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Giving power to the people

Six key steps Queen's Park must take to ensure a safe, reliable power for Ontario

Toronto Star - September 19, 2003
by Ron Bartholomew and Tom Campbell

After a decade of mismanaging the electricity sector, Ontario finds itself scrambling to buy power amid rising costs and without a strategic plan to resolve the issues. Today the writers offer ways to fix the problem.

Last of three parts For part one visit How Bad is this Mess? and part two How Serious is this Mess?

How can Ontario ensure it has a reliable supply of electricity? Here are six key steps the government should take:

  1. Make a clear statement of intent to terminate the failing experiment in deregulation and privatization. All activity to sell or lease any further Ontario Power Generation or Hydro One assets should be halted.

    The 1998 legislation related to disposal of existing electricity generation and bulk transmission assets should be repealed.

    New legislation should be enacted requiring a referendum (or at least a full public hearing) before the sale or lease of any significant part of those assets. The lease of the Bruce generating stations should be terminated (bought out) at an appropriate time.

  2. Re-embrace the Ontario tradition of "public power at cost" in a competently regulated marketplace. It should not be necessary to significantly restructure OPG, Hydro One or IMO (the Independent Electricity Market Operator). However, the government should provide them with new "power at cost" mandates; to provide citizens and industries access to electricity at the lowest cost consistent with acceptable reliability of supply and protection of the environment.

    The government should create an Ontario public power authority to monitor the performance of OPG, Hydro One and IMO against their new mandates and to ensure they are integrating their activities for the common benefit of the ratepayers.

    The power authority would be required to issue an annual report to the premier and cabinet and be accountable to Queen's Park — but sufficiently at "arm's length" to avoid political interference. While its primary function would be monitoring and reporting, over time the government could consider assigning it a greater role, including having it hold in trust the outstanding shares of OPG and Hydro One — and assume the "financing" duties of the Ontario Electricity Financial Corporation. The structure should be designed in a way that avoids corporate income tax for all public power entities.

  3. Re-establish a long-term electrical system planning function that would take full responsibility for strategic supply and delivery issues, focusing on price stability and reliability of supply. Each of the existing three companies (OPG, Hydro One and IMO) would have key roles to play, which the new power authority could integrate and implement. This could include long-term supply contracts or involvement in private/public-sector partnerships to secure the needed electricity supply.

    Ontario does not have economical indigenous sources of energy for the future. Therefore, strategic planning and investment are essential and deregulation will not provide them.

    The crisis will take a long time to correct so it is imperative to get restarted on strategic, long-term planning now.

  4. Combat short-term emergency supply/demand problems by intensifying conservation. Ontario faces a severe shortage of supply reserve in the next few years and we cannot rely solely on Quebec and the U.S. for help.

    In addition to any extra generation coming from wind, solar, bio-mass or small hydraulic generators, Ontario must launch a conservation program of an intensity unprecedented in our history. Not only is conservation — including energy efficiency upgrades — needed, but serious initiatives are required to change time-of-use patterns, thus reducing peak demand.

  5. Managing total "Hydro" debts and long-term liabilities. In the absence of a need to sell assets at distressed prices, there is no rationale left for separating the debt into "asset-supported" and "stranded" components.

    Since the electricity rates always did, and always can, service and retire that debt, the total debt should be re-apportioned to OPG and Hydro One with a legislated debt retirement period. The government should tone down the misleading rhetoric on debt-financing for large capital-intensive projects.

    Queen's Park should also reinstitute the provincial debt guarantee as this provides crown corporations with the most economical financing for large-scale projects, at no additional cost to the government or taxpayers.

  6. Lobby vigorously with Ottawa to oppose global trade initiatives that could force Ontario into an undesirable continental deregulated market.

    Clearly, our position in this regard will be more secure when we have formally discontinued the deregulation experiment.

In summary, we believe that well-intended actions taken by the Ontario government to restructure, deregulate and privatize electricity supply and delivery have proven to be both unworkable and unpopular.

The last 10 years of planning and implementation of what seemed initially to be a plausible plan to lower consumer prices, now represent, unfortunately, a decade of lost opportunity — which has placed Ontario in a crisis situation for reliable supply of affordable and environmentally acceptable electricity.

In order to restore public and industry confidence, whoever forms the next government should take the above series of bold and historically important actions to re-embrace the concept of public power at cost.

(As a courtesy, the recommendations in this series of articles were given to all three political parties before the Ontario election was called.)

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