On the Brink: Avoiding a Canadian California

 

 

Ontario's government has imposed substantial burdens on customers, with no benefits.

On a recent trip through Toronto's Pearson International Airport, I was stopped by an immigration official who, upon learning my business, snapped, "Why would anyone hire a Yank to advise on the Ontario electricity sector?"

Based on the recent passage of Bill 210, which freezes prices to end-users, Ontario Premier Ernie Eves seems to be taking advice from California Gov. Gray Davis. In the face of electricity price volatility far less extreme than observed in California, Ontario's provincial government has imposed measures that, over the long run, will put substantial additional burdens on consumers, with no corresponding benefits. In effect, the provincial government has chosen to destroy the village in an attempt to save it, when the village was never in danger in the first place.

It is easy to identify flaws in the law that caps retail prices through 2006, and the government's directive to Ontario Power Generation (OPG) to "assess" a suite of projects with doubtful economics given current market supply/demand dynamics.