Energy Probe

John Spears and Richard Brennan
Toronto Star
April 1, 2004

Ontario faces a "severe potential shortfall" of electricity over the next 10 years unless measures are taken to boost supply and decrease demand, says the agency that keeps the power grid running.

And "the most pressing need" is in Greater Toronto, where power shortages loom because of plans to shut the coal-fired Lakeview generating station in Mississauga next year.

On a day when the province said it wants to develop 3,000 megawatts of new wind power, the Independent Electricity Market Operator, or IMO, predicted yesterday that Ontario will need to build or overhaul a whopping 11,600 megawatts of generating capacity in the next decade. That’s more than one-third of existing capacity.

The IMO noted only 750 megawatts is currently under construction.

Energy Minister Dwight Duncan said the IMO was right to point out that the province has "big problems" but says they’re not insurmountable.

"There are big decisions for this government and this legislature to take to ensure that we have an adequate and reliable source of electricity going forward," he said, adding that he will have more to say later this month on the Pickering A refurbishment project.

An alternative to building generators is to curb demand. But the IMO isn’t betting on that. In fact, it predicts demand will grow in Ontario by 0.9 per cent each year over the next decade.

Nor is the market operator optimistic about the prospects of new generation coming on stream in a hurry. It notes that a string of projects to build new power plants have been on the drawing boards for years. The IMO no longer includes any proposed projects in its plans unless they are under construction.

The biggest hole in Ontario’s supply is the Liberal government’s plan to shut down all coal-burning generators in Ontario by 2007 – starting with Lakeview in 2005.

That wipes out about 7,500 megawatts of generating capacity, or one-quarter of the province’s theoretical total capacity.

Tom Adams, executive director of Energy Probe, said even the gloomy IMO report could be too optimistic.

It predicts a second refurbished unit at the Pickering A nuclear station will return to service in 2005. That’s not a sure thing given the project’s troubled history, Adams said.

Duncan bristled when he learned that OPG had assured the IMO that Pickering A will be on line by late 2005.

"I am the sole shareholder and I and this government will make those determinations," he said.

Adams questioned the assumption that three units of the Pickering B nuclear station will last until 2013 before their pressure tubes must be replaced. The pressure tubes, in the reactor core, contain the uranium fuel and heavy water that plays a part in the nuclear reaction and carries heat to the steam generating units.

According to some estimates, the pressure tubes may have to be replaced years earlier than 2013, Adams said.

"There’s a major risk on that score."

The GTA’s position is especially precarious because of the impending loss of the Lakeview generating station. There are transmission bottlenecks limiting the flow of power into the GTA, especially the western portions. When Lakeview is shut down, a source of local power disappears.

Hydro One has several projects on the go to augment transmission lines into Toronto, but the IMO says more is needed. One possibility is a transmission line running under Lake Ontario connecting downtown Toronto with the Niagara region, but that has not yet been approved.

"We are confident there will not be any supply interruptions in the GTA by 2005, when they close down Lakeview," Duncan said.

Duncan said yesterday that the province wants to build about 3,000 megawatts worth of wind power on crown lands or almost as much power as that produced at the Darlington nuclear plant with four reactors.

Requests for proposals for constructing windmills, totalling 300 megawatts, should go out in about two weeks.

Farmers should consider their land for windmills, Duncan said.

"You can continue to farm, depending on the windmills … and some farms actually make more money having windmills on them than they do with cash crops," he said.

The problem with windmills is that they run only when the wind blows, and may not be available on days when the need is greatest – such as a hot, steamy day in July.

Planners estimate windmills will produce power 25 per cent of the time or less.

Natural Resources Minister David Ramsay said successful candidates to produce wind power will be allowed to build their windmills on crown land with a 25-year lease.

John Spears
Toronto Star
April 7, 2004

North America needs strict standards for electrical reliability, backed up by stiff penalties for breaking them, says a U.S.-Canadian task force into a huge power blackout last August.

While those standards are largely in place in Ontario, the task force blames the utility industry as a whole for not setting tight, enforceable standards.

The task force released its final report yesterday, and pointed a finger once again at Ohio utility FirstEnergy Corp. for triggering the blackout that turned off the power to 50 million people on Aug. 14.

