Ottawa Citizen

Ontario power to cost 8% more

Tories end NDP-ordered rate freeze; annual bill to rise by $72

Tom Blackwell

TORONTO -- Ontario homeowners and businesses are about to be hit with the province's first wholesale electricity rate increase in almost a decade.

The provincial government is expected to approve within days an eight-per-cent price hike to catch up with inflation, fund environmental upgrades, and pay off the huge debt built up by Crown-owned electrical utilities.

That means the average homeowner would see an additional $72 a year tacked onto their hydro bills.

"There's the environment and obviously there's the need to pay down the debt," said a well-informed energy-sector source, confirming the impending increase after the long rate freeze.

"Had we had a competitive market by now, the government wouldn't be setting rates. But in the absence of a competitive market, and with these pressures continuing, they've got to do something."

The government is planning to open the power generation market to competition, but it has indefinitely delayed implementing the change, originally scheduled for last fall. Once it does happen, the province would no longer set prices.

The previous NDP government froze the wholesale rates charged by Ontario Power Generation, formerly Ontario Hydro, eight years ago. The Conservatives maintained the freeze when they took over in 1995 to help spur on a moribund economy.

In that time span, inflation in the province has jumped 15 per cent.

Earlier this week, Environment Minster Elizabeth Witmer said the government planned to convert a huge coal-fired power plant just outside Toronto to cleaner burning fuel, and reduce harmful emissions from four other coal stations.

That job is expected to cost more than a billion dollars, said the source. Ontario Power Generation has already had to spend more than $2 billion in recent years to meet new environmental standards.

The debt left behind when Ontario Hydro was split into a handful of smaller companies totals about $20 billion.

The opposition NDP accused the government of imposing the increase now to justify the move to a free electricity market, when market forces will determine prices.

"If true, it's a real blow to the pocketbook for many families and will hurt an economy that is already slowing down," said Frances Lankin, deputy New Democrat leader.

The government has said it wants to delay opening the industry to competition so it can make sure it avoids the kind of mistakes that have led to high prices and other problems in places such as California and Alberta.

The U.S. state has recently suffered through repeated blackouts, with much of the blame pinned on mishandled deregulation of the electricity market.

-- Rachel Gibson (rgibson@hotmail.com), March 30, 2001