[BETA] Fortnightly

AS A FOLLOW UP TO OUR APRIL 1 ARTICLE ON CANADIAN-U.S. energy convergence, Public Utilities Fortnightly interviewed Ontario Energy Minister Jim Wilson to find out what's in store for the province as it moves ahead with restructuring its electricity industry. During the interview, which took place shortly after the Market Design Committee released its first interim report on Ontario's electricity restructuring process, Minister Wilson spoke about how collective agreements with labor unions have affected Hydro Ontario's nuclear operations restructuring, lessons learned from this past winter's ice storm, and the future of natural gas and renewables as generating fuels.

What does the Market Design Committee's first interim report say about the progress of restructuring?

We are on two very tight time frames. The Market Design Committee interim report talks about establishing an independent market operator. The Servco - the new services commercial successor company to Ontario Hydro - will be separate in all ways from the independent market operator. And [the report] begins to move into the area of its next phase, [which] will be market power.

The independent market operator will regulate the market, they'll do the honest brokerage. In our jurisdiction, clearly the shareholder in the largest services company and generating company is the people of Ontario, or the government of Ontario, and therefore the government can't do the oversight directly. So the Ontario Energy Board, which is a quasi-judicial arm's-length body, will provide oversight, will ensure consumer protection. The IMO will establish the rules of the market. Legislation will establish flexibility so if we don't get it right the first time they'll be able to come to the government for approval of regulations. But it can't expect the OEB to be the oversight monitor on behalf of the people. The worst thing we can do for investor confidence is to keep meddling around in the independent market, because we're such a major shareholder.

What are some major restructuring issues that still haveto be tackled?

Market power is the major issue, domestically. Our particular conundrum in setting up a competitive market for the year 2000, is [that] Genco, the successor company to Hydro's generating facilities, will hold all the facilities, so it will represent about 90 to 95 percent of the generating capacity in the province. Our independent power producers are very worried that they won't be able to compete or that there won't be a level playing field because Genco will be so large. We're trying to assure them that the Market Design Committee is made up of a group of experts and will ensure that there's a level playing field.

But the market we're looking at is the northeastern United States. We'll be out of the chute in the year 2000; Genco would represent about 15 percent of the Northeast United States market and Ontario, combined, which puts market power in a different perspective. It sort of puts us on a level playing field with U.S. competitors, we think. That's their next report that's due in a couple of months.

Ontario will be the first jurisdiction in Canada in