Ontario limped through a power emergency for the ensuing week, as the blackout forced many of the province’s nuclear generators to shut down.

"The report makes clear that this blackout could have been prevented and that immediate actions must be taken in both the United States and Canada to ensure our electric system is more reliable," says a covering letter from U.S. Energy Secretary Spencer Abraham and Canadian Minister of Natural Resources John Efford.

"First and foremost, compliance with reliability rules must be made mandatory with substantial penalties for non-compliance."

Voluntary reliability standards are currently set by the North American Electric Reliability Council, or NERC, which is controlled by the utility industry. The result has been ineffective reliability rules, the task force says, but the industry as a whole must take the blame.

"If NERC’s standards have been unclear, non-specific, lacking in scope or insufficiently strict, that reflects at least as much on the industry community that drafts and votes on the standards as does NERC," the report concludes.

The task force says an "independent, international electric reliability organization" should be set up, funded by a hike in the transmission rate charged to all customers.

That wouldn’t affect Ontario power rates, according to officials during a conference call yesterday.

"Canadian electricity companies already have high reliability practices. We don’t anticipate there is going to be much in the way of additional costs," said André Plourde of Natural Resources Canada.

In Ontario, the Independent Electricity Market Operator (IMO) sets operating standards and can fine utilities or generators that break rules.

Jimmy Glotfelty of the U.S. Department of Energy said the United States "for many years has neglected transmission investments," and there will be a cost to catch up.

Neither U.S. nor Canadian officials would estimate yesterday what that cost will be, but noted the work and output lost during the August blackout cost the North American economy as much as $13 billion.

The task force found that FirstEnergy exemplified the many things that could go wrong at a utility with weak operating procedures and no strong regulating oversight.

It had neglected to trim trees under its power lines, so when lines heated because of heavy power flows and sagged into the branches, the lines shorted out. At the same time, monitoring equipment had failed so system operators weren’t aware of developing problems until they had snowballed.

Even then, it could have prevented the failure from spreading outside Ohio had FirstEnergy’s control room taken the proper steps. But FirstEnergy had provided little or no emergency procedure training for its staff, so employees didn’t know how to take the strain off the system by selectively cutting off power to some customers.

The result was a major breakdown at FirstEnergy, which then spread with little or no warning to its neighbours, including Ontario.

The causes "did not leap into being that day," the report states. "They reflect long-standing institutional failures and weaknesses."

It lists 46 recommendations, including mandatory reliability standards.

The report points a finger at Canada’s nuclear regulator, the Canadian Nuclear Safety Commission. The commission was left in the dark, unable to communicate with nuclear plants when the blackout hit, because its headquarters in Ottawa had no backup power system.

That should be fixed, the task force said. Commission spokesperson Michel Cléroux said it has installed temporary backup power and "we will very soon have a permanent backup system."

Tom Adams, executive director of Energy Probe, said the report makes some useful recommendations that would require utilities and regulators to publish data about how reliably the power grid is performing.

"The data that’s available and published is very, very thin," Adams said in an interview.

He welcomed the recommendation to study whether there’s any link between competitive electricity markets and the blackout, and to make sure in designing markets that competition doesn’t affect reliability.

Federal and provincial governments have set up a group to co-ordinate work on the task force recommendations. The federal government represented Canada on the task force, but electricity systems are largely regulated by the provinces.

Joe Schneider
Bloomberg.com
April 15, 2004

Ontario Power Generation Inc., the province’s biggest producer of power, will have the price of its hydroelectric and nuclear energy regulated by the provincial government to reduce the volatility in consumers’ monthly bills.

Electricity from Ontario Power’s other energy sources as well power from other producers can be sold on the open market, Ontario Energy Minister Dwight Duncan said in a speech in Toronto.

"We’ve looked at moving to a fully competitive market, but couldn’t find one that worked anywhere in the world," Duncan said. "Our aim is not to limit options, but in fact to improve them."

