IPPSO News Release, November 7, 2002
For immediate release: November 7, 2002
"The system is sound" power producers say
- A rate freeze would be counter-productive -
Ontario's electric power system is fundamentally sound, according to power producers, and it would be a major mistake to take the advice of some critics and abandon the newly-installed competitive system. "Certainly there are problems that need to be addressed, we'd be the first to admit that, but it would be a serious mistake to discard the competitive system developed so far or to walk away from the important direction set in Ontario with the reforms of the last four years, as some commentators are suggesting," says IPPSO President John Brace
"The recent surges in prices for power in Ontario may appear dramatic at first. However, they are not so extreme when averaged over the six months of market operation or particularly when you consider the effect of the Market Power Mitigation Rebate which most consumers will be entitled to receive," Brace stresses.
Most consumers with large increases in their bills are seeing the combined effect of higher consumption and higher prices which occurred together at the same time as several nuclear plants were out of service during the record-breaking hot weather of last summer. This is not a sign of anything wrong with the market system, but a truer reflection of the value of energy during those unusual circumstances, and increasing usage. Since Ontario consumers are just now seeing the bills from the hottest summer on record, it's a bit early to judge prices and adjust our usage habits until we have been through a full year.
"The important thing is that now, with a competitive system, anyone who can beat these prices is free to enter the market, and consumers are free to switch to a more competitive supplier, a right which Ontarians did not enjoy under the old system."
Ontario's premier Ernie Eves is expressing understandable sympathy with the plight of low- income and vulnerable consumers who have been particularly hard-hit by the recent bills from the hottest summer on record, Brace said. However, he stresses that "Social problems caused by electricity prices are most appropriately and effectively addressed through social policy, rather than changing the competitive basis on which rates are determined." A rate freeze would do nothing to reduce the actual cost of power, and the full amount would have to be paid by all consumers sooner or later in any case. "Government attempts to manipulate market prices would certainly drive away investment in new generating capacity," Brace said.
IPPSO supports an earlier, possibly semi-annual calculation and distribution of the MPMA rebate to consumers, which would put millions of dollars back in the hands of the consumers, without any significant change to the market design developed so far.
"A competitive market is still the best way to achieve lower prices in the long run, and more competitive pricing in the short run," Brace says. "In fact, given that we've had the hottest summer on record, with several nuclear plants unexpectedly out of service, it's a testament to the effectiveness of the market that supply has been consistent and prices have not been more extreme."
In this light it seems that some of the recent news stories about electricity prices have been rather unfair and based on incomplete information, focusing on extreme examples rather than the overall price situation.
"The market is not perfect, but its defects are more like birthing pains rather than signs of any fundamental issue with the design. Much greater problems could result from political interference in the market design or pricing system at this time."
As Premier Eves has acknowledged, if Ontario power prices were forced lower through direct political intervention, not only would there be almost no incentive for developers to build new power plants here, but the whole basis for future power sector investment would be upset as potential investors would question the stability and reliability of our competitive market design and our government's commitment to instituting a dependable system relying on market forces.
IPPSO is a non-profit organization representing about 100 individuals and companies involved in independent power production and related efforts such as equipment supply, consulting and environmental work. IPPSO members produce power from co-generation, hydro-electric, gas, coal, nuclear, wind energy, waste wood and other sources. IPPSO's members currently produce over 90% of the electricity consumed in Ontario. For more than a decade, IPPSO has advocated competition, open markets, and improved environmental standards for the electric power industry.
For more information, contact:
Jake Brooks, Executive Director, 416-322-6549
John Brace, President, 416-962-6262
For queries or suggestions, please forward to:
IPPSO, PO Box 1084 Station F, Toronto, Ontario, M4Y 2T7 Canada.
Street address: 163-C Eastbourne Ave., Toronto, Ontario M5P 2G5
Last update: November 7, 2002