Dangerous path

Toronto Star - January 9, 2001
Editorial

Energy Minister Jim Wilson keeps saying that deregulation of electricity will give Ontarians, if not lower prices, at least lower prices than Ontario Hydro would have charged if its monopoly were maintained.

This view is built on the premise that competition from private-sector electricity producers will impose a new discipline on Hydro and thereby ensure that Ontario will get all the electricity it needs at the lowest possible cost.

But that is not what happened in California, where deregulation has led to price increases of as much as 300 per cent.

Albertans, too, have faced brown outs and unexpectedly high price hikes since Premier Ralph Klein deregulated electricity there.

In the so-called bad old days, regulated utilities were responsible for ensuring that there would be enough electricity to meet the growth in demand. If a new generating plant was needed, it was built because there was virtually no risk to the utilities that were guaranteed a fair rate of return.

But in California and Alberta, no one now bears the responsibility for ensuring that there is enough electricity to meet the growth in demand. As a result, a shortage of electricity has pushed prices through the roof - and yet new sources of supply are not coming on stream.

In some part of California, heavily indebted utilities are on the verge of bankruptcy, and so are in no shape to invest in new facilities. In other areas, debt-free ultilities are making so much money from the shortages that they have little incentive to expand supply.

Queen's Park says this could never happen in Ontario because here we have enough capacity to avoid shortages for at least the next 10 years.

But that projection is based on questionable logic. It assumes, for instance, that the Americans won't buy up a disproportionate amount of our electricity supply once the market is opened up to them.

If they do, we will be forced to bid up prices to reclaim some of the energy we'll need.

That could leave Ontarians with the income to afford sky-high rates sitting in the dark. Technically, the province might not be experiencing shortages. But that is only because of the drop in local electricity use.

If this were to happen, Wilson could hardly claim that prices were lower than they otherwise would have been.

For Wilson to postulate about hypothetical outcomes that can never materialize offers Ontarians no assurance whatsoever as to what deregulation will mean.

If he is so sure that we will not face the same kind of problems that have plagued California and Alberta, let him put his money where his mouth is - with guaranteed provincial subsidies to protect consumers in the event that the world of deregulation unfolds here as it has in California and Alberta, and not as Wilson keeps promising it will.

If he isn't willing to provide that insurance policy, then what he is really telling Ontarians is that he doesn't have a clue about what will happen here. If that's the case, then let him not lead us into a deregulated morass that is causing havoc in Alberta and California.

Let him put his "leap of faith" policy on hold for the time being.

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