FOR IMMEDIATE RELEASE: July 11, 2000
Bruce lease is a "big step" in the direction of competition
"This announcement is a big step and perhaps the most concrete development yet in the long process of creating competition in Ontario's electricity business," said IPPSO Executive Director Jake Brooks, in response to the recent announcement that the Bruce nuclear plant will be leased on a long-term basis to a new company led by British Energy. "Ontario has made a clear break with the past. We hope this will be the first of many such steps that will introduce and improve competition and customer choice for electricity consumers in Ontario," Brooks said. IPPSO and many others have advocated the breakup of Ontario Power Generation Inc. (OPGI), the government-owned company that inherited all the generation assets of the former Ontario Hydro. "This transaction will have the benefit of bringing at least one major new player into the Ontario power market, helping to create meaningful competition," he said.
"Although this announcement is positive in principle, IPPSO will be watching closely to see the details of how it is implemented, especially how it will impact the environment for further competition," he cautions. "We are assuming that the details are consistent with implementing a level playing field and encouraging competition." In IPPSO's view, "the benefits of this kind of initiative will be best realized if full competition is introduced as quickly as possible." This will mean facilitating the startup and entry of multiple new competitors in Ontario, and curtailing any residual advantages enjoyed by the former monopoly. One important example of encouraging new competitive entry is to reduce or eliminate the planned "Debt Reduction Charge" whereby consumers may have special charges added to their electricity bills designed to help pay down debts left over from the former Ontario Hydro. IPPSO and others are suggesting that the annual lease payments from the Bruce station, in the order of $150 million per year, should be dedicated first to paying down the stranded debt of the former Ontario Hydro.
"IPPSO, together with other stakeholders, expects that any proceeds from decontrol transaction should be dedicated first to help retire the debts of the former Ontario Hydro, in order to reduce the need for special charges," Brooks says. Some stakeholders, particularly those representing customers, will undoubtedly be concerned about whether the terms of this kind of deal leave too much of the costs and liabilities with the publicly-owned company."It has been recommended that regulators hold a public hearing to review the decontrol plan and set standards for any major changes like this," Brooks says.
"Implementing transparency will be very important with respect to the market as a whole, and for this transaction in particular, in order for players in the market to assess what kind of new business opportunities are open to them," Brooks said. The transaction is not subject to a hearing at the Ontario Energy Board (OEB), but the operator will have to make extensive disclosure in the process of being licensed by the OEB.
IPPSO continues to encourage the government to greatly accelerate the time-line for divestiture or decontrol of the assets of the former Ontario Hydro. "OPGI should be required to decontrol down to 35% of the price-setting market long before November 2004," Brooks said. This is in line with IPPSO's previous recommendation that the time-frame for decontrol be shortened, and a plan for decontrol be made available for review in a public hearing process.
The views expressed recently by the members of the Stakeholders' Alliance for Competition and Customer Choice are broadly reflective of IPPSO's feelings on the subject:
- The Government needs to adopt an even stronger role of leadership in continuing to push the competition agenda
- The Province should move as quickly as possible to sell electricity assets in an open process that puts competition, early debt-reduction and price-reduction as high priorities.
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For further information, please contact:
Jake Brooks, Executive Director 416-322-6549
Independent Power Producers' Society of Ontario (IPPSO)
PO Box 1084, Stn. F, Toronto, Ont. M4Y 2T7
tel.: 416-322-6549 fax 416-481-5785
e-mail: ippso@ippso.org website: http://www.newenergy.org