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At Issue
There Was Nothing Right About the Old Ontario Hydro
Tuesday, November 12, 2002
Last Monday, Premier Ernie Eves effectively said the Progressive Conservatives were wrong about opening the electricity market up to competition. Since the electricity market was opened up last May 1st to competition, hydro bills across the province have soared. With the Ontario Tories set to go to the polls next spring, Eves attacked the issue hoping to wouldn't get out of control.The Eves plan will be to lower residential and small business hydro rates to 4.3 cents a kilowatt hour, effective December 1st, and freeze the rates there. People who signed fixed-term contracts for their hydro will also pay 4.3 cents a kilowatt hour. The government will also refund the money paid by consumers above the 4.3-cent price, retroactive to May 1st. The initial rebates are expected before the end of the year.
Since May 1, the primary wholesale price for electricity has averaged 5.17 cents a kilowatt-hour, according to the Independent Electricity Market Operator, which is accountable for ensuring the province has enough power to meet demands. When the market was being set up, the price was supposed to average 4.3 cents. At times since May 1st, prices have hit seven cents, and even exceeded eight cents. It wasn't supposed to be this way.
It has turned into a pretty big mess. It's now become even more complicated because you have our politicians chiming in. Everybody seems to have an opinion. But electricity economics and political opportunism don't mix. I don't think the Eves plan is the end of the story. Mike Harris's pledge to open hydro up to competition is certainly not turning out the way it was envisioned. The finger pointing is starting to reach a crescendo.
It's easy to do that. But there is more to this than simply longing for the old days when power was cheap. You have to understand what electricity means to an economy. It's a big deal and one I think is being lost as the political rhetoric heats up.
A fundamental truth for any developed economy is to have a strong economic infrastructure as a basis for consistent growth. This usually takes the form of good roads, schools, access to water and electricity. When "electricity" came into vogue, it was obvious to everyone involved that it would have a profound effect on the economic well being of the
population. It's production and distribution was seen as paramount to the future. In many ways, that's why Ontario Hydro was created in the first place.
Electricity seemingly was everywhere. I remember very clearly the day it arrived on my father's farm over 40 years ago. There wasn't a lot of talk about cost. Just get the farm hooked up! With hydro we'd be able to so many wonderful things on the farm.
The rest, as they say, is history. Ontario Hydro turned into one of the ugliest government monopolies. They spent gobs of money, investing in nuclear facilities at a time when excess capacity could be bought from Hydro Quebec. The hydro debt kept building, but successive provincial governments were too afraid to do anything about it. The debt which eventually got to $38 billion was continually passed on into the future.
None of this was a secret. As an aspiring young writer and broadcaster during those times, I often mused to my readers about when the bill would be paid. Little did I know someone by the name of Mike Harris would come along who would finally tackle the problem. Bad old Ontario Hydro was broken up, and handed over to the private sector. At the time, I thought "good riddance". Surely an IPO and a little bit of private management smarts would be better than what had gone on in the past.
It hasn't quite worked out that way. The hot summer of 2001 and some bad political nerves helped to derail the new hydro grid. Add the current political machinations into the mix and private capital required to revamp the system will become increasingly recalcitrant.
There is also the Kyoto protocol to think about. The Ontario Liberals support Kyoto and the elimination of coal fired power generation plants into the next decade. With the Liberals currently leading the provincial polls, the future of a competitive electricity market should prove quite interesting.
So it is a very complex and difficult issue. When the old Ontario Hydro was broken up, there was nothing right about it. It perpetuated the myth cheap power was forever and we'd never have to pay for it. A whole generation in Ontario grew up taking hydro for granted. But like it or not, it is a new day. Premier Eves better get this one right. If he doesn't, we'll be paying for a long, long time.
Philip Shaw, farms 830 acres near Dresden, Ontario. He holds a Masters of Agricultural Economics and Business Degree from the University of Guelph and is a well-known commentator on agricultural issues in print, on radio and over satellite in Canada and the United States. In the Chatham-Kent Times, Phil will use his frank and forthright writing style to address political and economic issues from the local to the international stage. He is a keen observer of political life at all levels, reads widely and has travelled the world to gather fodder for his column. See what's At Issue this week.
