Distorted information

Toronto Star - July 5, 2002
Editorial

For competition to work effectively, buyers and sellers must have timely, accurate information. One need look no further than the recent WorldCom scandal to see how markets fail when the information that people have is just plain wrong.

The stock market would break down if buyers couldn't get up-to-the-minute price quotes. They'd be in even worse shape if the quoted prices were significantly different from the price they actually had to pay.

Yet the Ontario government permits its so-called competitive electricity market to operate on the basis of such distorted information.

While the market price for electricity is adjusted every five minutes, prices are only posted on the hour. But for businesses buying electricity, even the hourly posted price isn't much help. As they discovered this week, the price they are charged for electricity can be substantially higher than the posted market price. The market price takes no account of the higher costs of electricity imports, which are simply added on to businesses' electricity bills. (Residential users pay a fixed surcharge on top of the market price, which is supposed to cover the imported power they use.)

The whole point of having a continually fluctuating electricity price is to encourage users to conserve power when demand runs up against supply. But how can households and businesses adjust their usage in response to changing prices when they have no idea what the prices actually are? If they did have that information and state-of-the-art electricity meters that would actually save them money if they cut back when prices soared the market would have a chance of working the way it is supposed to.

Instead, we were treated this week to the spectacle of Energy Minister Chris Stockwell, the champion of our deregulated electricity market, pleading with users to conserve power because the vaunted market forces couldn't be made to work.

What Ontario needs is not a minister who tries to talk down demand for power when the weather is hot, but a market that enables consumers to respond to clear and current price signals.

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