Martin Mittelstaedt
Globe and Mail
January 10, 2001

Several highly profitable companies, including Imperial Oil and Dofasco, are among the businesses receiving subsidized electricity rates from Ontario Power Generation, according to regulatory filings by the companies.

Other businesses that have been granted special low-cost electricity from the provincially owned utility include energy giant Amoco, forest products companies Kimberly- Clark and Bowater, and chemical producer CXY Chemicals.

In a statement yesterday, Energy Minister Jim Wilson said the special deals could be phased out in as few as two years if Ontario Power creates more competition by selling its generating facilities and reduces its near monopoly on electricity production.

In its filing to the Ontario Energy Board, Dofasco said a rate discount it was receiving should continue because it is in the public interest for the government to help highly successful companies, such as itself, compete on world markets. It also said that if it didn’t continue receiving the special rate, it might reduce its Canadian steel production.

"It is in the public’s best interest that those leading Ontario enterprises that have otherwise competed effectively be allowed to continue to do so," Dofasco said in asking for lower rates.

But some observers were critical of the steelmaker’s public- interest claim.

"They’re dressing up their private interest as a public interest. It doesn’t wash," said Tom Adams, head of Energy Probe, an environmental and consumer advocacy organization opposed to the special rate deals.

The provincial government has refused to identify the companies receiving below-market rates for power.

It is also refusing to reveal the price of the rate deals, citing commercial confidentiality concerns.

About 8 per cent of the province’s peak electricity demand is sold to the companies at cut-rate prices. The exact number of companies receiving the subsidies is not publicly known.

But some of the companies involved gave testimony to an Ontario Energy Board hearing early last year that they should continue receiving some form of rate subsidy when the province’s electricity market opens for competition at an unspecified date to be fixed by the government later in 2001.

Under legislation passed by the Conservative government in 1998 setting up Ontario’s deregulated power market, the special rates were supposed to end when competition began.

The provincial energy regulator said in May, 1999, that continuing the low-cost sales to the big companies wasn’t in the public interest and would be a subsidy paid by all other electricity customers to the companies.

But Mr. Wilson ignored the board’s view and passed a regulation in June, 1999, granting the companies continued access to cheap power at a gradually diminishing rate for up to four more years, at which point the rate deals would end.

The low rates were introduced during the early 1990s when Ontario was enduring a business downturn and had an electricity surplus.

They were designed to help companies weather the downturn and create jobs, while helping the government- owned electricity system maintain demand for power.

Dofasco, the biggest industrial buyer of electricity in the province, told the energy board that a competitive market would cost it $7-million in extra power bills at its Hamilton electric arc furnance.

"As costs increase, the option of purchasing slabs from outside Dofasco (primarily non-Canadian sources) may become more attractive than in-house production," it said.