, Jeffrey to Gaby, 9 May 1919.

276 Notes to pages 48-53 25 Ibid., Jeffrey to Gaby, 22 July 1919. The "representative" districts were in (i) Scott Township (Ontario County); (ii) North Norwich (Oxford County), Burford (Brant County), and Windham townships (Norfolk County); (iii) East Whitby (Ontario County) and Darlington townships (Durham County); and (iv) Hallowell Township (Prince Edward County). 26 OHA, Jeffrey, Rural Power Supply, II, Gaby memorandum to Commission, 16 Sept. 1919; OHA, OR 125, Jeffrey to Gaby, 21 Aug. 1919. Primary lines, which ran from the substation to the customer's property, were generally in three phases, 4,000 volts, or one phase, 2,200 volts. Secondary lines, which carried the energy from the primary line up to the user's buildings, were usually single phase, 220/110 volts. See Gaby, "Canadian Electrical Development." 27 OHA, OR 102.2 1922-26, Gaby to Cooke, 10 May 1926; OHA, OR 125, Jeffrey to Gaby, 21 Aug. 1919; OHA, Jeffrey, Rural Power Supply, n, Gaby memorandum to Commission, 16 Sept. 1919. 28 AR, 1919,

259.

29 AO, RG 35, Carmichael Corresp. 1921, 21-39, memorandum to Commission, 30 April 1920; Gregory Commission, General Report, 1924, II, 177; Globe, 19 May 1920. 30 FS, 22 May 1920; 26 May 1920. 31 AO, RG 3, Ferguson, HEPC Special Series, Box 119, Gaby to Beck, 8 Feb. 1913; Statutes of Ontario, 1 Geo. 5, c. 14. 32 AO, RG 35, Carmichael Corresp., 1922, 16-39, PoPe to Mathewson, 18 Aug. 1922; FP, 11 July 1922; FS, 13 July 1922. 33 AO, RG 35, Carmichael Corresp., 1922, 16-39, Carmichael to Lethbridge, 31 Aug. 1922; Turnbull to Carmichael, 31 Aug. 1922; Advertiser, 16 Aug. 1922; 1 Jan. 1923. 34 AO, RG 35, Cooke Corresp., 1926, Co-Cy-6, Gaby to Magrath; AO, RG 3, Ferguson, Box 86, HEPC - General, Cooke to Ferguson, 23 Feb. 1926; Box 124, HEPC - St. Lawrence Power Co., Pope to Ferguson, 23 July 1926; Freeholder, 15 July 1926. The other company was Stormont Light and Power. Both were controlled by the Sun Life Assurance Co. of Montreal. 35 AO, RG 35, Cooke Corresp., 1926, Co-Cy-6, Gaby to Magrath, 7 Jan. 1926. 36 Ibid., Gaby to Magrath, 7 Jan. 1926; Cline to Cooke, 7 May 1926; Milligan to Cooke, 7 May 1926; Milligan to Cooke, 8 May 1926; Milligan to Cooke, 17 May 1926; Revised Statutes of Ontario, 1927, c. 57. 37 AO, RG 3, Ferguson, Box 124, HEPC - St. Lawrence Power Co., Magrath to McCarthy, 22 June 1926; McCarthy to Wallis, 4 Aug. 1926; AO, RG 35, Cooke, 1926, Co-Cy-6, Pope to McCarthy, 17 July 1926; Minutes, 10 Sept. 1926.

277 Notes to pages 53-64 38 AO, RG 3, Ferguson, Box 124, HEPC - St. Lawrence Power Company, Pope to Wallis, 10 Sept. 1926. CHAPTER FOUR

1 2 3 4 5 6

Fleming, "Uniform Rate," 497-500. Ibid., 500-1. Ibid., 501-2. Ibid., 502-4. ET, 16 March 1919; Fleming, "Uniform Rate," 504-5. AO, RG 35, Carmichael Corresp., 1921-D-7, Davidson to Drury, 23 Feb. 1920; AO, RG 3, Drury, Box 18, Hydro-Electric Municipal Representation, 1919 (this file contains several resolutions from municipal councils urging changes to the rate schedule); Fleming, "Uniform Rate," 505-6. The other members of the Lethbridge Committee were John Robert Cooke (Cons., Hastings North); John O'Neill (Lib., Toronto South East); Frank Howard Greenlaw (Lab., St Catharines); and William H. Casselman (UFO, Dundas). 7 Fleming, "Uniform Rate," 507-9. 8 Ibid., 508-9. 9 AO, RG 35, Carmichael, HEPC - Central Ontario System, 1920, general meeting of the OMEA, 15 Sept. 1920; OHA, AMEU / OMEA, Box 4, Flat Rate, "Hydro Power at Flat Rates"; Fleming, "Uniform Rate," 502, 504, 508-9; World, 16 Sept. 1920. 10 Fleming, "Uniform Rate," 508-9; Globe, 7 Sept. 1920. 11 OHA, AMEU / OMEA, Box 4, Gaby to the Hydro-Electric Railway Association of Ontario, 2 Dec. 1920. 12 Fleming, "Uniform Rate," 509-10. 13 OHA, OR 514, Wholesale General, 1920-41, "Resolution of the OMEA," 25 Feb. 1921; AO, RG 35, Carmichael Corresp., 1921-Hi-Hy-14, unsigned letter to Drury, 19 March 1921; Fleming, "Uniform Rate," 510-1. 14 AO, RG 35, Carmichael Corresp., Box 2-12, "Resolution of the Hamilton Chamber of Commerce," 9 March 1921. 15 Fleming, "Uniform Rate," 511; ET, 1 Dec. 1920. 16 ET, 27 Jan. 1921. 17 AO, RG 35, Carmichael Corresp., Weaver to Carmichael; Fleming, "Uniform Rate," 507, 512; FS, 26 Jan. 1921; 5 March 1921; DS, 29 Jan. 1921. 18 OHA, OR 102.2, 1921, Beck to Drury, 15 Feb. 1921; Beck to Caverhill, 15 Feb. 1921; Fleming, "Uniform Rate," 513. 19 DS, 9 Feb. 1921; 22 Feb. 1921; World, 10 Feb. 1921. 20 FS, 2 March 1921; 5 March 1921; 9 March 1921; 12 March 1921.

278 Notes to pages 64-70 21 FS, 19 March 1921. 22 AO, Ferguson Papers, MU 1027, Boyd to Ferguson, 26 March 1921; Ferguson to Boyd, 28 March 1921; Globe, 31 March 1921; FS, 9 April 1921. 23 FS, 2 March 1921; Fleming, "Uniform Rate," 514. 24 Fleming, "Uniform Rate," 515; ET, 2 May 1921; FS, 4 May 1921; DS, n May 1921. 25 AO, RG 3, Drury, Box 44, Rural Transmission Lines, Beck to Drury, 17 May 1921; JET, 10 May 1921. 26 OHA, OR 102.2, 1946-51, Rattray to Duffy, 12 Nov. 1951; Duffy to Rattray, 12 Nov. 1951; Globe, 1 June 1921; 10 June 1921. 27 OHA, OR 125, Minutes of the Rural Rates Committee, 6 Dec. 1921; 21 Feb. 1922; AR, 1927, 57; Minutes, 2 Dec. 1931. In 1935 Arthur Roebuck explained the apportionment process as follows: "Rural lines do not serve towns or villages. If and when a line originally constructed as a rural line is extended to a town or village, the said line is removed from the rural class and constituted a feeder line, and the bonus is returned to the Government. The cost of a feeder line serving a town or village, and also serving rural consumers en route is proportioned on a horse-power-mile basis as between the town or village and the rural consumers." See OHA, OR 503, 1-1, Questions and Answers, Legislative Assembly, Office of the Chief Engineer, 13 March 1935. 28 OHA, OR 102.2, 1921, Gaby to Beck, 18 Aug. 1921; AO, RG 35, Carmichael Corresp., 1921-21-39, Gaby to Neff, 25 Aug. 1921; Globe, 12 Aug. 1921; DS, 7 Oct. 1921. The first bonused lines were built in the townships of Nepean (Carleton County), Dorchester (Elgin); Sandwich (Essex); Edwardsburg (Grenville); Howick (Huron); Howard (Kent); Niagara (Lincoln); Nottawasaga (Simcoe); Saltfleet, Ancaster, Beverley, and West Flarnboro (Wenrworth). 29 FS, 30 March 1922; 1 April 1922; 20 April 1922. 30 Ibid., 4 Jan. 1922, 11 Jan. 1922; 14 Jan. 1922; 18 Jan. 1922; 28 Jan. 1922. 31 Ibid., 21 March 1922; 23 March 1922; 6 April 1922; 15 Aug. 1922. 32 Ibid., 9 Feb. 1922; 7 March 1922; 9 March 1922. 33 Ibid., 6 April 1922; 19 Dec. 1922. 34 AR, 1923, 71. 35 AO, RG 35, Special Series, Rural Dist. No. 2, Hannigan to Carmichael, 8 April 1922. 36 Ibid., Carmichael to Drury, 5 April 1922; Carmichael to Hannigan, 12 April 1922. 37 Ibid., Hannigan to Carmichael, 13 April 1922. 38 Ibid., No. 2, Nixon to Carmichael, 23 Jan. 1923; Advertiser, 2 Sept. 1922; FS, 10 March 1923.

279 Notes to pages 71-81 39 AO, RG, 35, Cooke Corresp., 1924, Ba-Bh-2, Cooke to Ferguson, 2 Jan. 1924; AR, 1924, 66. 40 FS, 29 March 1924. 41 Ibid., 12 April 1924; 16 April 1924. 42 Ibid., 12 April 1924. CHAPTER FIVE

1 AO, RG 35, Carmichael Corresp., 1921, Ca-Cl-5, Casselman to Carmichael, 3 May 1921; Casselman to Carmichael, 16 May 1921; Carmichael to Casselman, 19 May 1921; Revised Statutes of Ontario, 1921, c. 21. 2 AO, RG 35, Carmichael Corresp., 1922, Bra-By-4, Drury to Carmichael, 2 Feb. 1922; Jeffrey to Carmichael, 3 March 1922. 3 AO, RG 35, Cooke Corresp., 1926, A-1, Jeffrey memorandum to Commission, 16 Aug. 1926. 4 FS, 14 April 1922. The Cataract Electric Co. went bankrupt in 1924. Deagle sold the firm to R.O. Harris, who in turn sold the assets to the HEPC in 1944. See OHA, No. 633, Caledon Electric Co., Campbell to Jeffrey, 3 January 1945. 5 Ibid. 6 Ibid., 25 March 1922. 7 Ibid. 8 AO, RG 35, Carmichael Corresp., 1922-16-39, Orillia Water, Light and Power Commission to Drury, 25 March 1922. 9 AO, RG 35, Special Series, Rural Dist. No. 2, Ellis memorandum to the Commission, n.d. 10 Ibid., Kilmer to Carmichael, 9 May 1922; Godfrey to Carmichael, 10 May 1922. 11 FS, 30 May 1922; i June 1922; 8 June 1922. 12 Ibid., 10 June 1922. 13 Ibid. 14 Ibid., 13 July 1922. 15 AO, RG 35, Special Series, Rural Dist., No. i, Cooke, Gaby to Cooke, 31 Jan. 1927; Minutes, 29 Aug. 1923; 12 Dec. 1923. The HEPC finally agreed to grant the Orillia Commission a 5O-per-cent construction bonus in 1945, although relations between the two otherwise remained cool. 16 AO, KG 35, Cooke Corresp., 1923, Pi-Py-26, Gaby memorandum to Commission, 1 March 1923; Gaby to Ireland, 20 March 1923; Gaby to Ireland, 27 April 1923; Gaby to Saylor, 2 May 1923; Pope to Striker, 3 May 1923; Pope to Cooke, 18 Sept. 1923; FS, 13 June 1922. 17 AO, RG 35, Cooke Corresp., Rural Districts - Supply of Power, Peake to Cooke, 25 Feb. 1928; Cooke to Peake, 10 March 1928; AO, RG 3, Henry, Box 157, HEPC General 1933, Tinney to Henry, 22 Nov. 1933;

280 Notes to pages 81-8 Cooke to Tinney, 27 Nov. 1933; Tinney to Henry, 12 Dec. 1933; Henry to Tinney, 16 Dec. 1933. The syndicate was comprised of twenty-six farmers, two cheese factories, a church, and a school. 18 AO, RG 35, Special Series, Rural Dist. No. 1, Daley to Cooke, 17 Jan. 1927; Gaby to Cooke, 31 Jan. 1927. 19 AO, Ferguson Papers, MU 1027, HEPC - Misc., Beach to Dowsley, 23 March 1912; OHA, 510.001, Iroquois; Minutes, 11 July 1917. 20 AO, RG 35, Carmichael Corresp., 1922, Ba-Bo-2, Ellis to Carmichael, 3 June 1922. 21 AO, RG 35, Special Series, Rural Dist., No. 2, Beach to Carmichael, 6 July 1922; Carmichael to Beach, 12 July 1922; AO, RG 3, Ferguson, Box 123, HEPC Rural Transmission Lines, 1924-5, Pope to Biggs, 11 Sept. 1922; AO, RG 35, Cooke, 1923-1-20, Sweet to Cooke, 23 Aug. 1923. 22 AO, RG 35, Cooke, 1924, Ba-Bh-2, Beach to Cooke, 12 Nov. 1923; 6 Feb. 1924; 14 Feb. 1924; 26 March 1924. This file also contains numerous testimonial letters written by Beach's customers. 23 Ibid., Beach to Cooke, 22 Nov. 1923. 24 AO, RG 3, Ferguson, Box 123, HEPC Rural Transmission Lines, 1924-5, Pope to Cooke, 17 March 1925; Minutes, 3 March 1926. 25 AO, RG 3, Ferguson, Box 86, 1926, HEPC General, Cooke to Ferguson, 23 Feb. 1926; Minutes, 14 May 1930; 21 May 1930; 28 May 1930; AR, 1930, p. 61; RT, 8 Jan. 1929. 26 AO, RG 35, Special Series, Rural Dist., No. 1, memorandum on "arbitrary rates," n.d.; PS, 11 April 1922; AR, 1926, 71. 27 AO, RG 35, Cooke Corresp., 1926, Ra-Ru-28, Cooke to Jeffrey, 12 Aug. 1926. 28 AO, RG 35, Special Series, Rural Dist., No 1, Cooke to Ireland; FS, 27 April 1921; 28 March 1922; 16 May 1922; 28 Sept. 1922. 29 OHA, Gregory Commission, "General Report," Vol. I, 106; "Review of Legislation," 76—9. 30 FS, 28 Jan. 1922. 31 OHA, OR 520, General, 1918-56, Farewell to Cooke, 29 March 1924; AO, RG 35, Cooke Corresp., 1924-N-23, Pope to Cooke, 23 April 1924; FS, 3 Feb. 1923. 32 AO, RG 35, Cooke Corresp., 1928-E-8, Embury to Cooke, 20 Oct. 1927. 33 OHA, Jeffrey, Rural Power Supply, III, Jeffrey to Gaby, 4 Dec. 1924. 34 Ibid., Jeffrey to Gaby, 4 Dec. 1924; notice of Commission approval, 10 Dec. 1924. 35 Ibid., Gaby memorandum to Commission, 31 Dec. 1925; AO, RG 35, Special Series, Rural Dist., No. 1, Jeffrey memorandum to Commission, 7 July 1926. 36 CYB, 1925,

208,

210,

219-20,

239.

281 Notes to pages 88-94 37 FS, 12 April 1924; 3 Nov. 1925; Report of the Agricultural Enquiry Committee, 1924, 288. The other committee members were Aurelien Belanger (Lib., Russell), William David Black (Cons., Addington), William Keith (Cons., York South), John Giles Lethbridge (UFO, Middlesex West), Morrison Mann MacBride (Labour, Brant South), Thomas Alfred Thompson (Cons., Lanark North), Nelson William Trewartha (Cons., Huron South), and P.F. Cronin (secretary). 38 Report of the Agricultural Enquiry Committee, 1924, 45. 39 FS, 17 May 1924; 24 May 1924; 4 June 1924; 7 June 1924; 26 June 1924; 9 Oct. 1924; 6 Nov. 1924; Globe, 25 Feb. 1925. 40 FS, 14 June 1924; 26 June 1924; 3 July 1924. 41 Ibid., 14 June 1924; 21 June 1924; 26 June 1924; 3 July 1924. 42 Minutes, 7 April 1923; FS, 21 June 1924; 18 Sept. 1924; 9 Oct. 1924; 16 Oct. 1924. 43 OHA, OR 104.1, General, Gaby to Jamieson, 14 Jan. 1925; Report of the Agricultural Enquiry Committee, 1924, 45-50. 44 Report of the Agricultural Enquiry Committee, 1924, 45-50; FS, 2 Oct. 1924; OHA, OR 104.1, Cronin to Gaby, 6 Dec. 1924; Gaby to Jamieson, 14 Jan. 1925. 45 Report of the Agricultural Enquiry Committee, 1924, 50; Globe, 25 Feb. 1925; FS, 23 April 1925. 46 FS, 4 Feb. 1926; OHA, OR 102.2, 1922-26, Gaby to Magrath, 7 Oct. 1926; AO, RG 3, Ferguson, Box 123, HEPC Rural Transmission Lines (1925-6), Price to Magrath, 7 Oct. 1926. 47 AO, RG 35, Cooke Corresp., 1927-N-23, Cooke to Ferguson, 10 March 1927. 48 OHA,Jeffrey, Rural Power Supply, IV, "Gaby memorandum to Commission," 28 June 1926; AO, RG 35, Special Series, Rural Dist. No. 2, McKee to Carmichael, 22 Oct. 1921; Kerr to Carmichael, 24 Oct. 1921; James to Carmichael, 28 Oct. 1921. 49 AO, RG 35, Carmichael Corresp., 1923-1-20, Castator to Carmichael, 19 Dec. 1922; Carmichael to Jeffrey, 20 Dec. 1922; Jeffrey to Carmichael, 28 Dec. 1923; Carmichael to Castator, 3 Jan. 1923; Foran to Carmichael, 1 Feb. 1923; OHA, Jeffrey, Rural Power Supply, IV, "Gaby memorandum to Commission," 28 June 1926; Minutes, 7 July 1926. 50 AO, RG 3, Ferguson, Box 123, HEPC Rural Bonus Refund, "Gaby memorandum to Commission," 21 March 1927; Minutes, 23 March 1927; AR, 1927, 59. 51 OHA, Premier of Ontario, General No. 5, 1927, Magrath to Ferguson, 24 March 1927; AO, RG 35, Special Series, Rural Dist. No. 1, Cooke to Burnside, 12 May 1927; Cooke to Ferguson, 24 March 1927. 52 AO, RG 35, Special Series, Rural Dist. No. 1, "Pierdon memorandum to Commission," 11 May 1927; AO, RG 35, Cooke Corresp., 1928-16-26, Hallatt to Calder, 30 April 1928.

