RM
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RM Issue #030629

Ontario hydro therapy
Saturday, June 28, 2003

Ernie Eves, the Ontario Premier, acknowledged earlier this week that hot summer temperatures could cause power shortages in his province, similar to the ones that strained the system last year. In Mr. Eves's informed opinion, this is all Mother Nature's fault. Explaining that "it's always a challenge" when temperatures exceed 30C, the Premier noted on Monday that "obviously there are things the government can't control, and the weather is one of them."

That point is tough to argue. But everything else about Hydro delivery is, in fact, very much under his government's control -- which makes his attempts to shrug off responsibility rather unseemly. By Mr. Eves's own choice over that of his predecessor, Mike Harris, Ontario's power generation and transmission remain almost exclusively under public control - - and the result has not been pretty. Having promised additional generators to reportedly supply up to 10% of the province's energy needs, for instance, the government appears to have fallen well behind. Temporary generators across the province, originally supposed to be functional by now, are not expected to be functional until late next month, and mothballed reactors expected to be returned to service at the Bruce A and Pickering A generating stations are similarly behind schedule.

These stopgap measures, regardless, would do little to curb the long-term problem of power shortages. What is most needed are new, long-term power sources -- but given that it has already cost $600-million over the past 12 months just to maintain artificially low retail prices, the province's power utility is hardly in the position to invest in new development. Worse still, Mr. Eves has undermined any possibility of that responsibility shifting even slightly to the private sector.

In addition to canceling the sale of Hydro One, the province's transmission utility, and refusing to move forward with the privatization of Ontario Power Generation, Mr. Eves has done much to discourage any independent private investment. For one thing, having witnessed the Hydro One debacle -- which saw Mr. Eves go back and forth for months before canceling the utility's full sale, only to eventually call off any public offering whatsoever -- investors are understandably reluctant to go anywhere near the province's confused energy market. More importantly, in backtracking on a decade of market restructuring by freezing Hydro rates at 1995 levels through 2006, Mr. Eves effectively eliminated any prospect of private energy providers turning a decent profit. With prices having shot up to $0.08 per kilowatt hour on the open market, and provincial policy keeping the retail price at little more than half that, Ontario consumers have a major incentive to use electricity and increase demand.

Yesterday, the province announced the appointment of an independent task force to begin long-range Hydro planning. Unfortunately, the task force -- composed of representatives of 18 "stakeholders" -- has a massive mandate that smacks of the same old central planning that got the province into its current power crisis. Ultimately, success will be achieved only when Mr. Eves -- or his successor -- undertakes the competition-based, open market restructuring the government abandoned last year. If not, Ontarians could end up living in perpetual anticipation of brownouts, blackouts, and bills and debts that eventually shoot through the roof.

Copyright 2003 National Post


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