About 46 percent of the electricity produced in the province will now be sold at a fixed price because Ontario Power generates about 70 percent of Ontario’s power and two-thirds of that comes from hydroelectric and nuclear plants. Companies with hydroelectric and nuclear operations, such as Brascan Corp. and Bruce Power LP, can choose the fixed price or the spot market, Duncan said.

The pricing plan will be part of new legislation the government will introduce later this year, and which, if passed by the legislature, will take effect early in 2005, Duncan said. Duncan’s Liberal Party has the majority of seats in the legislature.

Ontario Power had a net loss of C$491 million ($365 million) last year and the company’s earnings between 1999 and 2003 of C$2.1 billion missed its own target by C$1 billion as higher operating costs and delays and cost overruns in refitting nuclear reactors cut profit.

CEO Search

Former Canadian energy minister Jake Epp, who has been Ontario Power’s interim chairman since Duncan fired former Chairman Bill Farlinger and Chief Executive Officer Ron Osborne in December, will keep the post on a permanent basis, Duncan said.

The government also plans to appoint nine new board members within the next few weeks. A search for a new CEO, to replace interim Chief Executive Richard Dicerni, has also begun, Duncan said.

Ontario faces a power shortage as early as 2006 as the province begins shutting coal-fired plants to reduce pollution. Closing the looming gap between supply and demand will cost between C$25 billion and C$40 billion over the next 15 years, Duncan said.

New Authority

The government plans to create a new agency, called the Ontario Power Authority, to oversee the construction of new plants and offer long-term contracts to companies, if necessary.

The minister’s proposals are similar to a system already in place in New Brunswick, where the government also regulates the provincial utility, said Tom Adams, executive director of researcher Energy Probe.

Since the regulation was put in place on New Brunswick Power Corp. its debt has gone up, Adams said.

"The rates are controlled but the costs are not," he said.

John Spears and Richard Brennan
Toronto Star
April 16, 2004

The Ontario government says it has a plan to stabilize electricity prices for small consumers, but can’t say what the price will be or offer concrete plans on how to generate much-needed energy. The province will create the Ontario Power Authority to offer consumers a stable price, Energy Minister Dwight Duncan said in a lengthy and much anticipated speech on the future of Ontario‘s electricity system at the Empire Club yesterday."It would be adjusted each year to ensure people pay the true cost of electricity over time, but the plan would remain stable over the course of a year," said Duncan, who wouldn’t hazard a guess on how much more consumers will be paying. Briefing notes prepared for Duncan when the Liberals took office, obtained by the Star, estimate that the cost of power will climb by 20 per cent when the current price ceiling is lifted. Duncan said yesterday that "it’s really a mug’s game to say prices are going to be lower or higher at this point." The energy minister also hedged on a Liberal promise to shut down all the province’s coal-fired power plants by 2007, saying the government must be totally satisfied that adequate alternatives are in place. These plants produce about 25 per cent of Ontario‘s power. The power authority will be able to sign long-term contracts with private power producers to encourage them to build more generators. But critics said encouraging private power producers will drive up the cost of power. "When you cut through all the bafflegab, this is going to be more private, profit-driven electricity and just like under the Conservatives what that means is that people’s hydro bills are going to skyrocket," NDP leader Howard Hampton said. Duncan told reporters after his speech that the best way to ensure that prices don’t jump "is by having more supply. "First of all we are returning to regulated prices and maintaining public ownership of the base load (provincially owned) assets. Those prices will stabilize electricity prices for small consumers. "Our view is that with modest changes in consumption, people can absorb the prices that they will be faced with," Duncan said, noting the authority will co-ordinate energy conservation programs. The minister said he will be introducing legislation in June. "We hope to have the power authority up and running by this time next year," he said. The key to stabilizing the cost of energy will be allowing the Ontario Energy Board to regulate the price of all power produced by Ontario Power Generation’s nuclear and hydro generating stations – close to half the province’s power. Private power producers will continue to sell power into Ontario‘s wholesale market, at varying prices. The energy board will then blend the regulated and market prices to set a consumer price. Consumers will know a year ahead what the price is likely to be, though there may be year-end adjustments. Consumers will also be free to buy power from private firms selling fixed-price contracts. Officials said pricing for electricity produced by private nuclear company Bruce Power, and by private hydro-electric companies, is still to be determined. But Tom Adams of Energy Probe said long-term purchase agreements between private power producers and the new authority won’t work. Ontario Hydro signed similar agreements with private operators a decade ago, but ended up paying far too much for the power, he said. (Briefing notes prepared for the new government indicate the province lost $150 million on the contracts last year.) "The taxpayers are at extreme risk" with the system Duncan is proposing, Adams warned. Duncan indicated that the provincial government, not the arm’s-length power authority, would maintain responsibility for deciding whether to move ahead with an aggressive new nuclear energy program.

