Thomas Adams
The Toronto Star
May 14, 1996

Breaking up and privatizing Ontario’s electricity system—now bloated, polluting and propped up by secret rate discounts for big business—will make the system trim, green and fair. With competition, rates would fall as every user gained the right to shop for big power bargains.

That’s what happened in the U.K., where privatization and competition have paid off big for users. According to the U.K.’s tough electricity regulator, who has rolled back excess profits and improved reliability, the 1990 privatization has made homeowners and small business big winners—their rates are down 10.1% and 11.7% respectively after removing the effect of inflation. The biggest winners have been medium and moderately large commercial and industrial users whose rates have dropped 16% to 17%. The smallest winners, but winners nonetheless, are the largest industrial users whose rates have dropped 6%.

Ontario’s natural gas users have also seen across-the-board rate cuts since competition was introduced ten years ago. Even without shopping, homeowners now enjoy rates down 36% after removing the effect of inflation.

Ontario Hydro is providing secret rate discounts to big power users like Amoco, Imperial Oil, and Sunoco because they have options for cheaper private power. Without these deals, Ontario Hydro will lose sales and its monopoly will collapse. Big business is happy with cheaper, market-priced power and the monopoly is happy with continued control. Meanwhile, small users pick up the tab. If public power was cheaper than private power in a competitive market, as public power supporters claim, then there would be no need for Ontario Hydro to buy off the competition.

Competition and privatization would help the environment. The environment would win because financial accountability would reverse Ontario Hydro’s dependence on megaprojects—risky, uneconomic nuclear plants, and dirty coal plants. Instead, cogeneration, which cuts both pollution and cost through energy efficiency, would flourish.

Although ecology was the last thing on Margaret Thatcher’s mind, the U.K.’s power privatization has been a stunning environmental winner. Before Thatcher’s privatization, the U.K. power monopoly relied on coal and nuclear production and was justifiably dubbed one of Europe’s worst polluters. Now, coal use is plummeting, replaced mostly by new, highly efficient natural gas-fired generators. Cogeneration and wind power, stalled in Ontario, are surging there. Privatization killed previously planned nuclear expansion. Instead, many nuclear stations are getting early retirement.

Competition and privatization will not solve all our power system’s environmental problems. However, tightening pollution rules would be easier when government is no longer in a conflict of interest as both regulator and polluter. When the U.K. government no longer owned coal stations, it imposed tough new rules requiring scrubbers on many stations. Competition here would lead clean producers to lobby for tougher pollution controls for their dirty competitors. Much stricter health and environmental controls are needed for the nuclear stations regardless of ownership.

Ontario Hydro’s managers, perhaps hoping to shield themselves from scrutiny, would have you believe that, since declaring the biggest loss in Canadian corporate history two years ago, the company has financially "turned the corner."

Ontario Hydro’s apparent profitability is a mirage created by aggressive accounting, setting the stage for huge future losses. For example, its accountants pretend our nuclear plants will operate for 40 years, thereby stretching out the loan repayment period. However, the accountants ignore Ontario’s own experience where we now have three prematurely closed reactors. The other nuclear utilities in Canada use the more cautious approach of assuming a 30-year lifetime. Many nuclear utilities in the U.S., where 30 years of service is the standard assumption for reactor accounting, are trying to speed up debt repayment. Just two weeks ago, a major U.S. nuclear utility, Pacific Gas & Electric, requested regulatory approval to shorten the nuclear write-off time by 15 years in order to prepare for competition.

Delaying privatization is already costing us dearly. Private owners would not neglect proper maintenance of its assets as Ontario Hydro does. Many of Ontario’s best power assets, its power dams, are literally falling apart after years of neglect. Even our greatest station at Niagara Falls recently suffered a ruptured water intake pipe supplying one generator.

Last year, Cornwall Electric, the only Ontario utility outside Ontario Hydro’s control, started up a cogenerating district heating system. The first of its kind in Canada, the system produces both power and heating for local buildings so cheaply and efficiently that it could revolutionize our energy economy. The bad news for the rest of us in Ontario is that as technologies for cogeneration make rapid improvements in cost and efficiency, the value of our existing generating stations goes down, just as computers depreciate with each improvement in technology.

Ontario Hydro’s powerful unions are the major forces opposing competition and privatization. With the average annual compensation at Ontario Hydro over $73,000 and with 649 people earning over $100,000, including 357 union members, their enthusiasm for the status quo is understandable.

Maurice Strong was Ontario Hydro’s best chairman, but he wasn’t allowed to finish the job he started. Now, the new premier, Mike Harris, has a mandate to privatize Ontario Hydro and he has the benefit of Mr. Strong’s skilful spadework. Let’s privatize carefully, and let’s do it now.