282 Notes to pages 94-102 53 AO, RG 35, Carmichael Corresp., 1922-Bro-By-4, Jeffrey to Carmichael, 3 March 1922. 54 AO, Ferguson Papers, MU 1028, HEPC Misc. 1925, "Biggs budget debate speech," March 1925; Minutes, 17 Feb. 1925. 55 Sissons, Memoirs, 214-16; Globe, 14 Feb. 1928. 56 Sissons, Memoirs, 205, 214-16; Globe, 14 Feb. 1928. 57 Sissons, Memoirs, 215-17; Globe, 14 Feb. 1928. 58 Ibid. 59 Sissons, Memoirs, 216-17. Sissons evidently did not realize that the legislation largely responsible for his predicament was the Rural Hydro-Electric Distribution Act, not the Power Commission Act. 60 Ibid., 217; Globe, 14 Feb. 1928. 61 AO, RG 35, Cooke Corresp., Rural Districts - Supply of Power, Jeffrey to Cooke, 15 March 1928; Sissons, Memoirs, 217; Globe, 14 Feb. 1928; 15 March 1928. 62 AO, RG 35, Cooke Corresp., 1929-Bl-Brn-3, Graydon and Lawrence to Kennedy, 25 March 1929; Gaby to Kennedy, 1 May 1929; Rural No. 2, Sullivan to Cooke, 31 May 1929; Gaby to Sullivan, 11 June 1929; Sissons, Memoirs, 216-17. 63 OHA, OR 102.2, 1922-26, Jeffrey to Gaby, 14 Feb. 1928. 64 AR, 1930, 72. 65 AR, 1925, 63; Beck, Misstatements, 12. 66 Fs 6 Sept. 1928; 8 Nov. 1928. CHAPTER SIX

1 For a discussion of the technological evolution of hydroelectric generation and distribution systems, see Hughes, Networks of Power, and Belfield, "Niagara Frontier." Hughes in particular has examined the "unprecedented capital requirements" of the new high-voltage systems. He concludes (365) that "the capital demands of the American utilities during the 19203, when many regional systems were under construction, exceeded those of the railroads during the decades of their most rapid expansion." 2 AO, RG 35, Carmichael Corresp., 1921-1-20, Thomas to Drury, 31 May 1920; Pope to Raney, 15 April 1921; James to Pope, 15 April 1921. 3 FS, 7 Jan. 1922; 27 Sept. 1928. 4 Ibid., 8 Nov. 1928; 15 Nov. 1928; 20 Dec. 1928; 28 Feb. 1929; 4 July 1929. 5 AO, RG 35, Cooke Corresp., 1924, Ba-Bh-2, Delyea to Cooke, 30 Nov. 1923; Cooke to Delyea, 19 Dec. 1923; Gaby to Pope, 4 Feb. 1924; Cooke to Delyea, 6 Feb. 1924. 6 Ibid., 1924, Ra-Rn-28, Gray to Cooke, 17 April 1924; Gray to Cooke, 15 May 1924.

283 Notes to pages 102-8 7 AO, Roebuck Papers, MU 2496, HEPC, General, Bell to Roebuck, 9 March 1936; Roebuck to Bell, 26 March 1936. 8 OHA, Gregory Commission, General Report, n, 147; Morrissey, "Study of the HEPC," 89; Plewman, Adam Beck, 260; Biggar, Hydro-Electric Development in Ontario,76-7. Biggar places the number of successful acquisitions at eighty-six. 9 Wilkes, "Power and Pedagogy," 35-9, 52-3, 57- In 1922, 2,581 of the 6,355 utilities in the United States were publicly owned. 10 Mosher, Electrical Utilities, 154-77; Wilkes, "Power and Pedagogy," 67-196, 226-7, 238; Belfield, "Niagara Frontier," 311. Hydro responded vigorously to the attacks. See the Hydro-sanctioned account by Biggar, Hydro-Electric Development in Ontario, 131, as well as two pamphlets published by the HEPC, Its Origins, Administration and Achievements, 29, and Rural Electrical Service, 2-3, 19. 11 FS, 4 Dec. 1924. Billing practices in Gadsby's own state were no fairer. By 1930, one holding company, Pennsylvania Power and Light, collected from its industrial customers, who contributed 70 per cent of the system's load, only 40 per cent of total sales revenues. Residential and farm customers, who used only 9 per cent of the energy, provided 28 per cent of the revenues. See Hughes, Networks of Power, 442. 12 Wyer, Niagara Falls, 14-16; Mavor, Niagara in Politics, 10-11; Globe, 17 Feb. 1925; 3 March 1925; 17 Feb. 1926. See also Lowitt, "Ontario Hydro," and Beck, Misstatements. 13 Stewart, Electricity in Rural Districts; OHA, OR 503, General, "Relating to Attacks," 21 Jan. 1929. 14 Stewart, Electricity in Rural Districts. By way of a rather selective comparison, Stewart cited the extent of use of electric motors on farms in Iowa (35 per cent), Oregon (47 per cent), and Minnesota (65 per cent). 15 Ibid. 16 Telegram, 21 June 1928; OHA, OR 503, General, "Relating to Attacks," 21 Jan. 1929; AO, RG 35, Cooke Corresp., 1928, Sn-Sth-32, Pope to Cooke, 22 July 1928. The HEPC claimed that Stewart received $7,500 and three free trips (two to Ontario, one to Europe) for preparing the pamphlet. See HEPC, Paid-far Propaganda, 25. 17 OHA, OR 510.001, Southampton; Minutes, 6 Nov. 1917; 15 March 1918; 27 March 1918; OHA, Foshay Purchase, "memorandum to Gaby," 20 Aug. 1928. 18 OHA, OR 510.001, Southampton, Gaby to MacAuley, 30 May 1921; James to Gaby, 9 July 1921; FS, 8 March 1924; Minutes, 20 Jan. 1920; 11 Jan. 1928. 19 OHA, Premier of Ontario, General No. 5, 1928-29, Robertson to Ferguson, 27 Feb. 1928; Ferguson to Magrath, 6 March 1928. 20 Minutes, 28 March 1928. 21 ST, 18 Sept. 1928.

284 Notes to pages 108-14 22. OHA, Foshay Purchase, Gaby memorandum to Commission, 3 Aug. 1928; OHA, Premier of Ontario, General No. 5, Magrath to Ferguson, 19 Oct. 1928. 23 OHA, OR 510, Walkerton, Lucas to Gaby, 23 Aug. 1928; ST, 12 Sept. 1928; 14 Sept. 1928; 5 Oct. 1928. 24 ST, 18 Sept. 1928; 20 Sept. 1928. 25 Globe quoted in ST, 29 Sept. 1928; Telegram quoted in ST, 3 Oct. 1928. The Globe had been warning its readers for several years that the "persistent and impressive propaganda" emanating from the United States "has had the effect of poisoning the public mind against the principle of public ownership" (1 April 1925). 26 OHA, Foshay Purchase, James memorandum to Commission, 8 Aug. 1928; James to Gaby, 18 Sept. 1928; ST, 5 Oct. 1928. 27 OHA, OR 510, Southampton and Port Elgin, "memorandum to Gaby," 14 Aug. 1928; Gaby to Macaulay, 8 Oct. 1928. 28 ST, 13 Oct. 1928. 29 OHA, OR 510, Wiarton; OHA, Premier of Ontario, General No. 5, Magrath to Ferguson, 19 Oct. 1928; OHA, Foshay Purchase, "comment," 20 Oct. 1928. 30 ST, 19 Oct. 1928; OHA, Foshay Purchase, James to Gaby, 20 Oct. 1928; OHA, OR 510, Southampton, Gaby to Macaulay, 23 Oct. 1928; Globe, 27 Feb. 1930. 31 ST, 20 Oct. 1928; 25 Oct. 1928. 32 Ibid., 18 Dec. 1928. 33 Review-Reporter quoted in ST, 2 Jan. 1929; FS, 25 Oct. 1928; 15 Nov. 1928; 22 Nov. 1928. 34 ST, 29 Oct. 1928; 31 Oct. 1928. 35 Ibid. 36 AO, Ferguson Papers, MU 1028, Magrath to Ferguson, 29 Oct. 1928; OHA, Premier of Ontario, General No. 5, "Magrath statement," n.d. 37 AO, Ferguson Papers, MU 1028, Magrath to Ferguson, 29 Oct. 1928. The Gregory Commission had earlier expressed reservations about the propriety of Hydro's becoming actively involved in municipal by-law campaigns and spending public monies to challenge private power companies. The Commission had failed, however, to establish concrete guidelines. Instead, it had reached the rather ambiguous conclusion that since "any addition to the consumers of power in a system has ... a tendency to decrease costs to all consumers of that system ... reasonable efforts should be made by [Hydro] to safeguard and promote the interests of its customers." See Gregory Commission, St. Lawrence Systems, "Commission Relations with the Town of Cornwall," 28-9. 38 ST, 30 Oct. 1928; 3 Nov. 1928; 15 Nov. 1928.

285 Notes to pages 115-21 39 Ibid., 16 Nov. 1928; 21 Nov. 1928; FS, 22 Nov. 1928; OHA, OR 510.001, Southampton. 40 ST, 19 Nov. 1928; 22 Nov. 1928. 41 Ibid., 23 Nov. 1928. 42 Ibid., 26 Nov. 1928; 27 Nov. 1928; 29 Nov. 1928; FS, 29 Nov. 1928. 43 Ibid., 6 Dec. 1928; 8 Jan. 1929; 6 Feb. 1929; 8 Feb. 1929; FS, 13 Dec. 1928; Minutes, 19 Dec. 1928; AO, RG 35, Cooke Corresp., 1929-29-38, Robertson to Cooke, 15 Feb. 1929. 44 OHA, Foshay Purchase, "Gaby memorandum to Commission," 11 Jan. 1929; Pope to Macauley, 25 Jan. 1929; ST, 5 Feb. 1929. 45 OHA, Premier of Ontario, General No. 5, Magrath to Ferguson, 7 Feb. 1929. 46 AO, Ferguson Papers, MU 1028, Magrath to Ferguson, 8 Feb. 1929. 47 FS, 21 Feb. 1929; 7 March 1929; 21 March 1929. 48 ST, 8 Feb. 1929; 5 March 1929. 49 Ibid., 5 March 1929; 6 March 1929; 9 March 1929. 50 AO, RG 35, Cooke Corresp., 1929-Sn-Sth-32, Cooke to Maguire, 5 March 1929; ST, 6 March 1929. 51 ST, 12 March 1929; 14 March 1929; 11 May 1929; OHA, Foshay Purchase, Shortt to Lucas, 13 March 1929. 52 OHA, Foshay Purchase, "Eldridge et al v. The Municipal Corporation of the Town of Southampton, 27 March 1929"; AO, RG 35, Cooke Corresp., 1928-16-26, Hanna to Cooke, 1 April 1929. 53 ST, 28 March 1929. 54 FS, 6 Dec. 1928; 28 March 1929; 4 April 1929. 55 Minutes, 24 April 1929; OHA, Foshay Purchase, Lucas to Magrath, 7 May 1929; Lucas to Tilley, Johnston, Thomson, and Parmenter, 9 May 1929. 56 sr, 17 May 1929; 18 May 1929; 20 May 1929; OHA, Foshay Purchase, "memorandum to Commission," 17 May 1929; Ferguson to Magrath, 23 May 1929; Ferguson to Foshay, 23 May 1929; AO, RG 3, Ferguson, 1929, HEPC Transmission Lines, Foshay to Ferguson, 13 March 1929; AO, Ferguson Papers, MU 1028, Magrath to Ferguson, 18 May 1929; Ferguson to Foshay (draft), 18 May 1929. 57 ST, 10 April 1929; 16 April 1929; 14 June 1929; 19 June 1929; 9 July 1929; 2 Aug. 1929. 58 Ibid., 19 June 1929; 13 July 1929; OHA, Foshay Purchase, James to Gaby, 10 July 1929. 59 OHA, OR 510, Southampton, Pope to Southampton Town Council, 23 July 1929; ST, 16 Aug. 1929. 60 OHA, Foshay Purchase, Gaby to Ferguson, 18 July 1929; "Gaby memorandum," 23 July 1929; "Gaby memorandum for Commission," 4 Sept. 1929; Jeffrey to Gaby, 10 Sept. 1929; AO, RG 35, Cooke Corresp., 1929-

286 Notes to pages 122-6

61 62

63

64 65 66 67 68

F-9, Cooke to Ferguson, 5 Sept. 1929; Cooke to Ferguson, 10 Sept. 1929. ST, 27 Aug. 1929; FS, 29 Aug. 1929. Minutes, 24 Sept. 1929; OHA, Foshay Purchase, Magrath to Ferguson, 4 Oct. 1929; Magrath to Ferguson, 12 Oct. 1929. The Commission had decided privately that it would offer up to $850,000 for the properties, but only if it was certain that Foshay would accept. ST, 1 Nov. 1929; 2 Nov. 1929; 12 Nov. 1929; 31 March 1932; Globe, 22 March 1932. The PUCC was by no means an anomaly. The NYT reported that in 1926 the electric light and power industry "absorbed nearly 25 per cent, of all the new capital floated in the American money market." Earnings of $439,286,000 in 1929 represented an increase of more than 900 per cent over 1918 levels. By 1929, only sixteen holding companies controlled more than 75 per cent of the private power industry. See Hughes, Networks of Power, 393, and Wilkes, "Power and Pedagogy," 67, 250. AO, Ferguson Papers, MU 1028, Magrath to Ferguson, 8 Feb. 1929. ST, 4 Nov. 1929; 9 Nov. 1929; AO, Roebuck Papers, MU 2496, Georgian Bay System, "Study of Georgian Bay System," Jan. 1935. OHA, Foshay Purchase, "memorandum to Gaby," 14 Nov. 1929; Chapman to Davis, 18 Nov. 1929; Minutes, 20 Nov. 1929. OHA, Foshay Purchase, Magrath to Davis, 21 Nov. 1929; "memorandum of conversation between Magrath and Davis," 30 Nov. 1929. Ibid., Chapman to Magrath, 25 March 1930; Magrath to Chapman, 4 April 1930; Minutes, 4 April 1930; 28 May 1930; 18 July 1930; 30 July 1930; 10 Sept. 1930; i Oct. 1930; Globe, 24 March 1930; ST, 5 April 1930; FS, 25 Sept. 1930.

69 AR, 1930,

6l; AR, 1931,

64, 75, 224.

70 OHA, Foshay Purchase, Jeffrey to Gaby, 4 Nov. 1930; AO, Roebuck Papers, MU 2496, "Study of Georgian Bay System," Jan. 1935; Globe, 19 Feb. 1931; 22 March 1932; sr, 19 Feb. 1931; 31 March 1932; NYT, 7 May 1934; 28 Jan. 1937; 16 Feb. 1937. 71 Roberts and Bluhm, Choices of Power, 177. CHAPTER SEVEN

1 By 1930 the HEPC was operating thirty-two of the province's 132 central electric-generating stations. Hydro's facilities, with a combined capacity of 1,047,284 horsepower, represented approximately 60 per cent of the provincial total. Its plants ranged in size from the 522,/790horsepower Queenston station to the 4OO-horsepower operation at Hanover. In the same year, the HEPC purchased 318,497 horsepower

287 Notes to pages 127-32 from eight privately owned producers in Quebec and Ontario. See AR, 1930, 10-11; CYB, 1931, 383-5. 2 RT, 9 Dec. 1919; Globe, 13 Dec. 1919; AO, RG 3, Drury, Box 18, HEPC Eastern Ontario - 1919, Johnston to Drury, n.d.; AO, RG 35, Carmichael Corresp., 1921-1-8, "Report of Meeting with Eastern Ontario Municipal Power Union," 12 Dec. 1920. 3 AO, RG 3, Ferguson, HEPC - Eastern Ontario Power Situation, Magrath to Gaby, 10 July 1926; Gaby to Magrath, 10 July 1926; Magrath to Gaby, 22 July 1926. For a discussion of the jurisdictional dispute see Armstrong, Politics of Federalism, 161-96. 4 FS, 23 March 1921; freeholder, 24 Feb. 1926; 11 March 1926; Daily Ontario, 7 July 1926; 8 July 1926; AO, RG 35, Cooke Corresp., 1926-E-8, Herity to Magrath, 8 July 1926; Sti-sn-33, "Resolution of Eastern Ontario Chamber of Commerce," 12 July 1927. 5 AO, Ferguson Papers, MU 1027, HEPC - Misc., 1926, Cooke to Ferguson, 24 June 1926; Ferguson to Cooke, 28 June 1926; Cooke to Ferguson, 30 July 1926; Cooke to Ferguson, 24 Feb. 1927. 6 AO, RG 3, Drury, Box 18, HEPC - Eastern Ontario - 1919, "Alexandria Town Council resolution," 5 Dec. 1919; "Summertown Station UFO resolution," 9 Dec. 1919; "Apple Hill Farmers' Club resolution," 10 Dec. 1919; Kennedy to Drury, 10 Dec. 1919. 7 DS, 12 Dec. 1919. 8 AO, RG 3, Ferguson, Box 100, 1928 - HEPC Trans. Lines, Macdonald to Ferguson, 5 April 1928; AO, RG 35, Cooke Corresp., 1928-V-36, Wood to Steadman, 27 April 1928; Gaby to Cooke, 6 June 1928. AO, RG 3, Hepburn, Box 238, 1935 - HEPC - General No. 3, Macdonald to Hepburn, 22 Oct. 1935; Macdonald to Hepburn, 26 Oct. 1935. 9 AO, Roebuck Papers, MU 2497, Legislation - 1930-36, Macdonald to Leduc, 3 April 1936; OHA, OR 524, General, 1911-36, Macdonald to Lyon, 10 July 1936; Armstrong, Politics of Federalism, 179. 10 AO, RG 3, Hepburn, Box 200, HEPC - 1936, Macdonald to Hepburn, 26 Nov. 1936; Rural Co-operator, 10 Oct. 1944; Globe, 19 April 1945. 11 CYB, 1937; CYB, 1945. Ontario's population in 1931 was 3,431,683, with eastern Ontario accounting for 692,178, or 20.2 per cent of the total. By 1941, when the provincial total had risen to 3,787,655, the population of the eastern counties was 751,280, or 19.8 per cent. 12 PS, 13 Nov. 1924; 25 Dec. 1924; 16 Dec. 1926; 24 March 1927; 6 Dec. 1928; 6 Nov. 1930; 13 Nov. 1930; 12 Feb. 1935; AO, RG 3, Ferguson, Box 77, 1925 - UFO Deputation, "1925 Deputation of UFO to Government," n.d. 13 Globe, 20 Feb. 1925; 25 Feb. 1925; 27 Feb. 1931; 13 March 1935; FS, 26 Feb. 1925; 14 March 1929.