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.

Canadian Press
Toronto Star
June 29, 2004

A Niagara Falls generating project that will power the annual electricity needs of an estimated 160,000 Ontario homes has been given a green light by the province as it searches for new energy supply.

The Niagara Tunnel Project, expected to be completed by 2009 and to cost an estimated $600 million, will be one way to help the province deal with its electricity supply challenges, Energy Minister Dwight Duncan said in an interview from Niagara Falls.

"It will give us enough juice for a city of about 160,000 people but it’s only one step," Duncan said.

The province has also put a call out to the private sector to build 300 megawatts of renewable energy and 2,500 megawatts of other energy, he added.

"We’re moving quickly. We’re almost at the halfway point in terms of the generation we need to replace coal," he said, referring to the government’s promise to close the five coal plants, which produce more than 20 per cent of the province’s power, by 2007.

The tunnel project would expand the capacity at Ontario Power Generation’s Sir Adam Beck hydro generating station by about 15 per cent by boring a new 10.5-kilometre-long tunnel under the city of Niagara Falls to divert more water from the Niagara River to the station.

The new tunnel – the third feeding water to the station – would increase the amount of water flowing to the existing turbines at the 50-year-old Adam Beck station, allowing it to produce an estimated additional 1.6 terawatt-hours of renewable electricity per year.

The station already produces 12 terawatts annually. Overall Ontario uses about 150 terawatt hours each year.

Under agreements with the United States, Ontario is allowed to draw more water from the river to its hydro generating station, said Ontario Power Generation spokesman John Earl.

"This new tunnel project, when built, will allow us to make better use of the water that’s entitled to Ontario under this international treaty," he said.

Ontario Power Generation will now seek competitive bids on the project from international companies that can do this kind of work and will choose the best bid, Earl said.

The tunnel project has been discussed as far back as the late 1980s and environmental assessments on the projects have already been completed, Earl said.

The government gave the go-ahead to provincially owned Ontario Power Generation after calculating that with the province’s new regulated higher electricity price, the tunnel is economically feasible, Duncan said, adding that electricity currently produced by the station costs about 1.5 cents per kilowatt-hour.

The government expects the project will create 6,000 person-years of direct and indirect employment, in the range of 2,500 jobs or more.

Last fall, the province raised the cap on electricity prices to 4.7 cents per kilowatt-hour for the 750 kilowatts used, and the price jumps to 5.5 cents per kilowatt-hour beyond that level. That’s up from a previous price cap of 4.3 cents per kilowatt-hour, which was below the cost of production.

As of next May, the Ontario Energy Board has been given the power to set prices, which will be based on a blended regulated price from the power generated by Ontario Power Generation and private-sector producers.

It won’t be cheap to build this tunnel, but the project is the right move, said Tom Adams, executive director of energy watchdog Energy Probe.

"It’s seriously necessary. Ontario has a major shortage on its hands," Adams said, but there’s still a huge amount of new energy supply that has to come online to deal with the shortage and the closure of the coal-fired plants.

"It’s a meaningful contribution but in the scheme of things it’s relatively small potatoes."

Action Alert
August 3, 2004

The fate of Ontario’s electricity sector is now being determined. The implications of this legislation for our environment and the economy are far-reaching and your participation in the consultation process is vital.

Bill 100 proposes to restructure the Ontario electricity sector, as well as create an Ontario Power Authority to coordinate and plan electricity supply, and a subsidiary conservation bureau to promote efficiency. We are concerned that while a new electricity structure is on the table, the same old decisions will follow. Without public consultation and before new legislation has even been approved, the government has given its consent to the restart of a second reactor at the Pickering nuclear plant at a cost of $900 million. The total cost of restarting all four of the old Pickering reactors is estimated to be at least $4 billion.

