Ontario to create new power authority

- The Ontario government will take its first step toward dealing with chronic shortages of electricity by establishing a new agency, the Ontario Power Authority, to buy electricity for the province, senior government sources say.

The new authority, along with a new pricing procedure to be introduced next year, will allow consumer prices for electricity to rise as needed to pay for new generating plants.

"We have to make sure that the price adequately reflects the cost of production," Energy Minister Dwight Duncan said recently. "That, in the long term, will ensure stable supply."

The announcement of the new authority is part of a sweeping overview of the Liberal government's plans to prevent power shortages similar to those that have left Ontario on the edge of blackouts in recent years.

"In the last five years we've had very little new supply," Mr. Duncan said. "We've had very little reliability in existing supply. We know, unequivocally, in the year 2007-2008 that we're going to be literally at the wall. And the conditions to produce new generation just don't exist right now."

Senior Liberals concede that their government's most important challenge is the need to revitalize Ontario's once-strong electricity industry. Without reliable supplies of reasonably priced power, the province would find it increasingly difficult to attract new investment, cabinet ministers have commented in recent interviews.

Further, the predicted shortfalls would hit in 2007, months before the Liberal government is expected to seek re-election.

The primary goal of the new policies is to create confidence among investors that policies in the electricity sector will be long-lasting after a series of reversals over the past five years.

"Stability in the whole sector is important. We hope that the announcements I make will be seen to be stabilizing," Mr. Duncan said.

The announcement of the new authority will be part of the phase-in of the Liberal government's policy that consumers should pay the full cost of production of power. As this article hits the presses, the price stood at 4.78 cents a kilowatt hour. Consumers were paying 4.7 cents on the first 750 kilowatt hours they use this month and 5.5 cents on electricity they use above that level. This is calculated before transmission, distribution and other costs.

Creation of the Ontario Power Authority will be a central part of the Liberals' plan to rationalize the confusing overlap of controls on the $12-billion-a-year industry, according to sources within the government.

Announcements will soon be made to define the roles of the Independent Electricity Market Operator, which oversees the minute-by-minute operation of the electricity system, and the Ontario Energy Board, which regulates rates and issues licences.

Other parts of the plan to revitalize the troubled industry are yet to come, but will be cited in Mr. Duncan's announcement.

In mid-April, Premier Dalton McGuinty will set out the government's plans to encourage electricity conservation.

The aggressive conservation program has been under development for six months and will focus on encouraging consumers to use less power and to draw it from the system at times of low demand. To do this, power will be more expensive during high-demand times, such as during the day when businesses are running, and the dinner hour.

Mr. Duncan's speech will set out the reorganization of the agencies that the previous Progressive Conservative government put in place five years ago when it was preparing to turn the electricity market over to the private sector.

The changes will shift some responsibilities from the IMO to the new Ontario Power Authority, which will be given the responsibility for projecting future electricity needs and for signing the contracts for the electricity that is sent into Hydro One's massive transmission grid.