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Ontario Liberals' McGuinty calls for breakup of Ontario Power Generation

Financial Post - March 15, 2002
by Paul Vieira

Dalton McGuinty, leader of Ontario's Liberal party, says the province needs to break up Ontario Power Generation Inc. (OPG), the Crown-owned utility, to ensure competition in electricity production.

"I support a genuinely competitive marketplace for the generation of electricity," Mr. McGuinty said in a statement released yesterday. "By this, I mean a marketplace in which there will be several kinds of generators of electricity -- public and private, large and small, and those providing green power.

"Unfortunately, the Tory government has ... ignored the advice to break up the former Ontario Hydro's monopoly in generation."

Mr. McGuinty's remarks come about six weeks before Ontario opens its $10-billion power market to competition. In the new market, consumers can buy their power from whomever they choose.

Sean Conway, the Liberal critic for energy, cited a recommendation from a 1996 blue-ribbon commission on Ontario's electricity system, which called for an end to Ontario Hydro's 90-year monopoly on generation by moving to a competitive market, for about five power producers of equal size subject to strong regulation.

"That was not done and that was a serious mistake," Mr. Conway said. "The government clearly avoided that recommendation and they did so because the people at OPG were determined. And they made it very clear: 'We want to be a big dominant player, not just in Ontario but in the United States.'

Well, that's not the policy the government advertised."

Big industrial users in the province have called for the government to accelerate OPG's divestment process. OPG, under the province's reform of its $10-billion electricity market, must reduce its control over the Ontario market from its current 80% stranglehold to 35% by at least May 1, 2012.

It must also shed 4,000 megawatts of "price-setting" generation (power tapped at times of high demand) within 42 months of the market opening, on May 1. It started that process with the sale last week of the Mississagi River hydroelectric complex near Sault Ste. Marie, representing close to 500 MW of price-setting power (enough electricity for a city of 500,000 people).

Ron Osborne, OPG's chief executive, has said he wants to shed the required assets well before the set deadlines.

OPG is one of five successor entities that emerged from the old Ontario Hydro monopoly. Hydro One Inc., the monopoly transmitter, was another and it will be privatized in an initial public offering expected this year.

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