The government is trying to limit public response to Bill 100 to a very short time-line and has scheduled our participation period to the middle of summer, when people tend to be away on vacation. We urge you to participate in the public consultation.

For background articles on Bill 100, please see:
Energy Probe’s testimony on Bill 100
New agency to ensure energy supply
Ontario reveals plan to overhaul power system

The full text of the proposed Ontario Electricity Restructuring Act (PDF file).

The consultation is being conducted by a legislative committee known as the Standing Committee on Social Policy (see below for a list of members and contacts).

Deadline to register with clerk for oral presentations:
5:00 p.m. on Thursday August 5, 2004
(Contact Anne Stokes, details given below)

Deadline to file written submissions with clerk:
5:00 p.m. on Thursday August 26, 2004
(Contact Anne Stokes, details given below)

Public consultation dates:
Monday August 9, 2004 – Toronto
Thursday August 12, 2004 – Toronto
Monday August 23, 2004 – Windsor (to be confirmed)
Tuesday August 24, 2004 – Sudbury (to be confirmed)
Wednesday August 25, 2004 – Ottawa (to be confirmed)
Thursday August 26, 2004 – Clarington (to be confirmed)

To contact the standing committee on social policy:
Clerk: Anne Stokes
Room 1405, Whitney Block
Queen’s Park, Toronto, Ontario M7A 1A2
anne_stokes@ontla.ola.org
Tel: (416) 325-3515
Fax: (416) 325-3505

Standing Committee on Social Policy:
Chair: Jeff Leal LIB / Peterborough
Vice-chair: Khalil Ramal LIB / London-Fanshawe
Members:
Ted Arnott PC / Waterloo-Wellington
Ted Chudleigh PC / Halton
Kim Craitor LIB / Niagara Falls
Peter Fonseca LIB / Mississauga East
Jeff Leal LIB / Peterborough
Rosario Marchese NDP / Trinity-Spadina
Ted McMeekin LIB / Ancaster-Dundas-Flamborough-Aldershot
Khalil Ramal LIB / London-Fanshawe
Kathleen Wynne LIB / Don Valley West

CBC News
August 9, 2004

Toronto: Almost a year after a massive blackout hit Ontario, the province’s electricity supply has seven per cent more capacity, which may make it better able to weather a similar blow.

Critics say changes the Liberal government has made don’t address the long-standing weaknesses in the province’s power grid, however.

The extra seven per cent of power capacity comes from the reactivation of three nuclear reactors that had been shut down for years, as well as a new gas-fired generating plant.

That may give Ontario a buffer large enough to avoid a repeat of the chaos that followed the blackout on Aug. 14, 2003.

It took almost a week to restore full power to millions of residents and thousands of businesses in the southern part of the province after a power plant in Ohio shut down unexpectedly, triggering a series of problems all along the transmission grid in the northeastern U.S. and eastern Canada.

Even before the blackout, Ontario had barely enough capacity to handle its peak demands on hot summer weekdays when air conditioners were running at full tilt and industry required its normal huge supply of electricity.

David Butters, a spokesperson for Ontario’s power generators, welcomes efforts by Ontario’s new Liberal government to stabilize the electricity market.

He said policy flip-flops by the former Conservative government kept the private sector on the sidelines, and that’s changing under Premier Dalton McGuinty’s watch.

"There’s still, I would call it, guarded optimism… They’ve made some moves."

Those moves include:

Increases in the price of electricity, a move designed to reduce consumption.

Tom Adams

August 12, 2004

The Acting Chair: Our next presenter is the Energy Probe Research Foundation, Tom Adams.

Mr Tom Adams: Thank you very much, Mr Chairman. I will speak briefly in order to leave time for questions. I will restrict my comments to two subjects. One is Energy Probe’s overall analysis of the approach taken with Bill 100 – the legislation itself rather than the surrounding policy issues – and secondly, I wish to address procedural concerns about the approach that’s being taken to the public review of the legislation.

