[cdn-nucl-l] Star: We'll freeze in the dark if electricity is deregulated

[MCLEAN Adam -NUCLEAR <adam.mclean@opg.com>]

We'll freeze in the dark if electricity is deregulated 
The Toronto Star August 7, 2001 Page A17 Myron Gordon and John Wilson 
California is very sick with deregulation fever but the illness doesn't have
to be terminal. With rehabilitation, California could once again lead the
United States as its biggest economic power.  It's a different story for
Ontario. If it can't prevent the dreaded electrical deregulation and
privatization disease, the result will be fatal. Why can California bounce
back to economic health with the proper medicine while Ontario will be
destined for Third World status? The answer is simple.
California's economic health requires reasonable electricity prices. For
decades, California has had reasonable but higher electricity prices than
the states that border it. Its economic growth occurred in spite of its
relatively higher prices. Unfortunately, it can't continue to grow with
frequent blackouts and prices increasing 5,000 per cent in just one year.
But, with a healthy dose of increased conservation, more generation and the
state's return to regulation of the industry, California can get back the
reasonable price it needs and economic health can return.
On the other hand, Ontario's economic health depends on an electricity price
that is not just reasonable but is significantly lower than that of its U.S.
neighbours. This lower price gives Ontario an advantage. It lets us compete
with American businesses in mining resources, pulping paper, manufacturing
steel and producing automobiles. Soon after Ontario's electricity is
deregulated and privatized, our electricity prices will be pushed to the
same level as that of our U.S. neighbours. Ontario's standard of living will
drop, there will be fewer jobs and our economy will nose dive.  And worse
yet, once deregulation and privatization take away our competitive
electricity edge, we will not be able to conserve and generate enough
electricity to get it back. This is because the North American Free Trade
Agreement (NAFTA) will prevent it. Under NAFTA, Ontario will have less
freedom of action and control of its electric power industry than California
currently has of its electricity industry.
NAFTA gives Americans wide-open access to Ontario's electricity. Once
deregulation and privatization hit, the government will be helpless and
unable to stop privatized generators in Ontario from selling to U.S.
customers. Even if there is a provincial power shortage, if we can't match
what Americans pay, Ontarians will freeze in the dark. No matter how much
electricity we conserve or how many generating plants we build, Americans
will continue to buy Ontario electricity and drive up Ontario prices until
they are as high as American prices. With our competitive edge _ relatively
low-priced electricity _ gone, Ontario's economy will be permanently
crippled.
The Ontario government is hastily privatizing our electricity generation and
has passed legislation that will very soon force Ontarians into the highly
competitive electricity market that is sitting on our doorstep.  Electricity
prices in New York are more than double ours. The U.S. has built little
generation or transmission capacity during the last decade and supply is
very tight. In addition, natural gas, a much touted alternative to coal and
nuclear generation, is doubling and tripling in price. The price of
electricity for Ontarians will soar as more and more of our supply is sold
to the U.S. Also, the likelihood of blackouts will increase as provincial
supplies fall.
Alberta's electricity deregulation provides Ontarians with a picture of
their future. Alberta electricity prices were lower than Ontario's before
deregulation. They are now more than triple our prices. Industry is reducing
operations, closing or moving work to the less electricity expensive night
shift. The government is being forced to provide billions of dollars in
rebates to residents and small businesses.  Alberta is paying for the
mistake of deregulating electricity with the enormous revenues it receives
from gas and oil sales. Unfortunately, Ontario doesn't have access to the
billions of dollars that will be needed to pay for deregulating its
electricity.  In Ontario, it is the residents, businesses and industry that
will pay dearly for the Harris government's electricity deregulation
mistake.  Other big electricity producing provinces have decided not to tie
themselves to a volatile high-priced American market. Quebec, Manitoba and
British Columbia are maintaining low, stable electricity prices for their
residents, commercial businesses and industry. They do this by continuing to
regulate and retain their provincial electricity companies, selling their
excess electricity to Americans for huge profits and using the gains to
finance health, education and other government services. Unless the Harris
government changes its direction, Ontarians will soon live in a Third World
economy that envies its smarter and wealthier provincial neighbours.
Electricity deregulation will be a fatal disease for Ontario. 
Myron Gordon is professor of finance emeritus at the Rotman School of
Management, University of Toronto. John Wilson is former president of the
Society of Energy Professionals and a former board member of Ontario Hydro
Services Company (now Hydro One).