Ontario hydro’s new planner

Tom Adams

National Post March 29/2003

Four years ago, the Ontario government established the Independent Electricity Market Operator (IMO) to arrange transactions between buyers and sellers of electricity. It was designed to be for the new competitive electricity market what the TSE is for stocks – an independent commodity exchange.

Now, in a move akin to the TSE pressing investors to put their money into tech stocks, the IMO has become an advocate for investments in nuclear power over other types of electricity generation. In doing so, it has abandoned its role as an honest broker and begun to transform into a government-controlled central planning agency for electricity.

Ontario “must consider building a nuclear power plant,” David Goulding, CEO of the IMO, told Bloomberg wire services earlier this week . . . [nuclear] has to be a viable option.” In promoting new nuclear power plants, Mr. Goulding – a former executive at Ontario Hydro, a nuclear utility – has rocked potential investors in natural gas and other advanced plants. Mr. Goulding controls the switch that decides which plants get dispatched and which must sit idle. Any hint that the IMO might give one type of plant a preference over another would give any investor pause.

Other IMO directors endorse the notion of an activist IMO. As one told me this week, the IMO should be “spelling out the relative cost/benefit aspects of certain options for the province.”

The IMO’s intervention into the marketplace extends beyond power plants. It is hoping to control power use by customers. Under one plan being considered, local distribution utilities like Toronto Hydro and Hydro Ottawa would become responsible for the amount of power that their customers consumed. What would induce customers to buy less power? Paying customers when they don’t consume electricity.

Good intentions motivate these notions. The IMO wants to counteract the harm caused by Ontario Premier Ernie Eves, who gutted the market by cancelling a planned privatization of Ontario’s power system, freezing retail rates and perpetrating other economically ruinous state interventions. But one set of ill-advised measures does not deserve another.

Ontario has a sad history of central planning – one that ran up an immense debt in building overpriced, polluting power plants. In thinking it can predict future prices and future demand better than the private sector, the IMO is on track to repeat Ontario Hydro’s mistakes.

Nuclear power a “viable option”? Ask the former shareholders of British Energy, the only company that ever attempted to operate nuclear plants in a fully competitive electricity marketplace. Unable to compete against high-efficiency gas technologies, British Energy’s blue-chip shares fell to penny stock status last year and, but for temporary government bailouts, would be bankrupt. Nuclear plants similarly all but bankrupted Ontario’s power system in the 1990s, and they remain the power system’s single largest liabilities. The power system’s second largest liability? Ontario Hydro’s failed multi-billion-dollar conservation programs. The power system’s next and greatest liability: Quite possibly, an all-powerful IMO.

Tom Adams, a former director of the IMO, is executive director of Energy Probe, a Toronto-based think tank.

 

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