Tom Adams
Presentation to CAMPUT 2001
June 19, 2001

Successes So Far

• Reasonably solid legislative foundation
• Slow but solid progress commissioning a good physical wholesale market: on track for November
• Promotion of competition and price protection through the Market Power Mitigation Agreement (MPMA)
• Some (albeit shallow) “decontrol” achieved

Challenge: Rising publicly-backed debt/direct taxpayer losses

• Ontario Electricity Financial Corp.’s (OEFC) Year One Cash Loss = $834 m (new debt) + $235 m (taxpayers)
• OEFC’s Year Two Cash Loss = ? (debt) + $54 m (taxpayers)
• Contradicts "White Paper" promise

Challenge: Politically secured industrial discounts

• Weakens financial and physical hedging markets (AKA competition)
• Exacerbates price volatility (fewer controllable loads)
• Higher publicly-backed debt (OPG pays subsidies out of foregone dividends)
• Contradicts Bill 35

Challenge: Minimal/risky generation investment

• Only significant post-Bill 35 new generation investment (1000s MW on ice):
  Trans Alta’s Sarnia cogen (440 MW new)
• Generation investment emphasizes putting nuclear eggs back in the basket:
  OPG/Taxpayers restart Pickering A (2040 MW for $1.3 B)
  Bruce Power’s Bruce restart 3&4 (1538 MW)

Challenge: Impediments to institutional independence

• Direct government intervention at OEB:
  net load billing for T service, Bill 100, the "Directive", Regulation 00/365 (re. gas), Regulation 01/61
• OEB compensation regime like a government department rather than an independent agency (eg. OSC)
• IMO directors not appointed by members

Challenge: Higher consumer prices for regulated services

• Distribution rates up about 70% not including Payments in Lieu of taxes (PILS)
• Accelerated Debt Reduction Charge (DRC) leads to double recovery until market opens
• Rising publicly-backed debt has caused DRC growth and taxpayer hit – more coming
• Contradicts "White Paper" commitments

Challenge: Leadership gaps on market opening and customer education

• No firm market opening date
• No resolution to the historic NUG issue
• Public is poorly informed/misinformed
  re. DRC, MPMA rebates, unbundling, distribution rate increases, PILS
• OEFC’s debt “reduction” plan secret
• Some (large and small) LDCs behind schedule on market readiness