Selling Ontario Power Generation would take the lid off electricity prices
The only thing that stands between Ontarians and soaring deregulated electricity prices are government caps.
by John Wilson
The current recession has caused a large government debt. To pay off some of that debt, the provincial government is examining the costs and benefits of selling publicly owned Ontario Power Generation (OPG) – our biggest electricity generator. The biggest cost to you of a sale would be soaring electricity prices. Prices rose steeply in U.S. states that sold their generators to complete the deregulation of their electricity systems. If OPG is sold, Ontario could be economically devastated by similarly rising electricity prices.
Regulated electricity prices are set by government boards, based on supplier performance and the cost of production. Deregulated electricity prices are unlimited - whatever the market will bear. The Harris-Eves government deregulated Ontario's electricity prices except for the final big step – allowing OPG to charge unlimited prices.
Currently, the only thing that stands between Ontarians and soaring deregulated electricity prices are government caps that force OPG to sell most electricity at near cost. Currently, OPG provides two-thirds of our electricity. Private suppliers in Ontario are allowed to charge unlimited prices. In the hands of a private owner, OPG could do the same.
About one-half of US states have deregulated their electricity prices. Power in the Public Interest (PPI) is an organization that promotes electricity policies that benefit consumers over the long term. PPI calculations, using US government data from 1999 to 2007, show that deregulated states have paid $292 billion more for electricity in increases over and above those experienced by states that remained regulated.
US states are scrambling to dig themselves out from the high electricity prices that deregulation created. Unfortunately, after generating assets are sold, there isn't a lot that can be done.
Ontario can't afford the billions in electricity price increases that the sale of OPG would cause. And, we wouldn't be able to dig ourselves out of the mess because Canada's free- trade agreements, such as NAFTA, prohibit the government from controlling deregulated prices, using subsidies, or reducing exports to the US – even if Ontario faces electricity shortages.
In addition, if OPG is privatized there is no way to know who may eventually become the owner. Private generating companies often change hands. Do we want a foreign wealth fund or multinational corporation controlling our electricity prices? Would multinational corporations look out after our interests? A privately owned OPG could even force us to bid against Americans to buy Ontario generated electricity.
Electricity is an essential of modern life that needs to be price regulated. Without a sufficient amount of affordable, reliable electricity Ontario's residents, farmers, manufacturers and tourist trade wouldn't be able to adequately support our schools and hospitals. Without public ownership of OPG the government couldn't afford to cut greenhouse gas emissions by attempting to phase out OPG's coal generation.
Selling off OPG might pay off some of the government's debt but it would cause far greater debt throughout the rest of the province. OPG's primary function should be to benefit Ontarians not balance government books at public expense.
John Wilson is an energy consultant and engineer. He has worked in the electricity industry for both public and private utilities in Ontario and the United States and served on the board of directors of Hydro One.
Posted: April 21, 2010
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