John Spears
Toronto Star
February 9, 2001
Delaying the opening of Ontario’s competitive electricity market has increased the cost of the new system by $41.8 million, according to estimates by the agency that will run the market.
The new figure pushes the total cost of setting up the market well beyond a quarter of a billion dollars, according to the Independent Electricity Market Operator (IMO).
Altogether, the IMO says the cost of installing the systems needed to track the complex electricity auction in a competitive market will be $285.1 million.
That figure is expected to rise, as further delays are likely before the market opens.
The numbers are contained in the IMO’s business plan, filed with the Ontario Energy Board. The costs don’t include the money utilities and businesses are spending to prepare for the new marketplace.
Under the new system, generating companies will offer electricity at certain prices, which utilities and businesses will bid for – kind of like an electricity stock market.
The IMO must install a system capable of running the auction and settling all the purchases.
Despite the high cost, IMO vice-president Bruce Campbell says the system will pay for itself – if the new marketplace produces the hoped-for efficiencies.
For example, the new market may make the price of off- peak electricity very attractive. If businesses adapt to using more power at night and less during the day, that could eliminate the need to build a new generator costing hundreds of millions.
Ontario’s competitive market was supposed to open last November, but has now been put off until at least May, probably longer. The delay is blamed on a lack of preparation by utilities and market rules that took longer than anticipated to prepare.
The delay means the IMO has had to keep extra staff on standby for months longer, so they’ll be available to troubleshoot when the market opens. It has also increased financing costs.
“Should it be decided for any reason that the market should open later than May, 2001, then extra costs will be incurred,” the business plan warns.
Tom Adams of Energy Probe, an IMO director, says that while some big costs of switching to a competitive market are evident, some of the potential savings are not.
For example, he said under a competitive market it’s unlikely that anyone would have financed and built the giant Darlington nuclear generating station.
Darlington’s huge costs helped to push Ontario Hydro to virtual bankruptcy. Electricity customers will be paying an extra levy on their bills for years to retire Ontario Hydro’s massive debt.
Adams said that in addition to the IMO, municipal utilities must all spend millions on new market systems as well.
His rough guess at the cost of transition for all parties is $500 million.
That’s a big figure, he said, but noted that Ontario residents and businesses spend $10 billion a year on electricity.
Sheree Bond of the Municipal Electric Association said the association is not opposed to the market delay, even though it means added cost – because of the risk of moving too quickly to a new system.
Energy Probe 