Ontario warned of energy crisis

Tom Blackwell
Ottawa Citizen
January 19, 2001

Toronto – Ontario is heading toward the kind of blackout calamity that’s hobbled California if the province doesn’t fix its flawed plan to deregulate electricity, a prominent analyst warned yesterday.

Government decisions have discouraged the kind of investment in new generation plants that’s needed to meet future demand from a booming economy, said Tom Adams of the consumer group Energy Probe.

“The lights aren’t going to go out in Ontario tomorrow,” he said, “but we need to make some important changes to our electricity deregulation to maintain our security. If we continue on the same path, we are going to be in trouble. We won’t have enough juice.”

Not everyone agrees.

The Ontario government and at least one other analyst insist the province is making progress to avoid the kind of mistakes the Golden State made with its deregulation program and has nothing to worry about.

“This is not California,” said Mike Krizanc, spokesman for Energy Minister Jim Wilson.

Mr. Adams can say that we are discouraging investment, but the thing is there are people who are coming here (to invest) and there are people looking at coming here.”

Mr. Krizanc said the province already has enough capacity to meet demand over the next 10 years. At the same time, companies have promised $3 billion in new generating facilities.

He also argued that other places, such as Pennsylvania and the United Kingdom, have had great success with deregulation, bringing consumers cheaper power prices and ample supply.

In California yesterday, another wave of rolling blackouts swept across the state as authorities struggled to contain their power supply disaster.

Gov. Gray Davis declared a state of emergency a day earlier. The crisis stems in part from the state’s four-year-old experiment with electricity deregulation.

By freeing wholesale prices but keeping caps on the price utilities can charge to consumers, the changes forced California’s two main electricity companies to near bankruptcy, leaving them without enough credit to buy the needed power.

The state has also suffered from a lack of new investment in generation, even as the demand has skyrocketed, Mr. Adams noted.

The investment climate in Ontario has also suffered because of government actions that include extending for four years the subsidized rates charged to several major power users.

The first new private power plant, in Sarnia, had to be scaled back because three of its proposed customers continued to get the discounted rates and had no incentive to buy from the new plant, said Mr. Adams.

Legislation that allows the government to roll back some electricity price increases, confusion about exactly when the market will be officially opened to competition and a moratorium on the sale of government-owned coal-fired plants have also dampened the investment climate, he claimed.

But California faced a number of unique problems, said David Drinkwalter, a consultant and former chief economist at Ontario Hydro.

As power demand exploded, several of its plants were taken off line for various reasons and few were added, partly because of environmental restrictions, he said.

“It is unlikely for us to experience the California problems,” said Mr. Drinkwalter.

“This province has sufficient generation plants today to cover demand for the immediate future and there are additional plants under construction.”


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