- Enbridge warns McGuinty on natural gas

Fluctuating electricity policies in Ontario have disrupted markets beyond the electricity sector and created confusion and uncertainty in much of the energy business, a senior executive of Enbridge Inc. said yesterday.

Stephen Letwin, group vice-president of gas strategy and corporate development for the Calgary-based pipeline giant, also warned the new Ontario government that Canada's biggest pipeline company would resist having natural gas manipulated to hold down the price of electrical power.

The province's aborted electricity deregulation and privatization ``stifled energy investment across the board," Letwin said.

Under the just-defeated Conservative government of Ernie Eves, ``energy policy has been volatile, to say the least," said Letwin, who oversees Enbridge Gas Distribution, formerly Consumers Gas, the dominant gas distributor in Ontario with 1.6 million customers in the province.

In particular, he cited Eves' decision last November to cap retail electricity rates at 4.3 cents per kilowatt-hour — well below the prevailing market price, with the province paying the difference.

It's estimated that policy has cost the province more than $600 million in subsidies to consumers to keep prices capped.

While the Liberals led by Dalton McGuinty appear to be focusing on education and health care rather than energy policy, Letwin suggested in a presentation to investors the new government might move quickly to accelerate the conversion of coal-fired electricity generating plants to natural gas.

"Natural gas, of course, is priced with the market. It becomes an interesting scenario between how much natural gas you want to divert to electricity generation when you're subsidizing the prices," he said.

"That's a big issue with us, obviously, because we don't want our natural gas franchise subsidizing electricity rates."

Letwin noted that throughout the Aug. 14 electricity blackout and the 10-day period of emergency that followed in Ontario, "natural gas flowed to your home.

"In fact, we only had one small compression problem during that entire time."

And despite the electricity price cap and volatile gas prices over the past year, "we continue to be very competitive."

He also said the Ontario Energy Board and other regulators have a "consumer-protection bias" and "I'd be realistic in saying it's going to be a couple of years before we get to what I would call an acceptable performance-based regulatory regime."

Enbridge is one of Canada's biggest energy services companies, with operations in oil and liquids pipelines, natural gas pipelines and gas distribution.

The company, which owns the major oil pipeline that brings western Canadian crude to eastern markets, generated revenues of more than $4.8 billion and profits of $610 million last year.

Enbridge employed 3,870 people at the end of 2002, down from 6,000 the previous year before the company began divesting non-core businesses.