Windsor, Ont. — Ontario risks sharp price increases if it gives the private sector a greater role in the electricity market, a British expert on energy markets says.
Stephen Thomas of the University of Greenwich issued the warning in a report scheduled to be presented Monday to a legislature committee holding hearings across Ontario.
Introducing competition in the market may result in higher costs for the consumer because it will be easy for retail suppliers to exploit small consumers and save their best rates for large users, Mr. Thomas said in his report to the standing committee on social policy, which is reviewing a government proposal to overhaul the electricity network.
“If you're a residential consumer, you're going to have to be as tough a negotiator for your electricity as the aluminum smelter,” Mr. Thomas said in an interview from this southwestern Ontario city. “And clearly you are not going to be that good.”
An operator stands in front of screens showing Ontario power grids as he works in the control room at the Independent Electricity Market Operator facility in Mississauga, Ont. Kevin Frayer/CP (Kevin Frayer/CP)
Mr. Thomas, who was asked by the Society of Energy Professionals to provide independent testimony before the committee, recommends abandoning the idea of retail competition.
He also said he thinks the plan relies too much on a mistaken belief that international companies want to pour money into Ontario's energy sector.
“If you look at the companies from the United States and from Europe, they are looking to get rid of their non-home country assets,” Mr. Thomas said. “So I think if you are relying on private investment, it can only come from Canadian companies, and I think you need to consider very carefully whether the Canadian companies are able to produce that much investment and whether they'll be able to do it at a reasonable price for consumers.”
Drawing on his experience evaluating energy markets in Brazil and Britain, Mr. Thomas said Ontario should not be experimenting with novel energy programs with supply teetering dangerously close to not meeting demand.
He said that energy reform in Britain worked because there was a surplus of generating capacity, so there was no need for the market to work immediately.
On the other hand, he said, in Brazil, there was a shortage of generating capacity and consumers had to reduce consumption by 20 per cent to keep the lights on, which had a serious adverse effect on the economy.
“What concerns me is trying to introduce a new system of building power plants, a new untested system, when there is an exceptional need for new investment,” he said. “I think the much safer plan would be to stick with the tried and tested method at least until the big need for new power stations passes.”
Mr. Thomas said Ontario Power Generation should be relied upon to carry out the investment in new power generation, rather than the government opening up the process to other companies.
He added that the Liberal government should rethink its decision to phase out the province's coal-fired generators by 2007.
He said that keeping them around a little longer will smooth the demand for new capacity.
“Closing the power stations will be no great benefit if in the process the lights go out,” he said.
The standing committee's hearings, which began on Aug. 16, continue through this week.