288 Notes to pages 132-40 14 AO, KG 3, Ferguson, Box 105, 1930 - HEPC gen., Cooke to Henry, 11 December 1930; Globe, 26 Jan. 1934; FP, 26 Jan. 1934. 15 ET, 10 Jan. 1935; 29 May 1935. 16 Border Cities Star, 10 Jan. 1935; 11 Feb. 1935; Whig-Standard, 23 Jan. 193517 Expositor quoted in Globe, 15 Jan. 1935; 23 Jan. 1935. 18 FS, 3 July 1924.

19 Ibid., 22 March 1928. 20 Ibid., 27 Dec. 1928. 21 Ibid., 15 Nov. 1928; 27 Feb. 1930; 20 March 1930; 19 Dec. 1930. 22 Globe, 22 April 1932; AO, RG 3, Hepburn, Box 173, HEPC - Gen. 1937, Dezell to Hepburn, 23 May 1934. 23 Globe, 22 April 1932. 24 Ibid., 1 April 1931. 25 Ibid., 9 March 1932. 26 Ibid., 12 March 1932; 18 March 1932. 27 Ibid., 22 April 1932. 28 Ibid., 17 March 1932; 23 March 1932. 29 AO, RG 3, Ferguson, Box 77, Rural No. 2, Barrie to Cooke, 13 March 1929. All service charges were subject to a lo-per-cent discount for prompt payment. Unless otherwise noted, all rates for service charges are referred to on a net basis. 30 AO, RG 3, Henry, Box 137, HEPC Gen. 1931, Cooke to Henry, 24 July 1931; AO, Roebuck Papers, MU 2507, HEPC - Rural - Financial Statistical, Jeffrey to Roebuck; OHA, Jeffrey, Rural Power Supply, vi, 1937-7. 31 FS, 14 March 1929. 32 AO, RG 35, Cooke Corresp., 1929-29-38-Rural, Jeffrey to Magrath, 20 Sept. 1929; Minutes, 12 Sept. 1929. 33 OHA, Jeffrey, Rural Power Supply, IV, "Gaby memorandum to Commission," 12 Sept. 1929; v, "memorandum to Commission," 3 Jan. 1930; Jeffrey to Gaby, 7 April 1931. 34 Ibid. 35 FS, 19 Sept. 1929. 36 Ibid., 26 Sept. 1929; FHWS, 2 Oct. 1929. 37 FS, 17 Oct. 1929; FHWS, 6 Nov. 1929. For an account of the 1929 election campaign see Oliver, Ferguson, 359-62. 38 ET, 31 Oct. 1929; OHA, Jeffrey, Rural Power Supply, v, "Gaby memorandum to Commission," 3 Jan. 1930; OHA, OR 524, 1911-36, Ferguson to Magrath, 17 Jan. 1930; Globe, 6 Feb. 1930; 13 Feb. 1930; 19 Feb. 1930; 21 Feb. 1930; FS, 20 Feb. 1930. 39 Globe, 25 Feb. 1930; 7 March 1930; AO, Drew Papers, MU 3550, Hydro, "Rural Hydro Legislation," n.d.; Minutes, 15 April 1931; OHA, Jeffrey, Rural Power Supply, v; AR, 1930, 66.

289 Notes to pages 140-5 40 OHA, Jeffrey, Rural Power Supply, v, "Jeffrey memorandum to Commission," 7 April 1931; Minutes, 15 April 1931. Fourteen RPDS were paying service charges below $2.50 when the legislation was passed. Their rates were not increased to the new maximum. By the end of 1933, losses incurred by the Rural System on account of the reduced service charges totalled $129,004. Although the government reimbursed Hydro for this sum, Jeffrey noted "considerable comment by Government officials who, in spite of the 1930 Act amendment, expected the Commission ... to operate the Rural Power Districts on a self-supporting basis." See OHA, Jeffrey, Rural Power Supply, vn, 1938. 41 FS, 11 Dec. 1930; Farmers' Advocate and Home Magazine, 18 Dec. 1930; AO, RG 3, Henry, Box 137, HEPC Trans. Lines - 1931, Schaus to Henry, 22 Aug. 1931; Globe, 14 March 1934. 42 AO, RG 35, Cooke Corresp., 1924-Bi-Brn-3, Blain to Ferguson, 29 April 1924; Ferguson to Cooke, 30 April 1924; Cooke to Pope, 1 May 1924; Pope to Cooke, 3 May 1924; Cooke to Blain, 7 May 1924; HEPC, Rural Electrical Service in Ontario, 15. 43 AO, RG 3, Ferguson, Box 100, 1928 - HEPC Trans. Lines, Macdonald to Ferguson, 5 April 1928; Ferguson to Macdonald, 13 April 1928. 44 Ibid., Macdonald to Ferguson, 19 April 1928. 45 FS, 18 Dec. 1927. 46 AO, RG 35, Cooke Corresp., 1927-Go-Gy-n, Robertson to Cooke, 10 May 1927; Gaby to Cooke, 7 June 1927; Cooke to Robertson, 5 July 1927. 47 AO, RG 35, Cooke Corresp., Rural No. 2, "Loughboro Township Council resolution," 4 Feb. 1929; Black to Cooke, 11 Feb. 1929; Rocheleau to Ferguson, 10 May 1929; Wilson to Cooke, 8 June 1929; AO, RG 3, Ferguson, Box 103, 1929 - HEPC Trans. Lines, "Kent County Council resolution," 13 June 1929. 48 AO, RG 35, Cooke Corresp., Rural No. 2, "statement to A.C. Atkinson," 18 June 1929. 49 FS, 16 May 1929; 7 Nov. 1929; 5 Dec. 1929; 12 Dec. 1929. 50 AO, RG 35, Cooke Corresp., Rural No. 2, Cooke to Black, 27 Feb. 1929; Minutes, 28 March 1928; 30 Aug. 1928. 51 OHA, AMEU / OMEA, Box i, OMEA Annual Meeting, 29 Jan. 1930; FS, 6 March 1930; AO, RG 3, Henry, Box 137, HEPC General 1931, Cooke to Henry, 8 May 1931. 52 CYB, 1937, 401. 53 Minutes, 13 April 1934; Globe, 26 April 1934. If the minimum number of contracts per mile could not be secured, individuals who might otherwise have been prevented from receiving the service had the option of signing a guarantee contract. These contracts ensured Hydro of enough revenue to allow construction to begin. As additional cus-

290 Notes to pages 145-51 tomers joined the line, the guarantors' obligations were reduced accordingly. See AO, KG 3, Cooke, Rural No. i, Kennedy to Cooke, 21 Feb. 1929; Cooke to Kennedy, 28 Feb. 1929. 54 Globe, 27 April 1934; 3 May 1934; Expositor quoted in Globe, 2 May 1934. 55 Globe, 28 April 1934; 30 April 1934; 10 Jan. 1935; Border Cities Star, 13 Dec. 1934. 56 Globe, 3 May 1934; Minutes, 4 Sept. 1934; AR, 1934, 77; AR, 1935, 79; AR, 1937, 108. 57 OHA, AMEU / OMEA, Box 4, OMEA Publicity Committee, "Rural Hydro Service," n.d.; Globe, 3 May 1934. 58 AO, RG 3, Hepburn, Box 238, 1935 - HEPC - Gen. No. 2, Cleland to Jeffrey, 23 Jan. 1935. 59 AO, Roebuck Papers, MU 2507, HEPC - Rural - Financial - Statistical, "Rural Service Charge," n.d.; OHA, Jeffrey, Rural Power Supply, vi, "Commission Minute," 27 Sept. 1935. 60 Globe, 25 Oct. 1935; 26 Oct. 1935; 30 Oct. 1935; 22 Nov. 1935; 4 March 1936; OHA, Jeffrey, Rural Power Supply, vi, Pope to Lt.-Gov. in Council, 18 Nov. 1935; Minutes, 21 Nov. 1935. 61 Minutes, 31 Oct. 1935. 62 Ibid., 29 April 1936; AO, Roebuck Papers, MU 2507, Rates-i935-6, McCrimmon to Roebuck, i May 1936; OHA, OR 125, "Minutes of Special Rating Committee," 11 May 1936. The "Special Rating Committee" was comprised of T.H. Hogg, T.K. James, R.T. Jeffrey, A.M. McCrimmon, and W.G. Pierdon, all of the HEPC, and H.L. Lowe, an engineer with the Stone and Webster Engineering Corp. of New York. The chair and commissioners of Hydro sat as ex-officio members. 63 OHA, OR 125, Lowe to McCrimmon, 12 Nov. 1936; OHA, Jeffrey, Rural Power Supply, vn, "Stone and Webster Report on Proposed Rural Rates for the Hydro-Electric Power Commission of Ontario," 12 Nov. 1936. 64 OHA, Jeffrey, Rural Power Supply, vn, "Stone and Webster Report". Between 1933 and 1936, 177 of the 285 municipalities comprising the Niagara, Georgian Bay, Eastern Ontario, and Thunder Bay systems stopped collecting service charges. 65 Ibid. 66 OHA, Jeffrey, Rural Power Supply, VII, "Commission Minute," 20 Oct. 1936; "Jeffrey memorandum to Commission," 15 Dec. 1936; Minutes, 30 Nov. 1936; 21 Dec. 1936; Globe, 1 Dec. 1936; OHA, OR 102.2, 193645, Lyon to Pierdon, 31 March 1937. 67 Globe, 22 May 1936; 17 Aug. 1936; 25 Aug. 1936; 15 Sept. 1936; 2 Oct. 1936; i Dec. 1936; 3 Dec. 1936; 21 Jan. 1937; Armstrong, Politics of Federalism, 179-81. 68 OHA, AMEU / OMEA, Box 4, "Annual Meeting, Feb. 2-3, 1937"; AR, 1936, 91, 98. The Commission was well aware that a growing number

291 Notes to pages 152-8 of its users who were not bona fide farmers received hydro under farm contracts recently made more attractive. Consequently it redefined "farmer" in 1936. Henceforth, only those customers "owning and operating farm land, five acres or more, and producing farm products for sale from the land so occupied" would be eligible for class 2B and 3 services. 69 OHA, Premier of Ontario, General No. 10, 1937, Mills to Hepburn, n.d.; Gaskin to McCrimmon, 12 March 1937; OHA, OR 524, 1937-55, McCrimmon to Hepburn, 19 March 1937. 70 Minutes, 2 April 1937; 27 April 1937; 22 July 1937; Expositor, 27 April 1937; OHA, AMEU / OMEA, Box 5, Rural Power, Hannigan to Jeffrey, 2 June 1937; Jeffrey to Hannigan, 8 June 1937; Hannigan to Jeffrey, 10 June 1937. 71 AO, RG 3, Hepburn, Box 353, Speech Material - Election, Lyon to Hepburn, 8 June 1937; Box 354, Election Campaign - Savings, Lyon to Hepburn, 23 Aug. 1937; AR, 1937, x; AR, 1938, 78; AR, 1939, 50. CHAPTER EIGHT

1 2 3 4 5 6 7 8 9 10

11 12

13

FS, 19 Sept. 1929. Ibid., 19 Sept. 1929; FHWS, 13 Nov. 1929; 12 March 1930. Globe, 25 Feb. 1930; 4 March 1930. OHA, J.R. Cooke, 1928-29, No. 174, Lucas to Cooke, 23 Nov. 1929. Globe, 25 Feb. 1930; 4 March 1930; OHA, OR 102.205, Rural Loans (Rural Loans Act), "Regulations for the Administration of the Rural Power District Loans Act," n.d.; AR, 1930, 66; AR, 1931, 70. Globe, 27 Feb. 1930; 4 March 1930; PS, 27 Feb. 1930. Globe, 4 March 1930; FS, 6 March 1930; FHWS, 12 March 1930; ST, 5 April 1930. Minutes, 10 Sept. 1930; 5 Nov. 1930; 10 Dec. 1930. AR, 1931, 70-1. AO, Roebuck Papers, MU 2507, HEPC Rural - Financial Statistical, "Rural Rate Studies and Estimates in Connection with Proposed New Business," i Oct. 1934; MU 2490, "memorandum of HEPC Minutes," 15 Feb. 1935; Pope to Roebuck, 18 Feb. 1935; Minutes, 5 Oct. 1934; 10 Oct. 1934; 15 Feb. 1935; 11 June 1935. Minutes, 26 Oct. 1937; AR, 1937, 103. Minutes, 12 June 1940; OHA, Premier of Ontario, General No. 11, 1940-48, Hogg to Hepburn, 20 June 1940; OHA, OR 102.2, 1936-45, Jeffrey to Hogg, 26 June 1940; AR, 1941, 43; AR, 1942, 43. Four loans were granted in 1941, but these had been processed prior to the application deadline of 31 October 1940. FS, 6 March 1930; OHA, OR 102.205, Rural Loans, "memorandum to all Rural Offices," 5 Nov. 1936; OHA, Premier of Ontario, 1940-48,

292 Notes to pages 159-64 "memorandum to Hon. George A. Drew, Re: The Rural Power District District Loans Act," 29 May 1944. 14 AO, Roebuck Papers, MU 2507, Mickle to Jeffrey, 30 Sept. 1936; OHA, OR 102.205, Rural Loans, Mickle to Jeffrey, 29 Oct. 1937; "memorandum to Hogg," 11 Aug. 1938; "memorandum to Hogg," 31 March 1942; OHA, Premier of Ontario, 1940-48, "memorandum to Hon. George A. Drew, Re: The Rural Power District Loans Act," 29 May 1944. Approximately $950 was recovered from the sale of repossessed equipment. 15 AR, 1931-42. Only 7.7 per cent of the loans had terms of six or more years' duration; five- and three-year terms (52.2 per cent and 24.3 per cent, respectively) were by far the most common. 16 OHA, Cooke, No. 174, Gaby to Cooke, 25 Feb. 1930; AR 1931-42. 17 Leacy, Historical Statistics, M-18, M-104. The number of occupied farms in Ontario fell from 192,174 to 178,204 (-7.3 per cent) between 1931 and 1941. 18 Eaton's Spring and Summer Catalogue, 1930; Eaton's Fall and Winter Catalogue, 1939. 19 FS, 1 Oct. 1931; Border Cities Star, 13 Dec. 1934. 20 Globe, 14 Dec. 1934; OHA, OR 102.2, 1927-35, Jeffrey to Hannam, n.d. 21 FS, 13 April 1933; Globe, 11 Jan. 1935. One exception to the Commission's otherwise unenthusiastic response to the idea of constructing transmission lines as relief projects occurred in 1935. Gaby thought that by using government-financed relief workers to build lines into northern mining areas, capital costs could be reduced by more than 50 per cent. He could imagine no other service that "would give more impetus to the development of the North," but clearly he was concerned with helping mine owners more than idle labourers. See OHA, OR 102.2, 1927-35, Gaby to Meighen, 6 Feb. 1935. 22 Minutes, 11 Sept. 1934. 23 Ibid. Hepburn had purged the HEPC'S executive ranks within one month of his June election victory. Among those dismissed for contributing to "the wreck of Hydro" were Cooke, Maguire, and Gaby. Meighen, who had seen the writing on the wall, had resigned in May. See Globe, 19 March 1934; Denison, People's Power, 205. 24 Whig-Standard, 14 Sept. 1934. 25 Globe, 10 May 1935; 28 Aug. 1935. 26 Minutes, 18 Sept. 1934; Globe, 19 Sept. 1934; 4 Jan. 1935. 27 AO, Roebuck Papers, MU 2507, HEPC, Rural - Financial Statistical, "Rural Rate Studies and Estimates in Connection with Proposed New Business," i Oct. 1934. Jeffrey estimated that 5,100 (9.1 per cent) of Ontario's 56,000 hamlet residences were unlikely ever to receive HEPC service because of their isolation. Of the remaining 50,900 hamlet resi-

293 Notes to pages 164-8 dences, Hydro already reached 34,200 (67.2 per cent). Three years later the HEPC reduced to 30,000 its estimate of the number of farms "to which, due to various economical and other circumstances, service is improbable or at best indefinite." See AR, 1937, 95. 28 AO, Roebuck Papers, MU 2507, HEPC, Rural - Financial Statistical, "Rural Rate Studies and Estimates in Connection with Proposed New Business," 1 Oct. 1934. 29 Ibid. 30 Minutes, 12 Oct. 1934; Globe, 17 Oct. 1934; 12 Jan. 1935; AR, 1934, 66. Hydro's engineers calculated the average monthly hydro consumption for each of the bonused items and deducted that amount from the accounts of eligible customers. 31 Minutes, 12 Oct. 1934; Globe, 17 Oct. 1934; 24 Jan. 1935; AR, 1934, 66. 32 Globe, 3 Oct. 1934; Border Cities Star, 4 Oct. 1934. 33 Globe, 4 Oct. 1934; 18 Oct. 1934; 15 Dec. 1934. 34 FP, 14 Dec. 1934. 35 ET, 21 Jan. 1935; 5 Feb. 1935. The Telegram's figures were high; the Rural System grew by approximately 40,000 customers between the fall of 1925 and early 1935. 36 Minutes, 5 Oct. 1934; 16 Nov. 1934; Globe, 21 Jan. 1935. The 534 "good" prospects were located as follows: St Mary's RPD (Perth County), 117; Burford RPD (Brant), 99; Dorchester RPD (Middlesex), 32; Bowmanville RPD (Durham), 56; Bradford RPD (Simcoe), 37; Chatham area (Kent), 142; and Innisfil area (Lanark), 51. Despite the survey's emphasis on rates, one Hydro canvasser found that "only a small percentage [of rural customers] object to the cost of the electricity supplied. The stumbling-block is the cost of wiring the farm houses and buildings." See AO, Roebuck Papers, MU 2507, Rural Gen. Corresp., Hatheway to Johnson, 30 Jan. 1937; Roebuck to Hatheway, 23 Feb. 1937. 37 AO, Roebuck Papers, MU 2493, Data for the Hon. A.W. Roebuck, 1936-7, "Result of Canvass in Rural Power Districts During 1935," n.d. 38 OHA, Gregory Commission, General Report, Vol. 1, 55. In the period between passage of the 1917 "controller" legislation and McCrimmon's arrival, auditors continued to condemn the HEPC'S financial practice. G.T. Clarkson's 1923 submission to the Gregory Commission was typical: "Breaches of statutes and unauthorized courses of action have so frequently been condoned and ratified by subsequent legislation, and the law has been so often changed to validate the wrongful act or to declare that no fault has been committed, that these wrongful practices on the part of the Commission become habitual." 39 Globe, 21 Nov. 1934; 5 Feb. 1934.

