Colin Perkel, Canadian Press
National Post
June 22, 2004

New power caps ease taxpayers’ burden   by Colin Perkel, Canadian Press

Toronto: Forcing Ontario consumers to dig a little deeper into their pockets for electricity appears to have staunched the flood of red ink caused by the artificially low price cap imposed by the former provincial government.

While exact figures have yet to be calculated and it is still early, the interim pricing system put in place by the Liberal government April 1 has closely approximated the roughly five cents a kilowatt-hour it actually costs to produce power.

"The price-points certainly look like they’re reflecting the scenario we were aiming to have, and that’s that prices need to more closely reflect the cost of generating electricity," Shane Pospisil, an assistant deputy minister with the Energy Ministry, said Tuesday.

"So far it looks like the numbers are in that range."

Following the double whammy of an unusually hot summer and tight supplies in the summer of 2002 that led to soaring electricity bills and a consumer revolt, then-Tory premier Ernie Eves capped retail prices at 4.3 cents a kilowatt-hour.

However, with wholesale prices soaring well above that level, taxpayers ended up picking up the difference – about $918 million.

With the province staring at a mammoth deficit, the new Liberal government said the situation was not sustainable and it would break a campaign promise to maintain the cap.

Last winter, it brought in legislation raising the price cap to 4.7 cents for the first 750 kilowatt-hours used and 5.5 cents for amounts above that, effective April 1.

The government estimated the extra cost to the average homeowner would be between $5 and $15 a month.

Energy analyst Tom Adams said the higher caps have shifted the cost of power from taxpayers to users.

"The weighted average price is floating right around the weighted average revenue," said Adams.

"So the treasury is not in or out of the money yet. It’s very close to zero."

Taxpayers could still be on the hook if the weather turns extreme as it did in the summer of 2002, or if the province’s nuclear power plants start acting up as they did the same year – or if both happen at the same time.

Even so, the supply situation is far healthier than it was.

In the past 16 months, more than 3,000 megawatts of additional supply – enough to power 2.4 million homes on an average spring day – have come online through refurbished nuclear-power plants or new gas-fired facilities.

That has pushed reserve margins higher and left the province less reliant on expensive imports.

Still, the current system is only temporary. As of next May, it will be up to the Ontario Energy Board to set power prices in the province, while a new power authority will have to figure out long-term supplies as the province moves to shut down its coal-fired plants by 2007.