When Ontario’s previous Tory government aborted its plans to open the province’s electricity market to competition, dozens of private power plants that were on the drawing board vanished from existence, their owners writing down their investments to zero. Mr Harris’s successor, Mr Eves, further jeopardized the province’s ability to meet its needs by freezing power rates, encouraging excessive consumption and investing in nuclear power plants – proven non-performers.

Now, Mr McGuinty’s government, panicked by the impending power shortages that Ontario faces due to these decisions of predecessor governments, is going one step further and creating a centralized power authority for the province. Bill 100 will create a new bureaucracy, the Ontario Power Authority, subject to the whims of the government of the day and empowered to develop and implement long-term power plants for the province. It will be able to issue debt and enter into long-term contracts, all backed by taxpayer credit.

10:20 am

Energy Minister Dwight Duncan expects that the power authority will need in the order of $25 billion over the next 16 years but acknowledges that this figure could be as much as 50% higher. Given the sorry history of power authorities around the world, the $40-billion outer perimeter for his estimate may prove to be optimistic.

The Ontario Power Authority is little more than a formal rejuvenation of Ontario Hydro, which collapsed financially and operationally in 1997 under the weight of its nuclear and financial problems. The fates of other centralized power authorities around the world bear an uncanny similarity to the fate that befell Ontario Hydro.

In the UK in 1947, they established something called the Central Electricity Generating Board on the model of Ontario Hydro. Like Ontario Hydro, its preferences were coal and nuclear. By the middle of the 1980s, CEGB was heavily in debt, hounded by serious labour strife and unable to get permission to start the next round of mega-project expansions. In 1987, the Thatcher government lost confidence in CEGB’s ability to meet the country’s future electricity requirements and decided instead to competitively restructure the power system, including breaking up CEGB and privatizing some of the pieces.

Then the truth came out about CEGB’s financial accounts. When CEGB was a government agency, its financial accounts were not subject to the same scrutiny that prevailed when it faced the prospect of issuing prospectuses in public markets. Once the utility needed to meet the disclosure requirements of securities laws, its financial officers faced the possibility of jail time for misleading investors. CEGB drastically revised its financial statements, revealing that its nuclear program was wildly loss-making rather than profitable as previously claimed.

France’s version of Ontario Hydro, called Electricité de France, right now is in the early stages of the same process that killed CEGB. Again, the prospect of privatization is shining light on previously rosy financial accounts. The cash-strapped French government announced in 2002 its intention to sell a portion of its holdings in EDF. Last month, the Economist magazine reported the results of an analysis it had commissioned on Electricité de France’s financial condition. Here’s how the Economist summarized its findings:

"What emerges is a picture of group that used some questionable accounting practices; that has never really made a profit; that has made imprudent use of funds set aside for nuclear decommissioning and waste management; that lacks transparency over the level of its nuclear provisions; and that has indulged in a reckless and costly strategy of international expansion."

California’s botched effort to bring competition to its electricity market failed in 2001, at which point the government of the day decided to switch to central planning. The result: The central planners entered into long-term power contracts with expected costs on the order of $40 billion over the lifetime of the contracts; the expected value, about half that.

The only jurisdictions in Canada where central power authorities have provided low-cost and reliable power are those jurisdictions blessed with abundant natural resources, easily harvested. Quebec, Manitoba and BC have abundant hydroelectric resources. Saskatchewan has practically limitless coal reserves easily available near the surface. In Ontario and New Brunswick, where making electricity is commercially complex owing to the lack of natural resources, central power authorities have accumulated vast debts, far beyond those that could be supported in a market environment.

Jurisdictions around the world that have embraced competition and have had the political capacity to ride out the inevitable bumps along the road have been very successful. Examples include the UK, most parts of the United States – particularly the neighbouring regions where they have a surplus of electricity now – New Zealand and Australia. These jurisdictions have attracted investors and benefited from improved service to customers and, in many instances, lower prices. The only losers in these instances were the existing systems and those that depended on the previous bureaucracies.

Some months ago, Energy Minister Dwight Duncan correctly observed that Ontario’s power system has suffered from political instability in recent years. This government’s comprehensive energy restructuring legislation is supposed to bring an end to this chaos. Unfortunately, by embracing the failed central planning model, Ontario’s electricity chaos is, we fear, destined to continue. Power investments will continue to be dumped into a black hole, and the provincial power supply will be more unstable in future than ever.