294 Notes to pages 168-73 40 AO, Roebuck Papers, MU 2496, General, May-Aug. 1935, "report to the Chairman," 7 Aug. 1935; FS, 11 Dec. 1930. 41 Minutes, 10 Oct. 1934; AO, Roebuck Papers, MU 2508, Sales Promotion and Advertising, "memorandum re: Hydro Load Building," 20 Feb. 1935; Hill, "Aspects of Government Ownership," 117; Vining, "Provincial Hydro Utilities," 156. The other committees comprising the Load Building Organization were Adequate Wiring; Budget and Finance; Data and Surveys; Industrial Commercial Applications; Lighting; Loads; Maintenance; Ranges and Water Heaters; and Sales and Advertising. 42 Minutes, 21 Jan. 1937; 30 Jan. 1938; OHA, AMEU / OMEA, OMEA Publicity Committee - Publicity Campaign Advertisements, 1934; OHA, OR 570.1, Rural Advertising Campaign, "Jeffrey memorandum to RPD Superintendents," 17 Feb. 1937; "Jeffrey memorandum to RPD Superintendents," 17 March 1937; AR, 1938, 68; AR, 1939, 59-62. 43 OHA, OR 102.206, u.s. Rural Electrification Administration, McHenry to Munger, 2 May 1939; AR, 1939, 62. 44 Morrissey, "Appraisal," 53. 45 Morrissey, "Study of the HEPC," 176, 180; AO, RG 3, Hepburn, Box 359, Speeches in Legislature, "Roebuck speech," 9 April 1935. 46 Globe, 18 April 1935; 9 Jan. 1936; 8 Oct. 1936; OHA, AMEU / OMEA, Smith address to Group 4 of OMEA, Brampton, 14 May 1940; AO, RG 3, Hepburn, Box 344, HEPC memos and briefs, "Operations of the Commission during the fiscal year ending 31 October 1938." 47 OHA, OR 524, General, 1937-55, "McCrimmon memorandum to Commission," 30 Aug. 1937; Revised Statutes of Ontario, 1937, c. 60. 48 AO, Roebuck Papers, MU 2497, Legislation - Answers to Hydro Questions, "transcript of Freeborn speech," 27 Feb. 1936; Globe, 28 Feb. 1936. 49 Minutes, 28 June 1935. 50 Globe, 16 April 1935; 25 April 1935; 4 July 1935; Revised Statutes of Ontario, 1935, c. 57. The five other communities affected were Lancaster (Glengarry County), Port Rowan (Norfolk), Alvinston (Lambton), and Priceville and Holstein (Grey). 51 AO, RG 3, Drury, Box 33, HEPC Trans. Lines - 1923, "Resolution passed by County Council of Lennox and Addington," 17 March 1923; AO, RG 35, Special Series, Rural No. 2, Pope to Carmichael, 23 April 1923; Carmichael to Doherty, 26 April 1923; Pope to Cooke, 3 Aug. 1923; Huey to Cooke, 10 Aug. 1923; RG 35, Cooke Corresp., 1927-F-9, McNaughton to Cooke, 29 June 1927; Gaby to Cooke, 14 July 1927. 52 FS, 23 Feb. 1928; Globe, 3 March 1937. 53 OHA, Premier of Ontario, 1937, No. 203, Lyon to Elmhirst, 25 August 1937. Lyon had long been concerned with the density question. In

295 Notes to pages 173-80 January 1935 he told Hepburn that the average number of customers per mile on the Rural System had fallen to 6.7 from 7 "since the breaking of the boom in 1929." Rather than encouraging easing of the requirement, Lyon was adamant that "our hope is founded on the fact that at least two or three possible customers per mile of line have not yet signed up." See AO, RG 3, Hepburn, Box 238, Lyon to Hepburn, 17 Jan. 1935. 54 OHA, AMEU / OMEA, Box 5, Rural Power, Jeffrey to Hannigan, 8 June 1937. 55 Expositor, 27 April 1937; Globe, 18 Feb. 1938; Minutes, 17 March 1938; AR, 1937, 104. 56 Globe, 5 April 1938; OHA, Jeffrey, Rural Power Supply, VIII, "Jeffrey memorandum to Commission," 17 May 1938; Minutes, 26 May 1938; AR, 1938, 72. The new minimum-density requirements for the lightload classifications were: IB, 2.25 units each; IC, 3.75 units; 2A, 1.9 units; and 2B, 3.5 units. The new requirements also cancelled automatically many of the guarantee contracts that had been signed on the basis of three class 3 contracts per mile of line. 57 AR, 1933, 76; AR, 1934, 74; AR, 1935, 76; AR, 1936, 96; AR, 1937, 104; AR, 1938, 78; AR, 1939, 50; AR, 1940, 50.

58 Globe, 16 Feb. 1939. CHAPTER NINE

1 RC, 9 Sept. 1939; AO, RG 3, Hepburn, Box 298, 1939 - HEPC, Ralston to Houck, 28 Sept. 1939; Houck to Ralston, 8 Oct. 1939; NAC, RG 19, J.L. Ralston Ministerial Records, Vol. 2684, file T-O2, McKay to Ralston, 9 April 1940; Eaton to McKay, 12 April 1940. 2 AO, RG 3, Hepburn, Box 298, 1939 - HEPC, Ralston to Houck, 28 Sept. 1939; Houck to Ralston, 8 Oct. 1939; NAC, RG 19, J.L. Ralston Ministerial Records, Vol. 2684, file T-O2, Church to Ralston, 15 Sept. 1939; Ralston to Church, 15 Sept. 1939; "memorandum for Eaton," 13 Oct. 1939; Eaton to Ralston, 3 Nov. 1939. 3 Globe, 22 Feb. 1940. 4 NAC, MG 28, I 66, Vol. 28, file 92, Kitchen to Graffe, 27 Feb. 1945; Graffe to Kitchen, 1 March 1945. 5 OHA, OMEA, Executive Minutes, 14 November 1945; 4 March 1946; 3 March 1947; 20 March 1947; Globe, 18 November 1947. 6 Globe, 21 September 1939; AR, 1939, p. xvi. 7 OHA, AMEU / OMEA, "Hydro and the War," 6 Feb. 1940. Established in 1919, the AMEU represented management and senior accounting staff of the municipal commissions. It had far less to say on policy matters than did the OMEA and generally followed the latter's lead.

296 Notes to pages 180-4 8 OHA, OR 102.2, 1936-45, Houck to Jeffrey, 25 June 1940; Jeffrey to Hogg, 26 June 1940. 9 Ibid., Mitchell to Hogg, 9 Sept. 1941. 10 Kennedy, Department of Munitions and Supply, II, 6, 17-18; CYB, 1942, 943; CYB, 1945, xli, 295, 336; Bothwell and Kilbourn, CD. Howe, 135; Bothwell, "War Production in Canada," 62. Individual controllers were appointed for aircraft, chemicals, coal, construction, machine tools, metals, motor vehicles, oil, power, priorities, radioactive substances, rubber, ship repairs and salvage, steel, supplies, timber, and wood fuel. Seven of these, with jurisdiction over coal, construction, motor vehicles, power, priorities, rubber, and timber, remained in office after dissolution of the WICB. The Power Control general orders in effect following this change were related to the use of natural gas in southwestern Ontario. 11 Kennedy, Department of Munitions and Supply, n, 76, 181-3; NAC, RG 28, Vol. 233, file 196-8-1, PC 3187, 15 July 1940; Vol. 54, file 1-1-98, PC 4129, 23 Aug. 1940. 12 NAC, RG 28, Vol. 54, file 1-1-98, Henry to Sheils, 11 Sept. 1940; Vol. 251, file 196-11, Symington to Hackett, 11 Feb. 1942. 13 OHA, Dominion Government Power Controller, No. 256, Symington to Hogg, 7 Oct. 1941; OHA, OR 102.2, 1936-45, "Hydro Discontinuing Rural Services," 30 Oct. 1941; OHA, OR 505.12, Priorities and Controls, 1941, Symington to Gorman, 21 Nov. 1941; Symington to Gardiner, 29 Dec. 1941; Minutes, 16 Oct. 1941; 23 Oct. 1941; 30 Oct. 1941; Globe, 31 Oct. 1941; NAC, RG 28, file 196-11-5, "Hehner memorandum," 31 Oct. 1941. 14 OHA, OMEA / AMEU, No. 78, Minutes of OMEA District No. 7, St Thomas, 24 Oct. 1941; OHA, Power Controller, No. 256, Symington to Hogg, 28 Oct. 1941; OHA, OR 102.2, 1936-45, Hogg to the editor of the Kingston Whig-Standard, 15 Nov. 1941; NAC, RG 28, Vol. 54, file i1-98, Symington to Sheils, 23 Dec. 1941. 15 OHA, Power Controller, No. 256, Symington to Hogg, 28 Oct. 1941; OHA, OR 505.12, 1941, Hogg to Symington, n.d.; Minutes, 30 Oct. 1941. 16 AO, RG 3, Hepburn, Box 215, 1941 - HEPC, Quick to Hepburn, 30 Oct. 1941; Jeffrey to Quick, 22 Nov. 1941. 17 Ibid., Collins to Hepburn, 31 Oct. 1941; Jeffrey to Collins, 13 Nov. 1941; Hay to Hepburn, 13 Nov. 1941; Jeffrey to Hay, 26 Nov. 1941. 18 Ibid., "Resolution of Guelph Township council," 4 Nov. 1941; "Resolution of Elgin County council," 3 Dec. 1941; AO, RG 3, Hepburn, Box 324, 1942 - HEPC - Gen., "Resolution of Ontario County council," 7 March 1942; "Resolution of Gosfield South Township council," 15 Dec. 1941; Lyman to Coatsworth, 13 Jan. 1942; OHA, OR 505.12,

297 Notes to pages 184-9 1941, Corman to Symington, 19 Nov. 1941; Symington to Corman, 21 Nov. 1941. 19 Globe, 29 Nov. 1941; OHA, Power Controller, 1942, No. 257, York County council special committee to Symington, 13 Dec. 1941; AO, RG 3, Hepburn, Box 215, 1941 - HEPC, Gardiner to Hepburn; OHA, 505.12, 1941, Hogg to Symington, 27 Dec. 1941. 20 NAC, RG 28, Vol. 251, file 196-11, Gardiner to Birkinshaw, 18 Dec. 1941; Symington to Gardiner, 29 Dec. 1941. 21 NAC, RG 28, Vol. 54, file 1-1-99, PC 5, 2O Sept. 1942. 22 Globe, 17 Dec. 1941; 20 Dec. 1941; 10 Feb. 1943; 11 Feb. 1943; OHA, OR 505.12, 1943-48, Jeffrey to Symington, 5 Jan. 1943; OHA, OMEA / AMEU, No. 78, Minutes of Annual Convention, 10-11 Feb. 1942; 10 Feb. 1943. 23 OHA, OR 102.111, System Expansion, Post-War Development, 1943, "Victory. What Then?," by the Standing Committee on Post-War Rehabilitation and Reconstruction of the Trades and Labor Congress of Canada, 14, 16-17. 24 NAC, RG 28, Vol. 251, file 196-11, Symington to Bateman, 8 March 1943; Symington to Borden, 8 March 1943; Fogo to Symington, 17 March 1943; Symington to Borden, 7 April 1943; Ashbaugh to Heilig, 11 May 1943; Vol. 252, file 196-11-3, "Quarterly Report of Power Controller," April 1943; OHA, Power Controller, No. 258, Hogg to Symington, 23 Feb. 1943; OHA, 102.2, 1936-45, Bateman to McHenry, 17 March 1943; "Statement," 22 March 1943; Minutes, 8 April 1943; 6 May 1943; 10 June 1943. 25 OHA, OR 520, General, 1918-56, Jeffrey to Connell, 29 Feb. 1944. 26 Globe, 19 March 1943; 23 March 1943. 27 AO, RG 3, Nixon, Gen. Corresp., Box 426, 1943 - HEPC, Oliver to Nixon, 28 June 1943; Jeffrey to Oliver, 20 July 1943. 28 AO, RG 3, Hepburn, 1941 - HEPC, Box 215, Jeffrey to Naylor, 13 Nov. 1941; OHA, Premier of Ontario, 1940-48, No. 263, Jeffrey to Hepburn, 21 Aug. 1942; AO, RG 3, Conant, Gen. Corresp., Box 418, 1943 HEPC, Hood to Conant, 8 April 1943; Conant to Lawler, 15 April 1943; Jeffrey to Conant, 26 April 1943. 29 OHA, Jeffrey, Rural Power Supply, vii, "Stone and Webster Report on Proposed Rural Rates for the Hydro-Electric Power Commission of Ontario," 12 Nov. 1936; Globe, 5 March 1937. 30 OHA, OR 102.2, 1936-45, Lyon to Pierdon, 31 March 1937; "Rural Power Supply," Jan. 1939; "memorandum to Pierdon," 2 May 1939; OHA, Jeffrey, Rural Power Supply, VII, 1938-9. At the end of 1938, the RPD Rates Suspense Account contained accumulated surpluses and deficits totalling $1,706,592 and $552,750 respectively.

298 Notes to pages 189-95 31 OHA, OR 102.2, 1936-45, "Rural Power Supply," Jan. 1939; "memorandum to Pierdon," 2 May 1939. 32 OHA, Jeffrey, Rural Power Supply, vii, "memorandum to Commission," 29 Dec. 1941; Minutes, 8 Jan. 1942; OHA, Hydro History Binder, Vol. I, "Rural Power Supply," 16 May 1943. 33 OHA, Hydro History Binder, Vol. I, "Rural Power Supply," 16 May 1943; OHA, Jeffrey, Rural Power Supply, IX, Drewry to Jeffrey, 13 July 1943. 34 OHA, OR 102.2, 1936-45, "Smith statement," 22 March 1943; OHA, OR 524, 1937-55, Mitchell to Jeffrey, 25 June 1943. 35 OHA, Osborne Mitchell Corresp., Flat Rate, "memorandum re: Rural Rate Schedules," June 1943. 36. Ibid. 37 OHA, Jeffrey, Rural Power Supply, VIII, 1943; AR, 1943, vii. 38 OHA, Jeffrey, Rural Power Supply, IX, Drewry to Jeffrey, 13 July 1943; "Jeffrey memorandum to Commission," 30 Nov. 1943; Mitchell to Jeffrey, 4 Dec. 1943. 39 OHA, OR 524, 1937-55, "Rural Hydro Consumers to Have Uniform Rate," 15 Nov. 1943; Expositor, 27 April 1937. 40 OHA, OR 524, 1937-55, "Rural Hydro Consumers to Have Uniform Rate," 15 Nov. 1943; AR, 1944, 45. 41 OHA, OR 524, 1937-55, "Rural Hydro Consumers to Have Uniform Rate," 15 Nov. 1943; OHA, OR 506.2, United States - Tennessee Valley Authority, Mitchell to Marple, 24 Feb. 1944; AR, 1942, 14; AR, 1943, xii; AR, 1944, 45; Denison, People's Power, 226. 42 AO, RG 3, Drew, General Corresp., Box 440, Rates and Reductions, 1943-45, "announcement of 13 November 1943"; OHA, OR 524, 193755, "Rural Hydro Consumers to have Uniform Rate," 15 Nov. 1943; OHA, Osborne Mitchell Corresp., "Report by the Hydro-Electric Power Commission of Ontario Relating to Differences in the Cost of Power Supplied Municipalities and Rural Power Districts in Ontario," 6 March 1944. The minimum monthly bill was also subject to a lo-per-cent discount for prompt payment. 43 RC, 14 Dec. 1943; Globe, 13 Nov. 1943; 15 Nov. 1943; 16 Nov. 1943; FP, 16 Nov. 1943; Telegram, 17 Nov. 1943. 44 OHA, OR 524, 1937-55, "Rural Hydro Consumers to Have Uniform Rate," 15 Nov. 1943; co, 19 Feb. 1944. 45 Minutes, 11 April 1944; Globe, 17 Feb. 1944; 15 March 1944; FHWS, 19 July 1947; 9 Aug. 1944. 46 OHA, Jeffrey, Rural Power Supply, x, "Jeffrey memorandum to Commission," i March 1945; OHA, OR 524, 1937-55, "A Description of the Rate Schedules for Rural Service, HEPCO," i May 1945; Minutes, i March 1945; AR, 1945, 55.

