Ontario faces uncertain electricity future in election's wake

TORONTO - - Ontario's electricity markets face an uncertain future following the re-election Thursday of the Liberal Party, but this time under minority rule, a situation not seen in nearly three decades.

"We have a lot of questions and I don't think a lot of answers," said David Butters, president and CEO of the Association of Power Producers of Ontario. "Folks are going to have to figure out how to run the government without stepping on mines and getting blown up."

Premier Dalton McGuinty was re-elected Thursday, with the Liberal Party capturing 53 electoral district, but Progressive Conservatives won 37 votes and the New Democrat Party won 17 votes, leaving the Liberals in charge but without a majority vote in the Legislative Assembly.

The shift in power follows heated debate over renewable energy, electricity prices, and power plant siting in the province. Conservatives attacked Liberal backing of green energy feed-in tariffs and smart meters, while the NDP pushed for more public and less private ownership of renewable energy projects.

With pressure from the right and left, the McGuinty government is going to have to engage in a lot of "brokerage," Butters said. This will represent a shift in business-as-usual, since Ontario's winning party for almost three decades has had the votes to simply put its policies in place.

Some of the brokering likely will center on energy prices, according to Butters. "There are cost pressures building up in the electricity sector. They will not want that fire to ignite. They will be looking at ways to manage costs."

Ontario's regulated electricity prices have risen about 6.3 annually since 2006, according to a report that the London Economics International published last month. The report cited integration of high-priced renewable energy, a lack of competitive procurement and market distortions for the rise. Ontario functions under what is known as a "hybrid market," which has elements of central planning and competition.