John Spears
Keeping the streets from going dark
September 11, 2003

 

Liberal power policy is focused on conservation, closing coal-fired plants; platform couched in environmental terms.

Since last month’s blackout, keeping Ontario’s lights on has become much more than a simple metaphor for the province’s electricity policy.

As the party leading the polls in the current provincial election campaign, how would the Liberals maintain a steady supply of power at reasonable prices?

The Conservatives and New Democrats have put their hydro policies front and centre – the Conservatives through their actions as a government, the NDP by choosing "publicpower" as its campaign theme.

The Tories have been criticized for inconsistency – they deregulated energy prices, then froze them; they tried to sell Hydro One, then retreated.

The New Democrats have a more consistent policy based on a power system that’s largely in public hands, but have taken their lumps for trying to turn back the clock to the days of Ontario Hydro.

But the Liberals have chosen to highlight other issues. Their most prominent energy promise – a pledge to shut down all coal-burning generating stations by 2007 – is couched more in environmental than in energy terms.

The Liberals do have an energy policy. They say they’d stop the sell-off of public power assets, provide a better environment for private generators and, possibly, build new nuclear plants.

But it’s not clear how all the pieces of their policy fit together; and the Liberals themselves acknowledge that many details will have to be worked out after the election, following a round of public consultation.

The Liberal energy policy document starts with a firm commitment to maintaining public ownership over the majority of Ontario’s power system.

"We will not sell any public generating stations or the transmission grid – period," the party vows. And they’ll push Ontario Power Generation (OPG) to increase its capacity, at Niagara Falls and elsewhere.

But privately operated generators would still have a place in the system.

When additional supply is needed, "independent generators that can sell power to the provincial utility at a fair rate will be able to do so," according to the Liberal policy document.

The question is: Why would an independent generator want to?

OPG currently is a behemoth sitting astride the Ontario market, generating more than 60 per cent of the supply.

Potential investors have long complained that it’s hard to compete with the sheer bulk of a company that large. The Tories promise to reduce OPG’s market share to 35 per cent by 2012. But if they’re elected, the Liberals say that won’t happen.

How would a publicly owned OPG and Hydro One mesh with private elements of an electricity system?

Liberal MPP Michael Bryant (St. Paul’s) says a new government would have to meet directly with OPG and Hydro One to sort out policy directions before it can give definite answers.

But he also claims a Liberal election victory would, by itself, set Ontario on the road to a healthier power industry.

"A change of government is going to encourage the industry, because this industry has been totally betrayed by Ernie Eves," Bryant says confidently. "So a change of government is necessarily going to be more positive for that industry."

Perhaps.

The Liberals have other ideas for increasing supply. They propose to provide $150 million in incentives for renewable energy projects, and creation of a more stable operating environment for all power companies.

But that brings back the pesky question of the market.

Investors ask: What kind of marketplace will exist, so that we can estimate our chances of earning a return on the considerable investment required to build a generator?

The Liberals say they won’t restore the spot market that produced the price spikes that triggered last summer’s consumer revolt.

Instead, they pledge: "Ontario consumers will buy their power at a regulated rate from their public power company."

That doesn’t mean energy hogs get a free ride.

The Liberals say they’ll charge a basic consumer electricity rate for the amount of power that a typical household might expect to use. Power-guzzlers who choose to use more are free to do so – but they’ll pay a higher rate for the amount they use beyond the benchmark.

They’ll also install "smart meters" in every home in the province by 2006, when the current price freeze expires. These meters measure more than the amount of power you use; they also record when you use it.

Power used at peak times, when the electricity system is under stress, would be more expensive than power used at 3 a.m., when demand is low.

But it’s hard to see how that fits with the Liberal pledge to charge a standard rate for basic power consumption.

Suppose two households each used the standard, regular-price quantity of power, but one household chose to use most of it during peak demand periods while the other managed to shift the bulk of their use to nights and weekends. Would one household pay a higher rate? The answer isn’t clear.

‘ … we are not hamstrung by some blind faith in spot-market ideology’

Michael Bryant, Liberal MPP

And such "smart metering" generally assumes there’s a spot market, based on supply and demand, determining when prices peak and when they don’t. Yet the Liberals are effectively abolishing the spot market.

Liberal strategists say these problems aren’t necessarily insurmountable.

One possible solution is for a central agency to contract for most of the power supply. The central agency would sign long-term contracts with suppliers – public or private – who would commit to sell large blocks of power at fixed prices.

The Liberals argue that generators don’t necessarily like the volatility of the spot market much more than consumers. Investors who have sunk hundreds of millions of dollars into a plant are also eager to lock in long-term contracts for sizable portions of the production at known prices.

But the Liberals say they can’t commit to a specific market model until after the election, because they’ll have to consult broadly with producers and consumers first.

Bryant says specifics aren’t crucial at this point.

"I don’t think the voters really want to play air traffic controller on electricity policy," he says.

"They just want to make sure that their government is consulting with everybody and putting something together that provides reliable, affordable electricity or increases the supply.

"The reason we are going to do a better job than the Tories is we are not hamstrung by some blind faith in spot-market ideology. Nor are we living in the ideological fantasyland of Howard Hampton."

Bryant argues that price and reliability are all voters really care about.

"I don’t think the people of Ontario care when they flip on a light switch whether that’s coming from Mother Hydro or an independent power producer, as long as it’s reliable and prices are stable and they’re seen as reasonable and affordable."

Then why not sell off some of OPG’s generators?

"Because these are seen as very much part of our public history and too important a public service to sell off now when we already own it today," Bryant says.

"To my mind, the privatization logic runs up against a brick wall when it comes to certain public assets."

The Liberals have other ideas for encouraging new supply. They’d build new transmission lines into Manitoba and Quebec. (Quebec has balked at a new transmission line to Ontario; some Liberals suggest Ontario could offer to pay the full cost of building the Quebec portion of a new link.)

The Liberals would also encourage industries capable of generating power to do so. Companies that use steam in industrial processes, for instance, can often harness the steam to run a generator as well.

And Bryant says new nuclear generators are not out of the question.

"We’re going to provide more electricity in the province of Ontario," he says.

"We need to provide a mix of electricity. Whether or not that includes new nukes is not for us an ideological question. It’s a cost-benefit analysis. We can’t afford to be ideological in a province where most of the hydro-electric opportunities have been exhausted."

Energy policy observers say there are Liberal policies raise question marks.

Tom Adams, executive director of Energy Probe, says some Liberal proposals to stimulate the investment needed to replace coal-burning generators are expensive.

They would push power prices higher, or force the government to run up debt if it decided to hold prices down.

Jan Carr, of consulting firm Barker, Dunn & Rossi, says both the Liberal and Conservative energy policies suffer from inconsistencies.

Shutting down coal plants (which will reduce supply), stimulating investment to increase supply, and regulating prices, which discourages investment, are all at odds with each other, Carr says.

"I find both the Liberal and Conservative policies lacking," he says. "They don’t have a consistent set of principles. In fact, they don’t have principles."

The Liberals and Tories have both tried to pick and choose random pieces of an energy policy, he says, when in fact a policy should be like a jigsaw puzzle where all the pieces fit.

"The only party that’s got a rational energy policy is the NDP, though I think the rationale is wrong," Carr says.