299 Notes to pages 198-207 CHAPTER TEN

1 Globe, 21 March 1941; 2 April 1941; 3 April 1941; 4 April 1941. 2 AO, RG 3, Hepburn, 1941 - HEPC, "Goderich Town Council Resolution," 4 April 1941; Elmhirst to Knox, 10 April 1941; OHA, Osborne Mitchell Corresp., "Arthur PUC Resolution," 24 April 1941. 3 AO, RG 3, Hepburn, 1941 - HEPC, "Huron County Council Resolution," 18 June 1941; "Prince Edward County Council Resolution," 27 Sept. 1941; OHA, Osborne Mitchell Corresp., Flat Rate, Denyes to Hogg, 22 Dec. 1941; Wilson to HEPC, 14 April 1942. Among county councils supporting the Huron County resolution were Hastings, Lennox and Addington, Peterborough, and Prince Edward. 4 Globe, 26 April 1941. 5 Ibid., 1 May 1941; 2 May 1941; 5 May 1941. 6 Herald, 20 Nov. 1941. 7 OHA, AMEU / OMEA, Box 1, OMEA Annual Convention, 29-32, 10 Feb. 1943; Box 4, Flat Rate, Ciceri to Reid, 23 Feb. 1943; Reid to Ciceri, 3 March 1943; Ciceri to Reid, 4 March 1943. 8 Ibid., Box 4, Flat Rate, Reid to Ciceri, 3 March 1943. 9 OHA, OR 514, 1942-58, Jeffrey to Hogg, 1 April 1943. 10 Globe, 14 April 1943; Minutes, 15 April 1943. 11 Globe, 14 April 1943; Minutes, 15 April 1943. 12 Minutes, 15 April 1943; Globe, 7 July 1943; 8 July 1943; 15 July 1943; 26 July 1943. 13 Star, 17 July 1943; 27 July 1943. 14 Review, Niagara Falls, 26 July 1943. 15 Daily Star, Toronto, 4 Sept. 1943; RC, 14 Sept. 1943; Globe, 14 April 1943; 24 Sept. 1943; 29 Sept. 1943. 16 Globe, 14 April 1943. 17 OHA, AMEU / OMEA, Box 4, Flat Rate, "Sarnia Municipal Council Resolution," 13 Sept. 1943; OHA, Osborne Mitchell Corresp., Flat Rate, Battram to Mitchell, 20 Sept. 1943; Globe, 13 Sept. 1943. 18 co, 12 Aug. 1943; 10 Sept. 1943. 19 co, 12 Aug. 1943; 10 Sept. 1943. 20 Globe, 12 Oct. 1943. 21 OHA, OR 510.1, AMEU / OMEA Resolutions, 1919-56, Battram to Mitchell, 5 Nov. 1943; OHA, AMEU / OMEA, Box 4, Flat Rate, OMEA District No. 8, Western Ontario, Windsor meeting, 10 Nov. 1943. Barnes incorrectly cited the two rate extremes as $90.11 per horsepower at Rosseau and $15.80 at Ottawa. Chatham's rates were lower than Sarnia's, but its annual consumption of 6,191 horsepower was lower than that of the border city. Alvinston and Courtright (Lambton County) and

300 Notes to pages 208-12 Erie Beach (Kent) paid the highest rates in District No. 8 - $52.00 per horsepower. 22 OHA, AMEU / OMEA, Box 4, Flat Rate, OMEA District No. 8, Western Ontario, Windsor meeting, 10 Nov. 1943. 23 Ibid. 24 Ibid. 25 Ibid. The examples Jeffrey cited of fuel and electrical expenditures as a proportion of total production costs were as follows: breweries, 2.92 per cent; flour and food mills, 1.55 per cent; sugar refineries, 2.84 per cent; boot and shoe manufacturers, 0.84 per cent; carpet and rug manufacturers, 4.24 per cent; box, bag, and paper companies, 1.23 per cent. The pulp and paper industry, by contrast, expended almost 17 per cent of its production costs on fuel and power. 26 Ibid. At least one mill owner would have disagreed with Jeffrey's conclusions. A few months earlier, Frank Parks of Cannington, sixteen miles east of Lindsay (Victoria County), complained to Harry Nixon about the high energy rates charged his company, Cereal Industries Ltd. If he moved the operation to Lindsay, where he could purchase a suitable building for $9,000, his monthly power bills would immediately fall to $111.87 from $172.74. These savings alone would pay for the new building. He urged the Liberals to correct this state of affairs by moving toward a more equalized system of power costs. 27 OHA, OR 510.1, 1919-56, "St. Catharines PUC Resolution," 6 Dec. 1943; Smith to Hogg, 8 Dec. 1943. 28 OHA, AMEU / OMEA, Box 4, Flat Rate Briefs, 1943-44, n.d. 29 Ibid., Smith to HEPC, 28 Dec. 1943; "Guelph clipping," 18 Jan. 1944; "Port Arthur memorandum," 1 Feb. 1944; co, 2 Dec. 1943; Minutes, 16 Dec. 1943. 30 OHA, Osborne Mitchell Corresp., Flat Rate, "OMEA speech," 7 Dec. 194331 Ibid.; Morrissey, "Study of the HEPC," 230-1. 32 OHA, Osborne Mitchell Corresp., Flat Rate, "OMEA speech," 7 Dec. 194333 Minutes, 22 Sept. 1943; 14 Oct. 1943; 26 Oct. 1943; 12 Nov. 1943; 25 Nov. 1943; 2 Dec. 1943; 9 Dec. 1943; 16 Dec. 1943; 15 Jan. 1944; 21 Jan. 1944; 1 Feb. 1944; 10 Feb. 1944; OHA, OR 510.1, 1919-56, Barnes to Hogg, 13 Dec. 1943; AMEU / OMEA, Box 4, "Resolutions," 1944. Sixty-two resolutions favoured a uniform rate; twenty-two were opposed. 34 co, 8 Jan. 1944; OHA, AMEU / OMEA, Box 4, Hat Rate, Ciceri to Christie, 14 Jan. 1944; Ciceri to Hay, 14 Jan. 1944; Ciceri to Hay, 15 Jan. 1944; Ciceri to Hay, 17 Jan. 1944.

3O1 Notes to pages 212-8 35 OHA, OR 510.1, 1919-56, Barnes to Hogg, 13 Dec. 1943; AMEU / OMEA, Box 4, "meeting of the Post-War Committee of the OMEA," Toronto, 19 Jan. 1944; "summary of Sarnia brief submitted to the OMEA," 19 Jan. 1944. 36 As note 35. 37 OHA, AMEU / OMEA, Box 4, Flat Rate, Ashworth to Ciceri, 14 Jan. 1944. 38 OHA, OR 510.1, 1919-56, Hilton to Drew, 7 Dec. 1943. 39 OHA, AMEU / OMEA, Box 4, Flat Rate, "St. Catharines PUC brief," 19 Jan. 1944. 40 OHA, AMEU / OMEA, Box 4, "meeting of the Post-War Committee of the OMEA," 19 Jan. 1944; Box 11, "meeting of 9 February 1944"; co, 20 Jan. 1944; 10 Feb. 1944; Globe, 20 Jan. 1944; OHA, Osborne Mitchell Corresp., Flat Rate, Christie to HEPC, 1 Feb. 1944. The co reported a vote of 150 to 75 against the resolution. 41 Globe, 9 Feb. 1944; 10 Feb. 1944; Telegram, 11 Feb. 1944. 42 co, 10 Feb. 1944. 43 Telegram, 11 Feb. 1944. A.H. Acres and A.W. Downer (PC, DufferinSimcoe) attempted to revive the flat rate in 1948 as a means of stemming rural depopulation. See Journals, 8 April 1948, 817, and 13 April 1948, 991. Two years later the OMEA endorsed a uniform rate resolution that repeated many of the same arguments used in 1943. The HEPC ignored the request, and the OMEA let the matter rest. See Globe, 1 March 1950; OHA, AMEU / OMEA, Box 10, Flat Rate, Kestell to Easson, 3 March 1950; Easson to Kestell, 9 March 1950. 44 OHA, Osborne Mitchell Corresp., "Report by the Hydro-Electric Power Commission of Ontario Relating to Differences in the Cost of Power Supplied Municipalities and Rural Power Districts in Ontario," 6 March 1944; Globe, 15 March 1944. 45 OHA, AMEU / OMEA, Box 11, "Minutes of OMEA Executive Committee," 14 March 1944. 46 Ibid., "Special general session of the OMEA," 15 March 1944. 47 Ibid., "Special general session of the OMEA," 15 March 1944; Globe, 16 March 1944; OHA, OMEA / AMEU, File 87, Mitchell to HEPC, 23 March 1944; Minutes, 13 April 1944. Toronto's peak load during 1944 was approximately 370,000 horsepower, compared to 200,000 horsepower for the Eastern Ontario System and 60,000 horsepower for the Georgian Bay System. 48 OHA, AMEU / OMEA, Box ii, "Special general session of the OMEA," 15 March 1944; Globe, 16 March 1944; Denison, People's Power, 226. 49 AR, 1944, X, 122; AR, 1945, X, 138; AR, 1946, 150; OHA, OMEA / AMEU,

Annual Meeting, 25 Feb. 1957; Denison, People's Power, 231.

302 Notes to pages 221-6 CHAPTER ELEVEN

1 OHA, OR 102.2, 1936-45, Jeffrey to Firestone, 6 Jan. 1944; AR, 1938, 78. The most the HE PC had ever spent on rural electrification was $6,100,139, in 1938. 2 Globe, 1 March 1945. 3 OHA, OR 102.2, 1936-45, "Rural Electrification in Ontario - A FiveYear Plan for Post-War Rural Hydro Development," March 1945; Globe, 31 March 1945; cc, 14 April 1945; AR, 1944, 52. Estimated Development for Five-Year Post-War Period Consumers to Be Added Year

Miles of Line

Farm

Non-Farm

Total

1st year 2nd year 3rd year 4th year 5th year

1,135 2,151 1,532 1,357 1,154

7,579 7,625 6,243 5,664 5,056

6,023 6,339 4,937 4,438 4,000

13,602 13,964 11,180 10,102 9,056

Total

7,329

32,167

25,737

57,904

4 OHA, OR 102.2, 1936-45, "Five Year Plan" March 1945; Globe, 31 March 1945. 5 Ibid., The RPD Loans Act was not reintroduced. J.M. Hambley reported several years later that "during and since the war, prospective customers had little difficulty in financing wiring costs due to higher incomes, and no additional loans were made." See OHA, OR 102.205, Rural Loans, Hambley to Warrender, 1 May 1956. 6 McKenty, Hepburn, 272-7; Caplan, Dilemma of Canadian Socialism, 1645; Globe, 11 May 1945; 12 May 1945; 22 May 1948. 7 Globe, 7 July 1945; 9 July 1945; 17 Aug. 1945; 2 April 1947. 8 Denison, People's Power, 229; Globe, 5 Oct. 1945. 9 Rea, Prosperous Years, 137-8; cc, 22 Dec. 1945; Globe, 11 Aug. 1945; 21 March 1946; 27 March 1946; 4 April 1946; 25 March 1947. Kennedy calculated that no more than 25 per cent of the population should be farmers. In fact, farmers accounted for 30 per cent of Ontario's population. 10 AR, 1945, 74-5; AR, 1946, 75; AR, 1947, 80; Minutes, 28 March 1946;

303 Notes to pages 226-33 Globe, 5 March 1946; Farmer's Advocate, 15 Jan. 1945; 12 July 1945; 22 Nov. 1945; cc, 22 Feb. 1945; 17 March 1945; 28 April 1945; 9 June 1945; 21 July 1945; 18 Aug. 1945; 15 Sept. 1945; 29 Sept. 1945; 27 Oct. 1945; 10 Nov. 1945. 11 AR, 1947, xiii; AR, 1951, 56; OHA, OR 102.2, 1946- 51, Kribs to Hearn, 9 Sept. 1947; Denison, People's Power, 234. 12 QUA, Ontario Federation of Agriculture Papers, 1OO5A, Series n, Box 8, File 78, "Minutes of Annual Meeting," 8 Jan. 1947. 13 AO, RG 3, Frost, Gen. Corresp., Box 77, 137-G, Rural Hydro extension, 1947-49, Magwood to Drew, 30 Jan. 1947; Magwood to Drew, 1 Feb. 1947; RC, 14 Jan. 1947. T.L. Kennedy estimated that at least 5,000 farm labourers were needed immediately; see Globe, 29 April 1947. 14 AO, RG 3, Frost, Gen. Corresp., Box 77, 137-6, Rural Hydro Extension, 1947-49, Challies to Magwood, 4 Feb. 1947; Challies to Scott, 14 Feb. 1947; OHA, OR 102.2, 1946-51, "Resolution of Huron County Council," 11 July 1947. 15 OHA, AMEU / OMEA, Box 11, Annual Meeting, 3 March 1948. 16 Journals, 13 March 1947, 258; 19 March 1947, 227; 25 March 1947, 542; 27 March 1947, 567; 6 April 1948, 748-9; AO, RG 16, Ministry of Agriculture and Food, Saunders to Drew, 26 April 1948; Globe, 26 March 1947; 28 March 1947. 17 Denison, People's Power, 238-9; AR, 1959, 57. 18 Journals, 23 March 1948, 503; 24 March 1948, 543-4; 6 April 1948, 746; Globe, 20 March 1948; 24 March 1948. 19 Journals, 25 March 1947, 436; 28 March 1947, 580-2; Globe, 25 March 1947; 26 March 1947. 20 Globe, 17 April 1948; 18 May 1948. Drew's critics claimed that his reason for holding an election just three years into his government's mandate had nothing to do with electrical power but was all part of Drew's ploy to replace John Bracken as leader of the federal Progressive Conservatives. See Graham, Old Man Ontario, 133. 21 AR, 1946,

58; AR, 1947,

XV, 6o-i; AR, 1948,

71, 75.

22 Globe, 20 April 1948; 22 April 1948; RC, 25 May 1948. 23 Globe, 11 May 1948; 18 May 1948; 25 May 1948; 27 May 1948; RC, 25 May 1948; Denison, People's Power, 233, 236. 24 Schull, Ontario since 1867, 329-31; Grube, "The Ontario Election," 83; Globe, 9 June 1948. 25 Journals, 17 Feb. 1949, 138; 22 Feb. 1949, 226; i March 1949, 425; 2 March 1949, 450, 509; 9 March 1949, 700-1; 15 March 1949, 887. 26 Globe, 6 March 1946; AR, 1947, x, 46; AR, 1948, viii, 53-4, 147, 154; AR, 1949, 62.

