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Close deregulated electricity market

Toronto Star - December 10, 2003
by John Wilson

Unfortunately, the word "deregulation" did not appear in the 134-page report of the U.S.-Canadian Power System Outage Task Force. In detailing causes of the Aug. 14 electricity blackout, the report took no notice of the fact that the blackout occurred in the northeast U.S. and Ontario, the only parts of North America that are deregulated (except for Texas and Alberta, which are electricity islands).

No mention was made of warnings the U.S. government received about the blackout risks of deregulation. Ontario, however, can't afford to ignore the effects of deregulation because we risk much higher prices and more blackouts unless the government acts.

The transmission grid, the wires and towers that carry electricity from producers to big consumers like factories and cities, is like a house — a rundown house with used paint cans and rags in the corners. On a hot day, a fire starts in a pile of rags and the defective smoke alarm doesn't work. Serious damage occurs. The question is, what caused the fire?

In short, the outage task force report blames the rundown house, rags, paint cans, hot day and defective alarm, claiming that human error, untrimmed trees, lack of training and the like blacked out electricity to 50 million people.

But it doesn't say how all this mess came about. The underlying cause of the blackout is electricity deregulation.

The transmission grid is rundown because deregulation dangled big, Enron-sized dollars in front of utilities and instead of attending to infrastructure, utilities chased electricity trading money. The grid is a mess because there wasn't enough concern about controlling all these new, deregulated companies.

The old regulated utility companies that used to look after the system were broken into pieces and sold off to big energy holding companies.

In the past, the grid was only pushed to its limits to move electricity around on hot and cold days.

Now, even when the weather is mild, deregulation results in big electricity flows pushing the grid's limits as companies move electricity over longer distances to make more money for shareholders.

Executives from the North American Electricity Reliability Council (NERC), formed after the big 1965 blackout, and the Electric Power Research Institute (EPRI), the largest U.S. utility and industry research organization, had warned Washington that deregulation has made its electricity system fragile and blackout-prone. One executive noted it wasn't a question of if the grid would fail, but when.

The president of the Ohio utility that the report tries to pin most of the blame on, says the "report does not adequately address the underlying causes of the outage." He admits his utility had problems but correctly notes that many other utilities had similar problems.

The Task Force Electricity System Working Group is stacked with deregulation cheerleaders and beneficiaries. A majority of the group's members receive direct compensation from organizations in the deregulation business, represent organizations lobbying for deregulation or are appointees of the Bush-Cheney pro-deregulation government.

It's no surprise the report didn't acknowledge deregulation criticism from NERC, EPRI and the Ohio utility president.

There is still faint hope that the task force's final report will acknowledge that electricity deregulation played a major part in the August blackout. Without recognizing the problem there is little hope of fixing it.

Ontario needs to acknowledge and fix its deregulation problems. Allowing producers to charge deregulated market rates for electricity while consumers pay a phoney fixed rate isn't sustainable.

Premier Dalton McGuinty should break with the Tory legacy and close Ontario's still operating, public-money-burning, deregulated market.

We can't afford high deregulated electricity prices and more blackouts.

John Wilson, P.Eng., is an energy consultant and a former board member of Hydro One.

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