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Fortnightly Magazine - March 1 1997

marketer's certificate by the FERC in a decision that has implications for Hydro-Quebec's and Ontario Hydro's applications.

Ontario Hydro is being forced to functionally unbundle its rates to establish a set of financial books that will make its business "transparent" for potential purchasers, if and when privatization is implemented. In addition, Alberta, which produces thermal power almost exclusively, created Canada's first "independent power pool," trading mechanism essential for competitively priced power. Like others, Manitoba Hydro is considering a transparent transmission pricing within the context of an independent system operator.

However, at least one major barrier still stands in the way of wholesale access (em electrical-grid interconnection. Currently, there is not enough capacity on existing power lines from Ontario to the U.S., Manitoba, or Quebec. This shortfall exists partly because electricity generation and transmission always was produced within the provinces. But there is yet another problem. In order to improve capacity, Canada would have to allow internal free trade.

Unlike the U.S. or European Union, Canada politically condones interprovincial trade barriers. If it weren't for the politics of provincial appeasement, the federal government easily could remove those barriers (em a necessary step toward integration of the North American electricity market.

In the U.S., agencies prevent internal trade distortions, while fewer trade barriers exist in the European Union. Before open access can become a reality in Canada, the anaemic Federal Canadian Competition Bureau will have to make a decisive move to promote interprovincial trade in energy by working with the National Energy Board and provincial regulators.

Pressure from Quebec

Enormous economic pressure is making Ontario consider wholesale wheeling and independent power. The province stands to lose existing comparative advantage and jobs if it doesn't open up its electricity grid to competition.

In October 1996, the Parti Quebeçois separatist government announced that private electricity

suppliers would be called upon to supply more electricity on the Hydro-Quebec power grid. The independents will pay Hydro-Quebec the cost of transporting electricity on its grid with transparent rates set by a new independent energy board.

In Quebec, private operators will have exclusive rights to build power stations with a capacity of up to 50 megawatts of electricity, up from the previous threshold of 25 megawatts. Under the new policy, Hydro-Quebec will remain the sole distributor of electricity in the province, with exception of nine small municipal utilities that exist. Private power is expected to create an additional 600 megawatts during the next 15 years.

Independent power producers are scrambling to build in Quebec. This construction boom will assist the separatist Parti Quebeçois government whenever the next sovereignty referendum is held. Both Hydro-Quebec and Ontario Hydro want to export more power to the U.S., which means compliance with the FERC. This, in turn, means means allowing wholesale access within each respective province.

The era of massive, central-government-funded power projects is over, partly due to the increased efficiencies of cogeneration and the impetus for local accountability.

Our electricity giants like to claim to be "crown-corporations" when it suits them. But state-owned Ontario Hydro wants access to the RTGs in the U.S.