304 Notes to pages 234-7 The HEPC'S 1949 capital expenditures on construction were Power developments Transformer stations Transmission lines Rural Operating Areas Administration and service buildings/other projects Total

$72,530,000 19,327,000 22,890,000 21,580,000

51.1% 13.6% 16.1% 15.2%

5,422,000

3.8%

$141,749,000

99.8%

27 Globe, 2 March 1949; 3 March 1949. 28 AR, 1951, ix, 337; AE, 1952, ix, x, 61; AO, RG 3, Frost, Gen. Corresp., Box 77, 137-0, Increase in Rural Rates, 1949-50, "R.H. Saunders announcement," Jan. 1950. 29 AR, 1951, 28-9; AR, 1952, 26-7, 62; AR, 1953, 24-5, 40, 332; AO, RG 3, Drew, Gen. Corresp., Box 441, 137-0, HEPC - Rural Hydro, 1947-9, "Report by Robt. Saunders to the Legislative Committee on Government Commissions," 20 March 1953, 42-5, 58, 86. 30 AO, RG 3, Frost, Gen. Corresp., Box 77, 137-0, Increase in Rural Rates, 1949-50, "Statement on Rural Rates," Appendix i, 10 Nov. 1949; RG 3, Drew, Gen. Corresp., Box 441, 137-0, HEPC - Rural Hydro Extensions, 1947-9, Saunders to Frost, 20 May 1952; Minutes, 22 Nov. 1950; OHA, OR 600, Rural Distribution of Power, No. 95, Easson to McDonald, 19 May 1952; OHA, OR 102.2, 1952-72, "A Report on the Minimum Density Requirements for Rural Extensions," 20 March 1957; "Density Requirements for Farm Extensions - Rural Operating Areas," 28 Oct. 1957; OHA, OR 520, General, 1957-59, "A Study of Extension of Rural Electric Service to Farms to Whom Service is Not Available Under Present Density Requirements," 27 May 1957. 31 AR, 1951, 66; AR, 1952, 65; AR, 1953, 56; AR, 1954, 37; AR,1955, 40, AR, 1956, 40; Journals, 2 March 1955, 495-6; OHA, OR 520, General, 1918-56, Purcell to Hearn, 9 Jan. 1956; Easson "Advice of Commission Decision," 18 Jan. 1956; Hambley to Nattress, 20 Feb. 1956; Minutes, 18 Jan. 1956. See also AO, RG 3, Frost, Box 30, Hydro Claims, 1951. This file contains numerous complaints from Frost's constituents that the new density requirement prevented them from receiving HEPC service. 32 OHA, OR 102.2, 1952-72, Sitzer to Hambley, 9 Aug. 1956; OHA, OR 524, 1956-58, Hambley to Duncan, 9 April 1957. The proportion of farms in the sos receiving HEPC service in January 1956 was as follows: Niagara, 96.8 per cent; Toronto, 94.7 per cent; Western, 95 per

305 Notes to pages 237-42 cent; West Central, 89.4 per cent; Georgian Bay, 88.7 per cent; Eastern, 80.3 per cent; and East Central, 84.4 per cent. 33 OHA, OR 102.2, 1952-72, "A Report on the Minimum Density Requirements for Rural Extensions," 20 March 1957. 34 OHA, OR 102.2, 1952-72, "A Study of the Extension of Rural Electric Service to Farms to Whom Service is not Available under Present Density Requirements," 27 May 1957; Sitzer to Hambley, 5 June 1957. 35 Journals, 11 March 1957, 1,154; OHA, OR 520, 1957-59, Sitzer to Hambley, 20 March 1957. 36 AO, KG 3, Frost, Box 77, 137-0, Rural Lines, Maloney to Connell, 25 June 1957; Maloney to Connell, 19 July 1957; Connell to Maloney, 7 Aug. 1957; OHA, OR 520, 1957-59, Duncan to O'Neill, 18 April 1957; OHA, OR 102.2, 1952-72, Duncan to Strike, 20 Sept. 1957. 37 OHA, OR 102.204, 1921-60, "Sitzer memorandum," 12 Oct. 1955; OHA, OR 102.2, 1952-72, Duncan to Banks, 9 May 1957; Journals, 11 Feb. 1958, 97; 19 March 1958, 1012. Farm in the sos without HEPC service as of 31 December 1956: situated on existing lines, 5,098; within y3 mile of an existing line, 825; between 1/3 and 1/2 mile from an existing line, 1,471; between 1/2 and 3/4 mile from an existing line, 1,133; beyond 3/4 mile from an existing line, 1,698; total: 10,225. Farms in the NOP without HEPC service, 9,021. Grand Total: 19,246. 38 OHA, OR 102.2, 1952-72, Hambley to Duncan, 6 June 1957; Duncan to Hambley, 2 July 1957; AR, 1956, 29. The estimated cost of serving all farms situated within one mile of an existing line was $6,847,000 in the sos and $1,661,000 in the NOP. 39 Ibid., MacPherson to Sitzer, 16 Aug. 1955; Hambley to Manby, 29 Aug. 1955; "Density Requirements for Farm Extensions: Rural Operating Areas," 17 July 1957; "Density Requirements for Farm Extensions: Rural Operating Areas," 28 Oct. 1957; OHA, OR 520, 1960-63, Consumer Service Division to Macaulay, 9 Feb. 1961. 40 Ibid.; AO, RG 3, Drew, Gen. Corresp., Box 441, 137-G, Rural Hydro, "Report by Robert Saunders to the Legislative Committee on Government Commissions," 20 March 1953; Minutes, 4 April 1956; 18 April 1956; 25 April 1956. 41 OHA, OR 102.2, 1952-72, "Density Requirements for Farm Extensions: Rural Operating Areas," 17 July 1957; "Density Requirements for Farm Extensions: Rural Operating Areas," 28 Oct. 1957. 42 OHA, OR 102.2, 1952-72, Easson to Hambley, 6 Nov. 1957. 43 OHA, OR 741.2, Water Rentals, 1945- , "Manby memorandum," 31 Oct. 1957; "Hambley memorandum to Commission," 5 Nov. 1957; OHA, OR 102.204, 1921-60, Duncan to Macaulay, 7 Oct. 1960. 44 OHA, OR 741.2, Water Rentals, 1945- , "Manby memorandum,"

306 Notes to pages 242-6 31 Oct. 1957; "Hambley memorandum to Commission," 5 Nov. 1957; Minutes, 6 Nov. 1957. 45 Ibid.; OHA, OR 500.42, Package Deal, Duncan to Frost, 30 Jan. 1958; Duncan to Frost, 24 June 1958. 46 OHA, OR 102.2, 1952-72, "Duncan broadcast," 12 Nov. 1957; OHA, OR 524, 1956-68, Macpherson to Macaulay, 30 July 1958; Globe, 13 Nov. 1957; Minutes, 15 Jan. 1958; Journals, 28 Feb. 1958, 467. 47 AR, 1958, 271. When the HEPC assumed full responsibility for rural extensions in the sos, it defined a "soundly established farm" as at least thirty acres of "improved land." Plots as small as three acres would qualify if Hydro received "reasonable assurance" that the property would "remain in agricultural production" after the contract had been granted. Previously, a farm had to be at least five acres in size, although smaller properties qualified if they were used for "intensive agricultural production," such as apiaries, market gardening, or poultry raising. See OHA, OR 520, 1957-59, Sitzer to Hambley, 7 Jan. 1958; Hambley to Sitzer, 15 Jan. 1958. 48 AO, Ferguson Papers, MU 1028, Box 12, Hydro-Electric Power Commission, Magrath to Ferguson, 29 Aug. 1928. 49 AO, RG 3, Frost, Box 77, 137-0, Increase in Rural Rates, "Statement on Rural Rates, Appendix i," 10 Nov. 1949; OHA, OR 102.2, Rural Electrification General, 1927-35, "Power for Northern Ontario," March 1929; Minutes, 3 Feb. 1938; 17 March 1938. 50 AO, RG 3, Drew, Gen. Corresp., Box 441, 137-0, Rural Power, "Robert Saunders report to Legislative Committee on Government Commissions," 20 March 1953. For Ontario Hydro's activities in northern Ontario, see Zaslow, Northward Expansion. 51 AR, 1959, 178; AR, 1970, 92. 52 OHA, OR 503. i, Questions in Legislature, Macaulay to Chappie, 23 May 1961. 53 OHA, OR 102.204, Grant-in-Aid (Rural Hydro-Electric Distribution Act), 1961-66, Boyer to Strike, 10 Oct. 1963; Rural Service Dept. to Boyer, 3 Dec. 1963; OHA, OR 102.2, 1952-72, Robarts to Mclntosh, 10 April 1969. 54 OHA, OR 104, Government Control Investigating Commissions, Commission on Northern Development, "Northern Development 1969: A Background Paper," n.d. 55 OHA, OR 520, 1964-78, Kerr to Gathercole, 20 Feb. 1970; OHA, OR 102.2, 1952-72, Gathercole to Kerr, 7 April 1970. 56 Globe, 29 March 1972. 57 AR, 1958, 271; AR, 1962, 48-9; AR, 1970, 92. 58 OHA, OR 514, 1959-66, Duncan to Macaulay, 22 Oct. 1959; "informa-

307 Notes to pages 246-59 tion requested by R.W. Macaulay's office," 18 Jan. 1960; Rural System - Retail Rate Study, 20 July 1965. 59 AR, 1966, 44; OHA, OR 524, 1956-68, Gardner to Boyle, 5 May 1965. 60 Vining, "Provincial Hydro Utilities," 157; Solomon, Power at What Cost?, 21-3. 61 OHA, OR 520, 1964-78, Hambley to Easson, 11 May 1966. CHAPTER TWELVE

1 2 3 4 5

Hughes, Networks of Power, 464. Belfield, "Niagara Frontier," 341. Nelles, Politics of Development, 248. Ibid., 464-5, 493. AO, RG 35, Cooke Corresp., 1929-1-15, Magrath to Ferguson, 9 Feb. 1929. 6 AO, RG 3, Ferguson, Box 100, Ferguson to Cochrane, 29 Oct. 1928; Ferguson to Willoughby, 19 April 1928. 7 Dales, Hydroelectricity and Industrial Development, 8-11. 8 Morrissey, "Study of the HEPC," 235.

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Conant, Gordon D. Papers. RG 3. Drew, George A. Papers. RG 3. Drew, George A. Private Papers. Drury, Ernest C. Papers. RG 3. Ferguson, G. Howard. Papers. RG 3. Ferguson, G. Howard. Private Papers. Frost, Leslie M. Papers. RG 3. Henry, George S. Papers. RG 3. Henry, George S. Private Papers. Hepburn, Mitchell F. Papers. RG 3. Hydro-Electric Power Commission of Ontario. RG 35. Ministry of Agriculture and Food. RG 16. Nixon, Harry C. Papers. RG 3. Roebuck, Arthur W. Private Papers. NATIONAL ARCHIVES OF CANADA

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OR OR OR OR OR

102.2 Major Development Programs. 102.111 Major Development Programs. 102.201 Rural Electrification, Agricultural Power Market. 102.203 Rural Electrification. 102.204 Rural Electrification.

3io Bibliography OR 102.204 Major Development Programs. OR 102.205 Rural Electrification. OR 102.206 Rural Electrification. OR 104.1 Investigating Commissions. OR 125 Ontario Hydro Committees. OR 500.42 Government Relations. OR 503 Public Criticism and Participation. OR 503.1 Questions in Legislature. OR 505.12 World War Two. OR 506.2 Foreign Utilities. OR 510 Municipal Customers. OR 510.001 Municipal Customers / Histories. OR 51O.1

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OR 514 Municipal Customers, Rates. OR 520 Retail Customers. OR 524 Rates and Service Classification. OR 570.1 Marketing and Utilization Programs. OR 600 Orders-in-Council. OR 741.2 Operation Costs. OR 901.01 Biographical Files. Association of Municipal Electrical Utilities / Ontario Municipal Electric Association (AMEU / OMEA). Beck, Adam Sir, Correspondence. Cooke, J.R., Correspondence. Dominion Government Power Controller. Foshay Purchase. (Gregory) Hydro-Electric Inquiry Commission. Hydro History Binder. 2 vols., no date. Jeffrey, Richard T. History of Hydro Rates. 6 vols., no date. - History of Hydro Rural Power Supply and Hydro Rates for Rural Electric Service. 10 vols. (1953). Minutes of the Hydro-Electric Power Commission of Ontario, 1906-58.

Mitchell, Osborne, Correspondence. Ontario Municipal Electric Association / Association of Municipal Electrical Utilities. Premier of Ontario. QUEEN'S UNIVERSITY ARCHIVES (QUA) Ontario Federation of Agriculture. U.S.

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313 Bibliography Bothwell, Robert, and William Kilbourn. C.D. Howe: A Biography. Toronto: McClelland and Stewart, 1979. Brady, A. "The Ontario Hydro-Electric Power Commission." Canadian journal of Economics and Political Science 2 (1936): 331-53. Brown, Deward Clayton. Electricity for Rural America: The Fight for the REA. Westport, Conn.: Greenwood Press, 1980. - "Rural Electrification in the South, 1920-1955." PHD thesis, University of California, 1970. Bucknam, Roland F. An Economic Study of Farm Electrification in New York,

with a Discussion of Rural Electrification in the Provinces of Quebec and Ontario, Canada. Ithaca: 1929. Busch, Frank J. "History of Montana Rural Electric Cooperatives, 1936-71." PHD thesis, University of Montana, 1975. Caplan, Gerald L. The Dilemma of Canadian Socialism: The CCF in Ontario. Toronto: McClelland and Stewart, 1973. Caro, Robert A. The Years of Lyndon Johnson: The Path to Power. New York: Alfred A. Knopf, 1982. Childs, Marquis W. The Farmer Takes a Hand: The Electric Power Revolution in Rural America. New York: DaCapo, 1974. Cooke, Morris L. "The Early Days of the Rural Electrification Idea, 19141936." American Political Science Review 42 (1948): 431-47. - "A Note on Rates for Rural Electric Service." Annals of the American Academy of Political and Social Science 118 (1925): 52-9. Dales, John H. 'Hydroelectricityand Industrial Development: Quebec, 1898-1940. Cambridge, Mass.: Harvard University Press, 1957. Day, W.H. "Electric Power and the Ontario Farmer." Ontario Agricultural College Review 20 (1908): 470-5. Denison, Merrill. The People's Power: The History of Ontario Hydro. Toronto: McClelland and Stewart, 1960. Dewar, Kenneth C. "State Ownership in Canada: The Origins of Ontario Hydro." PHD thesis, University of Toronto, 1975. Drummond, Ian. Progress without Planning: The Economic History of Ontario from Confederation to the Second World War. Toronto: University of Toronto Press, 1987. Eaton's Fall and Winter Catalogue, 1939. Eaton's Spring and Summer Catalogue, 1930. Evans, Harold. "The World's Experience with Rural Electrification." Annals of the American Academy of Political and Social Science 118 (1925): 30-42. "Farm Electrification." Images (summer 1969): 4-5, 8-11. Fleming, Keith. "The Uniform Rate and Rural Electrification Issues in Ontario Politics, 1919-1923." Canadian Historical Review 64 (1983): 494-518. Gaby, Frederick A. "Canadian Electrical Development: Electrical Service for

314 Bibliography Rural Districts as Provided by the Hydro-Electric Power Commission of Ontario." World Power (Sept.-Oct. 1927): 29-41. Galbraith, John Kenneth. A Life in Our Times: Memoirs. Boston: Houghton Mifflin, 1981. Garwood, John D., and W.C. Tuthill. The Rural Electrification Administration: An Evaluation. Washington, DC: American Enterprise Institute for Public Policy Research, 1963. Graham, Roger. Old Man Ontario: Leslie M. Frost. Toronto: University of Toronto Press, 1990. Green, Michael K. "A History of the Public Rural Electrification Movement in Washington to 1942." PHD thesis, University of Idaho, 1968. Grube, G.M.A. "The Ontario Election." Canadian Forum 28 (1948): 83. Hall, Carl A.S. "Electrical Utilities in Ontario under Public Ownership, 18901914." PHD thesis, University of Toronto, 1968. Hearn, Richard L. "Ontario Hydro - A Pattern for Progress." Canadian Geographical Journal 50 (1955): 216-27. Hill, Edmund R. "Some Aspects of Government Ownership in Canada." MA thesis, University of Pittsburgh, 1955. Hughes, Thomas P. Networks of Power: Electrification in Western Society, 18801930. Baltimore, Md.: Johns Hopkins University Press, 1983. Humphries, Charles W. 'Honest Enough to be Bold': The Life and Times of Sir James Pliny Whitney. Toronto: University of Toronto Press, 1985. Hydro-Electric Power Commission of Ontario (HEPC). The Hydro-Electric Power Commission of Ontario: Its Origins, Administration, and Achievements. Toronto: 1928. - Paid-for Propaganda ? Who Instigates Attacks on Hydro 1 Important Facts Brought to Public Attention by the Hydro-Electric Power Commission of Ontario. Toronto: 1934. - Rural Electrical Service in Ontario: A Statement Outlining Its Relationship to Electrical Service in Cities and Towns and Correcting Some Misunderstandings. Toronto: 1932. Johnston, Charles. E.C. Drury: Agrarian Idealist. Toronto: University of Toronto Press, 1986. Kennedy, J. de N. History of the Department of Munitions and Supply. Ottawa: 1950. Leacy, F.H., ed. Historical Statistics of Canada. 2nd ed. Ottawa: Statistics Canada, 1983. Lowitt, Richard, "Ontario Hydro: A 1925 Tempest in an American Teapot." Canadian Historical Review 40 (1968): 267-74. McCraw, Thomas K. Prophets of Regulation. Cambridge, Mass.: Harvard University Press, 1984. McKay, Paul. Electric Empire: The Inside Story of Ontario Hydro. Toronto: Between the Lines, 1983.

315 Bibliography McKenty, Neil, Mitch Hepburn. Toronto: McClelland and Stewart, 1967. MacLeod, Marion Jean. "Agriculture and Politics in Ontario since 1867." PHD thesis, University of London, 1961. Manitoba Electrification Enquiry Commission. A Farm Electrification Programme. Winnipeg: 1943. Manitoba Hydro. A History of Hydro-Electric Power in Manitoba. N.d. - The Manitoba Power Commission's Farm Electrification Program. N.d. Mavor, James. Niagara in Politics: A Critical Account of the Ontario Hydroelectric Commission. New York: E.P. Dutton, 1925. Merrill, Kenneth E. Kansas Rural Electric Co-operatives: Twenty Years with the RE A. Lawrence, Kan.: Center for Research in Business, 1960. Morrissey, Fredric P. "An Appraisal of the Hydro-Electric Power Commission of Ontario." Land Economics 27 (1951): 49-57. - "A Study of the Hydro-Electric Power Commission of Ontario." PHD thesis, Columbia University, 1951. Mosher, William E., ed. Electrical Utilities: The Crisis in Public Control. New York: Harper, 1929. Muller, Frederick W. Public Rural Electrification. Washington, DC: American Council on Public Affairs, 1944. Nelles, H.V., The Politics of Development: Forests, Mines and Hydro-electric Power in Ontario, 184.9-194.1. Toronto: Macmillan, 1974. - "Public Ownership of Electrical Utilities in Manitoba and Ontario, 19061930." Canadian Historical Review 57 (1976): 461-84. Noxon, William C. "Hydro-electric Development in Ontario, Canada." United Empire 16 (1925): 285-96. Oliver, Peter. G. Howard Ferguson: Ontario Tory. Toronto: University of Toronto Press, 1977. Owen, Leonard A. "Sir Adam Beck and the Hydro-Electric Radial Railways." MA thesis, University of Western Ontario, 1967. Plewman, William R. Adam Beck and the Ontario Hydro. Toronto: Ryerson Press, 1947. Rea, Kenneth J. The Prosperous Years: The Economic History of Ontario, 193975. Toronto: University of Toronto Press, 1985. Richardson, Lemont K. Wisconsin REA: The Struggle to Extend Electricity to Rural Wisconsin, 1935-1955. Madison: University of Wisconsin Experimental Station, 1961. Rioux, Albert. L'Electrification rurale du Quebec. Sherbrooke: Messager St-Michel, 1942. Roberts, Marc J., and Jeremy S. Bluhm. The 'Chokes of Power:' Utilities Face the Environmental Challenge. Cambridge, Mass.: Harvard University Press, 1981. Saskatchewan Power. A History of Saskatchewan Power. N.d. Schull, Joseph, Ontario since 1867. Toronto: University of Toronto Press, 1978.

