North America

Competition nears Ontario monopoly

Issue 2 and Volume 5.

Competition nears Ontario monopoly

The combination of wholesale competition in the US electricity market and mounting demand for choice of supplier from Ontario customers is increasing the pressure on Ontario Hydro`s 90-year-old supply monopoly, Hydro Chairman William Farlinger said at the recent Economic Developers Council of Ontario conference.

“The driving force in the world today is fierce competition … the monopoly is disappearing,” Farlinger said. “The electricity market is quickly becoming a North American market. In the US, regulators have already approved open transmission access. I believe Ontario Hydro should move to that same competitive environment as quickly as possible, in both the generation and retail aspects of Ontario Hydro and the municipal utilities.”

He said that if Hydro wanted to sell more into the much larger US market, it would have to open its own market. “Electricity is not a product that can be easily contained within the lines drawn by some cartographer. Our province has done well by free trade, and we intend to pursue aggressively any and all opportunities, not just with US utilities but also directly to American customers.”

Last year Hydro created an American subsidiary and has since applied to the US Federal Energy Regulatory Commission (FERC) for a marketer license that would allow it to buy and sell power within the American market. FERC recently rejected a similar proposal by B.C. Hydro, claiming that British Columbia must provide the same access to US suppliers. “This ruling may impact the timing of our US marketer license, but as we open up to competition we are confident one will be granted,” said Farlinger.

Some Ontario municipal electric utilities are anxious to buy power from sources other than Hydro. Farlinger said individual users should not be free to turn their backs with impunity on the debt that has been accumulated on electric supply facilities that were built and maintained for the benefit of members of the Ontario power pool. “Until such time as we open up for competition, we must maintain the integrity of the power pool so that costs and benefits can be shared equally,” he said. “If municipal utilities really want out of the power system, they will have to pay exit fees to pay their fair share of the costs of creating the system.”