December 19, 2001
‘Nothing will go wrong,’ Harris vows as new firms allowed in.
Opening Ontario’s electricity market to competition will not mean blackouts or price spikes, Premier Mike Harris vowed yesterday.
But Harris would not promise flat out that private hydro sellers will not increase the cost of electricity.
“As you know, I can’t tell you in a competitive market what people will charge,” he told reporters in announcing that the provision and sale of electricity will be opened to competition on May 1 next year allowing private companies to wade into the market.
The severe power shortages and price increases that crippled Alberta and California when deregulation occurred won’t be repeated here, he said.
“Nothing is going to go wrong, the supply is there,” he said
Harris said he is confident the end of the provincially owned monopoly will benefit consumers insisting that pricing will be determined by market forces, but with competition, prices will be lower.
“This will clearly lead to better service, more choice and lower rates than if we had not taken this decision,” Harris said. “I’m convinced that just as (deregulation) was done properly in Australia, or in the U.K., or Pennsylvania, rates will be substantially lower than they would have been had we not taken this decision.”
The new electricity market will replace the current system, in which almost all power is supplied at a regulated price by Ontario Power Generation, a successor to the old Ontario Hydro. In the new system, businesses and consumers will be free to buy electricity from any of a number of suppliers. Suppliers will not only include power plants now owned by the government, but any new generating plants built by the private sector.
Confirmation of the open market comes less than a week after Harris announced the selloff of Hydro One, the Crown corporation responsible for transmitting electricity through the hydro grid. It, too, is a division of the former Ontario Hydro, and has $10 billion in assets. It is to be privatized through the public sale of shares but Harris said last week he was not worried that privatization would lead to skyrocketing rates for the delivery of energy because fees charged will continue to be regulated.
Deregulation, first unveiled in 1998, has been delayed three times to allow smaller electricity sellers to prepare for the shift to competition.
New Democrat Leader Howard Hampton has vigorously opposed both deregulation and the selling of Hydro One. He urged Harris to hold off on the sale until after the next provincial election, giving voters an opportunity to vote on the plan.
He said deregulation and privatization have led to dramatic rate hikes in many U.S. states once pre-set price controls expired, including California, New York, Montana and Pennsylvania.
“In every case where they have moved to privatize and deregulate the electricity system, prices are now higher, in some cases they’re much higher, 40 per cent higher than they were before,” Hampton said.
Hampton said the more companies involved in delivering electricity to consumers, the more middlemen will be looking for their own slice of profit.
“All of these new profit-takers want their money and it will be the manufacturers and the consumers of this province who will pay for this,” he said.
Liberal MPP Sean Conway said while his party supports some level of competition in the generation of electricity for sale at market prices, he does not think Harris is being realistic when he predicts prices will not increase for consumers.
“I don’t expect that prices are going to go down,” he said, adding that there is still billions of dollars worth of stranded debt from the old Ontario Hydro that has to be paid. “We have a very substantial amount of old hydro debt that has got to be paid down in some way.”
Conway said a lack of investment in infrastructure to deliver electricity — including rotting hydro poles — must be addressed and the cost of retrofitting much of the system will be passed along to consumers.
But he did concur with Harris that supply of electricity should not be an issue for Ontarians in the near future.
“Having said that, last summer in the heat wave, we had to import power to keep all the lights on and the air conditioners on in Ontario,” he said of the soaring temperatures in early August.
Tom Adams of Energy Probe said electricity prices will likely go up by 20 per cent under the restructuring, but argued that something had to be done to repair the province’s deteriorating power grid.
“Ontario’s power system before we started this electricity restructuring was crippled and was in a declining condition,” said Adams. “In the long term, I’m reasonably confident that this restructuring is going to work out and restabilize our power system.”
David McFadden, a former Tory MPP who now represents the various industries vying to have the power market opened up, said Ontario is different from other jurisdictions who have restructured.
“We should have a 20 or 30 per cent surplus in terms of production, that is what gives us competition,” said McFadden. “The problem in California was when they opened the market, they had to import power from outside of the state just to meet their base demand.”