316 Bibliography Schulze, David A. "The Politics of Power: Rural Electrification in Alberta, 1920-1989." MA thesis, McGill University, 1989. Sissons, C.B. Nil alienum: The Memoirs of C.B. Sisson. Toronto: University of Toronto Press, 1964. Slattery, Harry. Rural America Lights Up. Washington, DC: National Home Library Foundation, 1940. Solomon, Lawrence. Power at What Cost? Toronto: Energy Probe Research Foundation, 1984. Stauter, Mark C. "The Rural Electrification Administration, 1935-45: A New Deal Case Study." PHD thesis, Duke University, 1973. Stewart, E. A. Electricity in Rural Districts Served by the Hydro-Electric Power Commission of Ontario. Minneapolis: 1926. Vining, Aidan R. "Provincial Hydro Utilities." In Public Corporations and Public Policy in Canada, edited by Allan Tupper and G. Bruce Doern, 14988. Montreal: Institute for Research on Public Policy, 1981. Volk, L.C. "The Social Effects of Rural Electrification in Saskatchewan." MA thesis, University of Regina, 1980. Warling, John D. "The Electric Power Industry in Ontario: An Analysis of the Operations of an Integrated Power System." BA thesis, University of Toronto, 1965. Wass, Philmore B. "The New Hampshire Electric Cooperative: Its History and Influence on Rural Living, 1935-1950." PHD thesis, Columbia University, 1951. White, Clinton O. Power for a Province: A History of Saskatchewan Power. Regina: Canadian Plains Research Centre, 1976. Wilkes, James, D. "Power and Pedagogy: The National Electric Light Association and Public Education, 1919-1928." PHD thesis, University of Tennessee, 1973. Wyer, Samuel S. Niagara Falls, Its Power Possibilities and Preservation. Washington: Smithsonian Institution, 1925. - "Recent Power Legislation in Ontario." Canadian Journal of Economics and Political Science 2 (1936): 212-15. Young, Robert A. "Planning for Power: The New Brunswick Electric Power Commission in the 19508." Acadiensis 12 (1982): 73-99. Zaslow, Morris. The Northward Expansion of Canada, 1914-1967. Toronto: McClelland and Stewart, 1988.

Index

Acres, Adam H., 132, 198, 228, 3oir»43 Agricultural Enquiry Committee: see Jamieson Committee Ailsa Craig (Middlesex County), 171 Allan, James, N., 241 Alliston Herald, 69, 199 Alton (Peel County), 1oo Alvinston (Lambton County), 299n21 Amabel Township (Bruce County), 120 Amos, W.A., 166 Ancaster Township (Wentworth County), 75-6 Ashworth, E.M., 213 Association of Municipal Electrical Utilities (AMEU), 179, 185-6, 295n7 "Background Paper on Northern Development" (1969), 244 Bancroft Light and Power Co., 102 Banks, E.H., 239, 241 Barnes, John T., 207-8, 212-13, 299n21 Barrie (Simcoe County), 44

Bateman, George Cecil, 181, 185-7. See fl'so Wartime Industries Control Board Beach, M.W., 76, 77, 78, 81-3, 99, 250 Beach Electric Co., 81 Beaver River, 8 Beck, Adam, ix, 9, 15, 19, 26, 37, 40, 51, 52, 62, 68, 69, 95, 100, 101, 103, 145, 165-6, 169, 177, 201, 215, 220, 247, 249, 254, 260; career of, 14; and Hydro-Electric Commission of Inquiry, 21; and cost of constructing transmission lines, 27; and radial railways, 28-30; and grants-in-aid, 35-6, 63, 65-7, 78; and Orillia Water, Light and Power Commission, 44; and the uniform rate, 56,57 Beeton (Simcoe County), 85 Belanger, Aurelien, 28In37 Belfield, Robert, 30-1 Bell, CM., 113 Bell, Charles E., 102 Belleville, 200, 208-9 Berlin, 26, 271n7

Berlin convention, 20 Big Chute generating station (Severn River), 8, 9- 43- 45 Biggs, Frank C., 77, 94-5 Bill 262, An Act to Make More Equal Provision for the Cost of HydroElectric Power in Ontario, 64-5, 74. See also grants-in-aid Black, William David, 28in37 Bluhm, J.S., 124-5 Blyth Standard, 69 Bowmanville, 217 Boyer, Robert}., 244 Brampton, 97 Brant County, 240 Brant Township (Bruce County), 108, 120 Brantford, 213 Brantford Expositor, 133, J45 Brazilian Traction Light and Power Co., 167 Brewin, Andrew F., 230 Brigden (Lambton County), 204 British Columbia Power Commission, 16 Brockville, 127, 128 Bronte (Halton County), 75 Bruce County, 61, 99,

318 Index 103, 106-25 passim, 232, 250, 256 Bruce Township (Bruce County), 120 Burk's Falls, 102 Burrill, John, 117 Caledon (Peel County), 100 California Railroad Commission, 122 Campbellford, 80 Campbellford Electric Power and Water Commission, 80 Canada Cement Co., 117 Canadian Countryman (Toronto), 169 Canadian Electrical Association, 29 Canadian FairbanksMorse, 226 Canadian Federation of Agriculture, 179 Canadian Forum, 231 Canadian General Electric, 226 Cargill Electric Light and Power Co., 116 Carleton County, 228 Carleton Place Public Utilities Commission (Lanark County), 227 Carmichael, Dougall, 50, 51, 64, 68, 71, 75, 77, 78, 81, 94; and grantsin-aid, 70, 74, 79 Casselman, William H., 74, 76, 78, 79, 277n6 Cataract (Peel County), 76 Cataract Power Co., 75, 76, 100, 279n4 Central Ontario and Trent System, 9, 27inio Central Ontario System, 8, 49, 50, 128 Centre Huron Liberal Association, 56 Challies, George, H., 198, 202, 222-4, 227, 228, 232 Chapman, John B., 244

Chapman, Joseph, 122-3 Chapman, W.J., 185, 216 Champan Township (Parry Sound District), 81 Chatham, 40, 299^1 Chatsworth (Grey County), 85 Chesley (Bruce County), 118 Christie, Kenneth A., 185-6, 217 Clarke, Ray, 194 Clarke Township (Durham County), 95, 97 Clarkson, G.T., 293^8 Cleland, W.B., 147 Collingwood (Simcoe County), 44, 162, 163 Collins, Alf, 183 Combined Northern Systems, 8, 9 Conant, Gordon D., 13, 187 contracts, service: see rural service contracts Cooke, John Robert, 14, 52, 63, 80, 81-2, 86, 102, 139, 147, 277n6, 292n23; and grants-inaid, 71, 92; and "power at cost," 71-2, 84-5; and Beach Electric Co., 83; and Jamieson Committee, 88; and C.B. Sissons, 96-7; and W.B. Foshay, 114, 115, 121; and the uniform rate, 132; and Robert Dezell, 135-6; and rural service charges, 137; and rural service contracts, 143-4, 145-6; and Rural Power District Loans Act, 156-7 Cornwall Township (Stormont County), 51-3 Courtright (Lambton County), 204, 299n21 Croft Township (Parry Sound District), 81 Cronin, P.F.,281n37

Curry, Harold, 166 Daley, J.E., 81 Davis, William G., 245 Day, W.H., 25, 29 Deagle, John M., 76, 77, 78, 81, 99, 279n4 Delyea, R.J., 102 Department of Munitions and Supply, 181 Derbyshire, John, 128 Detweiler, Daniel B., 147 Dewar, Kenneth, ix, 24, 25> 29 Dezell, Robert, 134-6 Dingman, W.S., 132, 136 Downer, Alfred W., 228, 3°ln43 Downie Township Council (Perth County), 58 Drainage Act, 156 Drew, George A., 13, 187, 192, 194, 195—6, 216, 222, 224, 227, 230, 231-2, 246, 3O3n2o; and the uniform rate, 2012, 203-4, 215, 219-20; and frequency standardization, 229 Drewry, G.F., 192, 193 Drury, Ernest C, 6, 13, 58, 69, 70, 128; and Lethbridge Committee, 62, 64; and grants-inaid, 65, 75, 76-7, 78 Duncan, James S., 240, 246, 253; and minimum-density requirement, 238; and Package Deal, 241-2 Dundas, 57, 77 Durnford, Richard M., 205-6, 207-8, 215 eastern Ontario, 40, 41, 57, 76, 126-30, 153, 198, 228, 287n11 Eastern Ontario Chamber of Commerce, 128 Eastern Ontario Division: see Eastern Ontario System

319 Index contracts, 142-3; and Eastern Ontario MuniciRural Power District pal Power Union, 57, Loans Act, 156-7, 158 127, 128 Federated Women's Insti"Eastern Ontario of Altute of Ontario, 236 monte" (pseudonym), Ferguson, G. Howard, 133 Eastern Ontario System, 13, 64, 70-1, 92, 101-2, 107, 113, 119, 121, 122, 9, 128, 171, 191, 201, 129, 131, 140, 141, 151, 213, 214, 217, 223, 237 Eldon Township (Victoria 153- 155- 255, 256; and Kemptville service conCounty), 178 Eldridge, William, 118 tract, 40-2; and grantsElliott, Frederick W., 111 in-aid, 77, 78,82; and Jarnieson Committee, Ellis, P.W., 62 88; and W.B. Foshay, Embury, J.W., 86 Equipment Obsolescence 114, 116, 117, 120; and and Contingency Fund, rural service charges, 138—9; and Rural Power 170 District Loans Act, 156, Erie Beach (Kent County), 3oon21 157 Erin (Peel County), 100 Finlayson, William D., Essex County, 142, 240 114 Eugenia Falls (Beaver Five-Star Program, 224 River), 8, 107, 117 Five Year Plan for PostEugenia Hydro-Electric War Rural Hydro DeAssociation, 85 velopment, 15, 222-32, Eugenia System, 8, 85, 247, 257, 260 101, 109 flat rate: see uniform rate experimental farms, 32-3 Forest (Lambton County), 204 Family Herald and Weekly Foshay, Wilbur Burton, Star (Montreal), 3, 17, 103, 108-25, 250 Foster, T. Kenzie, 232 155 Farmers' Advocate (LonFoxboro (Hastings don), 169 County), 86 Farmers' Sun (Toronto), Freeborn, J.W., 171 27, 50, 67-8, 69, 71, 79, free power, 155, 161-6, 101, 102, 117, 251, 254; 169, 173, 175, 293n30. and J.R. Cooke, 14; and See also rural electrificathe uniform rate, 58, tion, promotion of 68, 134; and Lethbridge Freeport Farmers' Club, Committee, 62, 63-4; 50-1 and Bill 262, 65; and frequency standardizagrants-in-aid, 68, 98-9; tion, 228-9, 230 and rural rate classifica- Frontenac County, 127, tions, 85-6; and Jamie142, 172 son Committee, 91; and Frost, Leslie Miscampbell, independent power 13, 239, 240, 246, 253; companies, 112; and and Package Deal, 241W.B. Foshay, 119; and 2 rural service charges, 138-9; and rural service Gaby, Frederick Arthur,

27, 41, 44, 45, 52, 86, 92, 97, 115, 172, 292n21, 292023; career of, 15; and the uniform rate, 60; and grants-inaid, 80, 81; and Jamieson Committee, 90-1; and independent power companies, 102, 108; and eastern Ontario, 127-8, 129; and rural service contracts, 142 Gadsby, G.M., 104, 283n11 Galbraith, John Kenneth, 4 Gathercole, George, 245 Gatineau Power Co., 128 Georgian Bay Division: see Georgian Bay System Georgian Bay Municipal Electric Association, 162 Georgian Bay System, 9, 117, 124, 171, 191, 201, 214, 217-18, 223, 237 Godbout, Adelard, 16 Goderich (Huron County), 55-6, 198, 204, 206 Goderich Board of Trade Hydro Committee, 567-59 Goderich Signal, 56, 69 Goderich Water and Light Commission, 142 Godfrey, John M., 78 Gosfield South Township (Essex County), 184 grants-in-aid, 35, 67, 69, 74, 87, 92, 97, 98, 130135- 153, 164, 173, 180, 192, 197, 205, 210, 211, 219, 223, 234, 238, 239, 240, 241, 247, 249, 250, 253, 255, 257, 2589, 278n27, 278n28; applied to primary transmission lines, 64-6; applied to secondary transmission lines, 70-

320 Index 2; and independent power companies, 7583; cancellation of, in southern Ontario, 2423; in northern Ontario, 243-5. See also HydroElectric Power Commission of Ontario; rates; rural electrification; Rural System Gray, Andrew W., 102 Greenlaw, Frank Howard, 277n6 Greenock Township (Bruce County), 108, 115-16 Gregory, W.D., 6 Gregory Commission, 6, 49, 70, 85, 102-3, 275n9, 284n37, 293 ^8 Grey County, 122, 226-7 Groves, William H., 11213, 115, 122 Grube, George, 231 guarantee contracts, 289n53, 295n56 Guelph, 208-9, 240, 271n/ Guelph Board of Light and Heat Commissioners, 210 Hallatt, H.H., 94 Hallowell Township (Prince Edward County), 80 Halton County, 75, 240 Hambley, J. Mervin, 239, 3°2n5 Hamilton, 26, 55, 57, 197, 200, 213, 240, 271n7 Hamilton Chamber of Commerce, 61 Hanna Chute (Muskoka River), 8 Hannigan, T.J., 59; and grants-in-aid, 70; and W.B. Foshay, 111, 112, 114—15, 118; and rural service charges, 151, 152

Hanover (Grey County), 117, 171 Hay, Alex, 183-4 Henry, George S., 13, 129, 132, 140, 146, 151, 153- 256 Hepburn, Mitchell, 13, 14, 15, 18, 129, 140, 146, 148, 153, 158, 166, 187, 224, 228; and rural service contracts, 145; and rural service charges, 147, 151; and minimum-density requirement, 173 Hepworth (Bruce County), 120, 122 Hillier Township (Prince Edward County), 80 Hillsburgh (Peel County), 100 Hogg, Thomas H., 158, 179-80, 216, 219, 231, 233, 29on62; career of, 15; and wartime construction moratorium (wwn) 182-3; and the uniform rate, 210-11; and maximum rate, 211-12, 214-15 Holden, Otto, 241 Holstein (Grey County), 207 Houck, William L., 176, 178, 187, 201, 203, 216 Howe, C.D., 181 Hughes, Thomas, 248-8, 282n1 Huron County, 198, 227 Hydro: see Hydro-Electric Power Commission of Ontario Hydro-Electric Commission of Inquiry (19056), 21 Hydro-Electric Power Commission of Ontario (HEPC): system growth and amalgamations, 79, 39, 191, 214, 216, 286n1; membership on,

13-14, 256, 27ini2; origins of, 20-1; and expropriation, 21-2, 42, 44, 103, 111, 113, 117, 119, 120, 123, 250; and relations with municipalities, 23-5, 50, 2512, 259, 272n5; and technological innovation, 26-7, 30-4, 37, 226; and procedure for signing rural service contracts, 40, 41, 46-9; and relations with independent power companies, 52-3, 74, 99, 1023, 106-25, 126, 179, 250, 253, 279n15, 284H37; and domination of rural power market, 99, 102, 24951, 253-4; and relations with dominion government, 178-9, 181-2, 187, 195. See also rates; rural electrification; Rural System Hydro-Electric Power Extension Fund, 65 Hydro-Electric Railway Association of Ontario, 60, 61 Hydro Users Association (HUA), 134-6 Ingersoll (Oxford County), 32 Inglis, George R., 203 Insull, Samuel, 109, 119, 125 International Power Co., 181, 187 Iroquois (Dundas County), 76, 81 James, T.C., 43, 109-10, 111,

112

James, T.K., 2gon62 Jamieson Committee, 88— 91, 133, 140, 203, 251, 28in37

321 Index Jamieson, David, 88, 90 Janes, Charles, E., 236 Jeffrey, Richard Thomas, 18, 28, 30, 31, 37, 84, 94, 97, 161, 163, 167, 176, 191, 210, 218, 252, 259, 2901162, 2921127, 300025; career of, 15; and Rural Rate Committee, 47-9, 66, 87, 155; and Lethbridge Committee, 62; and grants-in-aid, 75-6; and rural service charges, 137, 152, 289^0; and free power, 162, 164; and wartime construction moratorium (wwn), 180, 182, 183, 184, 185, 187; and the uniform rate, 200, 2089 Joint Rate Committee, 223, 28, 35, 37, 259 Jolliffe, Edward B., 202, 224 "Junius," 101 Kaministiquia Power Co., 8 Keith, William, 28in37 Kemp, Robert H., 172 Kemptville, 40-2, 46, 53, 250 Kemptville Milling Co., 4i, 42 Kennedy, J.W., 128 Kennedy, Thomas L., 13, 201, 216, 225, 232, 246 Kent County, 142, 172 Kenyon Township (Glengarry County), 128 Kilmer, G.H., 78 Kincardine (Bruce County), 12 Kincardine Review-Reporter, 112 Kingston, 102, 127, 191 Kingston Whig-Standard, 183 Krug, William, 118