Energy Probe’s procedural concerns with this process of review for the government’s restructuring legislation might best be described by contrasting the approach to the review of energy restructuring that is going on now, versus the one that happened the last time we had a comprehensive electricity restructuring effort. As some of you may know, in the mid-1990s, Ontario Hydro internally initiated a process of review to develop the intellectual basis for a comprehensive restructuring of the electricity system. They initiated a process called the TAT process – technical advisory teams – of which Energy Probe became a member. Other customer groups also participated, and a discussion was initiated as to how a new electricity market might be designed. That process continued with the Macdonald committee report, initiated in 1995, and it extended into 1996.

In 1997, the previous government issued a white paper describing its intentions. That white paper was subject to comprehensive debate in public – very detailed, technical debate. A technical committee called the Ontario Market Design Committee was established to develop the legal infrastructure underneath that white paper.

The government’s Bill 35, which was introduced in 1998, was itself subject to extensive review. Finally, when the bill was ultimately passed in October 1998, there was a very high degree of understanding – not necessarily agreement – of what the ultimate intentions were and what the choices were that had been made behind the scenes, as reflected in the legislation.

That process does not prevail now. The public does not have a clear understanding of where this energy legislation is going. These committee hearings are very short. They’ve been hastily assembled. Energy Probe’s attendance at this meeting today was only confirmed yesterday. It resulted in a limited time for preparation. The restructuring of Ontario’s power system is a very complex undertaking. This process is being undertaken in undue haste.

In conclusion, I have two summary comments. One is that Bill 100 will fail to provide a stable structure for Ontario’s power system going forward, and the passage of Bill 100 will necessitate a further comprehensive electricity restructuring in the near future. The second comment is that the review process for this legislation is, sadly, inadequate.

That concludes my prepared remarks. I invite questions from the committee.

The Acting Chair: We have time for one question.

Mr O’Toole: Thank you very much, Mr Adams. You’ve been an observer and a commentator on this topic for a good decade, and I commend you for your review that you’ve given us this morning.

It is a very comprehensive piece, somewhat uncertain in terms of the overarching mandate of the OPA. It’s really just the black hole that you’ve referred to: It’s where they’ll put the money. They’re not sure how they’ll price it, or they’re not sure how they’ll pay for it, except through consumers, either by a direct or indirect tax, as I understand it.

10:30 am

When I look at this bill in a broad sense – because you’ve had a very tertiary view – it’s a regulations bill. It’s a framework bill that’s going to be orchestrated through regulations.

Have you been privy to any of the discussions that I’m told by the minister in a letter that – I raised on his first day of hearings that I wanted to be part of or at least aware of the consultations on the myriad of regulations. Are you aware of any of the regulatory discussions with any stakeholders ongoing?

Mr Adams: No, I’m not aware of any.

Mr O’Toole: You’re not aware, and you’re Pollution Probe, right?

Mr Adams: Energy Probe.

Mr O’Toole: Do you know of any of your colleagues in the industry that are being consulted?

Mr Adams: I represent Energy Probe. I have not specifically asked any other participants or stakeholders in the electricity sector as to their participation, but I’m not aware of any who are participating in the preparation of new regulations. I, personally, am utterly in the dark as to what the intention is for future regulation.

Mr O’Toole: The industry today told us – the large consumers – that we could expect a 30% to 50% increase in the price of electrons. Is that going to have an impact on the economy that drives the rest of our standard of living?

Mr Adams: Electricity prices and overall public welfare are not directly related. All else equal, lower prices are a good thing. But Ontario has, for about a generation or perhaps longer, not paid the full cost of electricity. That’s an unfortunate mistake that will take us perhaps more than a generation to pay off. At the current rate, we’re not paying it off; we’re actually accumulating additional debt. So I disagree with the analysis that’s been presented by some political commentators, complaining that Bill 100 is flawed because it lacks the capacity to direct that customers get lower prices.

The Acting Chair: Thank you for appearing before the committee.