McNaughton, Duncan A., 172 MacPhail, Agnes, 141-2, 199, 232 McQuesten, Thomas B., 162, 192 Madawaska System, 9 Maganatawan River, 81 Magrath, Charles A., 52, 125, 137, 255; career of, 14; and independent power producers, 11314, 115, 116-17, 122, 123; and rural service charges, 139 Maguire, C. Alfred, ill, 112, 114, 115, 118, 292n23 Maloney, James, A., 238 Manby, A.W., 241 Manitoba Power Commission, 16 Marshall, Thomas A., 79 Martin, Victor, 228 Mavor, James, 104-5 May, F.H., 217 Meighen, Arthur, 292023 Merrickville (Grenville County), 42 metals controller, 181, 185-7 Midland (Simcoe County), 44 Milligan, John C., 52-3 Mills, Wilson H., 151-2 minimum-density requirement, 154, 172-5, 190, 229, 231, 233, 235Macaulay, Robert W., 244 6, 237, 238, 242, 255, McBride, A.H., 37 2 n MacBride, Morrison 94 53> 295n56- 3°4n3JSee also Hydro-Electric Mann, a8in37 Power Commission of McCammon, J.W., 182 Ontario; rates; rural McCrimmon, A. Murray, electrification; Rural 152, 167-8, 171, 192, System 29on62 Mitchell, Osborne, 180-1, Macdonald, Donald A., 190-2 129-30, 141 Morrisburgh (Dundas McEwing, Ross, A., 228, County), 8 232 Morrissey, P.P., 103, 169Mackay, William J., 134 70 McKeough, Darcy, 245

Lambton County, 172 Lennox and Addington County, 172 Lethbridge, John Giles, 51, 58, 71, 139, 28m37 Lethbridge Committee, 58, 62, 65, 71, 98, 130, 132, 199, 218, 277n6; report of, 60-1 Leuchtenberg, William E., 5 Lewis, A.C., 70 Lincoln County, 194—5 Load Building Organization, 168—9, 294n41 load factor, 31-2, 273n26. See also rates Lobo Township (Middlesex County), 51, 53 London, 7, 26, 55, 97, 187, 204, 27in7 London Chamber of Commerce, 132 London free Press, 194 Loucks, Peter, 118 Lowe, H.L., 290062 Lucas, I.E., 116, 119 Lyon, J.W., 61 Lyon, T. Stewart, 154, 160-1, 253; and rural service charges, 147-51; and free power, 161-2; and urban subsidies of rural rates, 162-4; and minimum-density requirement, 173, 294n53

322 Index Municipal Act, 118-19 Muskoka River, 8 Muskoka System, 8, 9 National Electric Light Association (NELA), 103-4, 106, 116, 119, 125. See also Stewart, E.A. Nelles, H.V., ix, 29, 251, 254 Neustadt (Grey County), 171-2 Nevada, California and Oregon Telegraph and Telephone Co., 122 Newboro (Leeds County), 102 New Brunswick Electric Power Commission, 16 Newcastle (Durham County), 95 New Hamburg (Waterloo County), 7 New Ontario, x, 243 New York Stock Exchange, 123 Niagara Division: see Niagara System Niagara Falls, 9, 57, 59, 97, 197, 199, 210, 219

Northern Ontario System (NOS), 9 Norwich (Oxford County), 25 Nova Scotia Power Commission, 16

Old Ontario, x, 7, 9, 16, 20, 26, 92, 114, 152, 161, 171, 175, 189, 219, 242, 243, 248, 250 Oliver, Farquhar, 136, 228, 231; and the uniform rate, 134; and minimum-density requirement, 172-3; and frequency standarization, 229 Oliver, James, 187 O'Neill, John, 277n6 Ontario Agricultural Committee of Inquiry, 203, 220 Ontario Agricultural Council, 176 Ontario Associated Boards of Trade, 57 Ontario Association of Rural Municipalities, 222 Ontario Chamber of Agriculture, 178 Niagara Falls Review, 133 Niagara Hudson Co., 148 Ontario Concentrated Milk Producers AssociNiagara in Politics, 104-5 ation, 174, 179 Niagara System, 7, 8, 9, Ontario Denison Tile Co., 56, 101, 128, 129, 171, 201, 209, 214, 223 94 Ontario Department of Nipissing System, 8, 9 Agriculture, 226 Nixon, Harry C., 13, 228, 3oon26; and minimum- Ontario Energy Board, 246 density requirement, Ontario Federation of Ag174; and wartime conriculture (OFA), 226 strution moratorium Ontario Federation of La(wwn), 180; and minibour (OFL), 229 mum monthly bill, 194Ontario Hydro: see Hy5; and the uniform dro-Electric Power rate, 198, 202, 203 Commission of Ontario Northern Ontario ProperOntario Hydro Power ties (NOP), 192, 223, Uniform Rate Associa233, 234, 235, 237, 239, tion (OHPURA), 57, 58, 241, 243-4

61, 127, 130, 131, 132, 135, 196, 197, 204, 219, 258. See also uniform rate Ontario Municipal Electric Association (OMEA), 36, 68, 169, 170, 179, 1856, 200, 201, 210, 212, 215, 218, 219, 227, 234, 252; and relations with HEPC, 24; and the uniform rate, 57, 59-60, 301043; and Lethbridge Committee, 61; and grants-in-aid, 70; and rural service contracts, 144; and rural service charges, 146, 151, 152; and Committee on Post-War Problems, 200, 214; and Western Ontario District No. 8, 206; and "maximum rate," 216-18 Ontario Power Co., 8-9, 15 Ontario Power Commission, 21 Orillia (Simcoe County), 43-6- 53' 77' 79, 99' 199, 250, 275ng Orillia Packet, 44, 45 Orillia Water, Light and Power Commission, 43-6, 250; request for grant-in-aid, 77, 79-80, 279m5 Orono (Durham County), 95 Oshawa, 130 Osnabruck Township (Stormont County), 53 Ottawa, 67, 228, 240, 2991121 Ottawa and Hull Power Manufacturing Co., 8 Ottawa Hydro Commission, 162 Ottawa System, 8, 9, 128 Ottawa Valley Power Co., 181

323 Index Ottinger, Albert, 105 Otto Holden generating station, 243 Overall, Cyril A.G., 203 Owen Sound, 85, 109, 111, 134, 191 Owen Sound Sun-Times, 109, no, 122 Package Deal, 241-2 Palermo (Halton County), 75 Parks, Frank, 3oon26 Peel County, 97 Pembroke, 130 Pennsylvania Electric Association, 104 Pennsylvania Power and Light Co., 283nn Perth County, 172 Pierdon, W.G., 94, 2gon62 Polymer Corp., 204 Pope, W.W., 81, 83 Port Arthur, 210, 231 Port Arthur System, 8 Port Elgin (Bruce County), 106-25 passim Porter, Dana, 238, 240 "power at cost," 11-12, 22, 23, 34, 35, 37, 50, 53' 54- 56, 59' 61, 68, H 71' 72' 85' 91' 96' 100, 111, 125, 130, 133, 137, 149, 153, 166, 169, 172, 175, 192, 193, 196, 2O2, 2O3, 2O5, 211,

2l6,

217,

257,

2l8,

22O, 244,

258

Power Circus, 32, 41, 169, 223-4 Power Commission Act, 21, 26, 44, 46, 50, 51, 75, 96, 113, 167, 168, 171, 172, 217, 240, 243, 254' 256 Power Control Act, 179, 182 power controller, 181-7, 191, 296nio

charges; Rural System; uniform rate Rate Stabilization Fund, 170-1, 176, 212, 213. See also rates Rating Committee, 18890 Rawdon Township (Hastings County), 84 Rea, Ken, 225 Reid, George A., 200 Renfrew County, 239 Rideau System, 8, 9 Rio de Janeiro Tramway, Light and Power Co., 167 Ripley (Bruce County), Quebec Hydro-Electric 207 Commission, 16 Robarts, John P., 244 Quebec power contracts, Roberts, M.J., 124-5 128, 129, 151, 170 Robertson, Charles A., Quebec Provincial Public 117, 155, 157 Service Board, 182 Robertson, David, 107 Queenston-Chippawa Robinson, F. Oliver, 228 generating station, 9, Rodney (Elgin County), 35, 213 39 Roebuck, Arthur, 102, radial railways, 29-30 162, 170, 278n27 Ralston, J.L., 178 Roosevelt, Franklin D., Rapids Power Co., 8 17, 124 rates: calculation of, 11Rose, Mr Justice, 118-19 12, 22, 28, 83-4, 257-9, Ross, George W., 20-1 273ni5; customer clasRosseau (Muskoka sifications, 49, 54, 85-6, County), 207, 214, 174, 192, 193, 246, 2991121 290068; "arbitrary Rowland, John, 107, 108 rates," 84; revisions to Royal Bank of Canada, rate schedule, 87, 137, 226 165, 188-95, 233' 234-5, Rural Co-operator (To241, 242, 246, 257; ronto), 193 "maximum rate," 129rural electrification: and 30, 203, 211, 214-18, labour-saving benefits 220, 256; minimum of, 3, 5, 32, 89, 143, monthly bill, 190, 193, 159, 226, 227, 248, 298n42; "diversity," 273n22; and rural depo208-9. See also grantspulation, 4, 25, 161, in-aid; Hydro-Electric 225, 227; in northern Power Commission of Ontario, 9-10, 88, 228, Ontario; Rate Stabiliza229-30, 233, 234, 235, tion Fund; rural electri237, 239, 240, 241, 243fication; rural service 5, 249-50; promotion

Prescott (Grenville County), 41, 42, 81 Preston, 27in7 Price, William H., 92, 144-5 Princeton (Oxford County), 59 public ownership, criticisms of, 10-11, 26, 103-6, 251 2&4n25 Public Utilities Consolidated Corp. of Arizona (puce), 108, 115, 118, 120, 122-5. See also Foshay, Wilbur Burton

324 Index of, 11-12, 32, 36-7, 67, Rates Suspense Account, 171, 176, 189 155,163,168-9, 223, 225-6; in Canada, 16Rural Power Districts 18; in the United (RPDS): administration of States, 17, 105-6, 248- 47-9, 5°, 19*, *93' 9, 259, 283nn, 2&3ni4; 252; financial standing influence of Second of, 93-4, 137, 140, 171, World War on, 17-18, 189-90, 233, 234-5, 177-96, 197, 220, 229; 237, 257, 289^0; amalin Europe, 30, 248-9; gamation of, 188-93, and power shortages, 195, 230, 234. See also 36, 50, 226; influence of Rural Operating Areas First World War on, 36, Rural Power District Ser177; in eastern Ontario, vice Charge Act, 139128-30, 153; influence 40 of Depression on, 144, Rural Power District Ser152-3, 154-75 passim, vice Charge Amend197, 220; since Second ment Act, 174 World War, 221-47, Rural Power District Ser260. See also experimenvice Suspense Account, tal farms; free power; 140 Hydro-Electric Power Rural Rate Committee, Commission of On47-9, 66, 87, 155. See tario; Load Building also rates Organization; minirural service charges, 34, mum-density require35, 89, 91, 95, 127, 135, ment; rates; rural 136-40, 146-53, 154, operating areas; Rural 155, 190, 191, 192, 193, Power District Loans 201, 202, 229, 235, 257, Act; rural power dis258, 288n2g, 2gon64. tricts; rural service See also Hydro-Electric charges; rural service Power Commission of contracts; Rural System Ontario; rates; rural Rural Electrification electrification; Rural Administration (REA), System rural service contracts, 35, 17 Rural Hydro-Electric Dis49, 89, 91, 94, 95, 96, 127, 136, 140-6, 153, tribution Act, 90, 154, 252, 256; cancella282n59 tion of inactive, 92-3; Rural Loans Department, introduction of five159 year, 144-6; and guarRural Operating Areas antee contracts, 145. See (ROAS), 230, 233, 234-5, also Hydro-Electric 237, 247, 257. See also Power Commission of Rural Power Districts Ontario; rates; rural Rural Power District electrification; Rural Loans Act, 154-60 pasSystem sim, 164, 169, 223, 29ini2, 292ni4, 2g2ni5, Rural System: relationship to HEPC'S non-ru302n5 ral clientele, 5, 7, 10, Rural Power District

*8, 33, 37-8, 98, 162-4, 171, 183, 188, 197, 221, 259; political interference with, 10, 18, 153, J 54/ J75/ 206, 210, 21516, 217, 222-3, 231, 246, 252-9; "optimum saturation" of, 176, 219, 222, 224, 233, 236-8, 239, 242-3, 248, 292n27, 304n32, 305n37; and suburban expansion, 239-40, 241, 245, 259. See also HydroElectric Power Commission of Ontario; rates; rural electrification Rural Travel Shop, 169. See also Power Circus St Andrews (Stormont County), 51-3 St Catharines, 57, 210, 214, 216 St Lawrence Power Co., 52-3 St Lawrence System, 8, 9, 41, 42, 128 St Mary's (Perth County), 217 St Thomas (Elgin County), 40, 182 Saltfleet Township (Wentworth County), 67 Saltford (Huron County), 142 Sao Paulo Telephone Co., 167 Sarnia, 204, 205, 209, 214, 219, 220, 240, 2991121 Sarnia Canadian-Observer,

205, 206, 212 Sarnia Hydro-Electric Commission (SHEC), 204-19 passim, 258 Saskatchewan Power Commission, 16-17 Sauble Falls generating station, 109, no, 113 Saugeen Electric Light

325 Index 193-4; and Five Year plan, 224; and frequency standardization, 229 Toronto Hydro-Electric Commission, 62, 170, 213 Toronto Telegram, 167, 219; and Orillia Water, Light and Power Commission, 44, 45; and Lethbridge Committee, 612; and Bill 262, 65; and W.B. Foshay, 109; and the uniform rate, 132Tara (Bruce County), 61, 3; and rate reductions, 107, 111—12, 121, 124 166; and minimum Taylor, David J., 117, 134, monthly bill, 194; and 157 the "maximum rate," Thamesford (Middlesex 215-16 County), 86 Toronto Township (Peel Thompson, Thomas County), 201 Alfred, 28in37 Toronto World, 63 Thunder Bay District: see Tottenham (Simcoe Thunder Bay System County), 207 Thunder Bay System, 8, Trades and Labor Con192, 223, 233, 234 gress of Canada (TLC), Thurlow Township Rate186 payers' Association transmission lines, pri(Hastings County), 148 mary, 275n21, 276n26; secondary, 275n21, Tinney, Herbert, 80-1 276&n26 Tiverton (Bruce County), Trent System, 128, 271n10 120 Toronto, 7, 55, 57, 67, 68, Trewartha, Nelson William, 281n37 191, 197, 200, 202, 209, 247 Twenty-Two Point pro213, 217-18, 219 South Falls (Muskoka gram, 202, 224 Toronto Daily Star, 65 River), 8 Sparrow Lake (Muskoka Toronto Globe, 136, 163, 199, 201, 231, 284n25; Underwood (Bruce County), 199 County), 120 and Orillia Water, Light Sparta (Elgin County), uniform rate, 56-72 pas151-2 and Power Commissim, 89, 101, 126-7, Special Rating Commitsion, 44, 45; and the 130-6, 189, 192-4, 195, tee, 148-50, 2gon62 uniform rate, 60, 199, "Standard Interpretation 197-215 passim, 218, 206; and grants-in-aid, 64; and Bill 262, 65; 219, 220, 233, 234, 246, of Rates" (first issued in 1913), 23 3oon26, 301n43; arguand C.B. Sissons, 96-7; Stanford Township (Weiand W.B. Foshay, 109; ments for, 58-9, 132-3, land County), 207 and rural service con198-9, 200, 201, 205-6, Stewart, E.A., 105-6, 116, tracts, 145; and free 207-8, 212-13; argu283n14, 283n16 power, 165-6; and minments against, 59-60, Stone and Webster Engiimum monthly bill, 132-3, 199, 200-1, 206,

and Power Co. (SELPC), 106—25 passim Saugeen Township (Bruce County), 115-16, 118 Saunders, Robert Hood, 228, 231, 240; and rate increases, 234-5 service charges: see rural service charges Severn River, 8, 9, 43 Severn System, 8 Seymour Power Co., 95 Seymour Township (Northumberland County), 80 Shallow Lake (Grey County), 122 Shantz, Allan B., 89 Shortt, Ernest £.,117 Sinclair, William E.N., 156 Sissons, Charles B., 95-7, 145, 253, 282n59 Sitzer, I.K., 236 Smith, J. Albert, 170 Smith, W.S., 134 Southampton (Bruce County), 106-25 passim Southern Ontario District (SOD), 191, 193 Southern Ontario System (sos), 9, 214, 221, 223, 226, 233-7 passim, 239, 240, 241, 243, 244, 245,

neering Corp., 149-50, 2gon62 Stratford (Perth County), 105, 271n7 Strike, W. Ross, 217, 238 Sweet, Aaron, 81-2 Swift Rapids (Severn River), 43, 44, 45 Symington, Herbert James, 181-7 passim, 195. See also Wartime Industries Control Board

326 Index 210, 213-14. See also Ontario Hydro Power Uniform Rate Association; rates; Sarnia Hydro-Electric Commission United Fanners of Ontario (UFO), 6, 24-5, 101, 160, 168, 178, 251; and the uniform rate, 69, 131; and rural service charges, 140; and Hydro Committee, 143, 160-1, 166; and rural service contracts, 143, 145; and free power, 166 United Farm Women of Ontario, 98, 142 United States National Grange, 104 Walkerton (Bruce

County), 107-11 passim, 113, 116, 120, 124 Walkerton Electric Light and Power Co. (WELPC), 106-25 passim war-revenue sales tax, 178-9, 195 wartime construction moratorium (wwii), 182-8, 195 Wartime Industries Control Board (WICB) (WWII), 181, 195, 200, 229, 296nI0 Wasdell's Falls, 8, 9 Wasdells System, 8, 43, 44 Waterloo, 97, 105, 271n7 Welland, 57, 144, 210 Wellington (Prince Edward County), 90, 95 Wentworth County, 184

Western Ontario Associated Boards of Trade, 57, 206 Weston, 59 Whitney, James P., ix, 21, 26, 220 Wiarton (Bruce County), 109, 110-11, 113, 124 Williamsburgh Township (Dundas County), 76 Winchester (Dundas County), 82 Windsor, 67, 97, 204, 206, 209, 229 Windsor Border Cities Star,

133 Wingham Times, 69, 83 Woodstock (Oxford County), 105, 133, 271n7 Wyer, Samuel, 104 York County, 185-6