Once it’s opened, though, it will be wide open. From the beginning, Ontario has planned to open the entire market up on both the wholesale and retail sides. Ontario expects that open access will create efficiencies on the supply side, and perhaps more importantly on the demand side as well.
For those of you waiting for the Canadian electricity market to open up to competition, you will now have to wait a little longer.
Although the plan was to open the market up in November of this year, the Ontario government announced on June 22 that the open date will be pushed back to a time not yet determined.
The reason: the oh-so-familiar issue of software systems. “The Independent Market Operator (IMO) has been developing the software systems that are needed to operate in a competitive market, but they have assessed that now they are at a point where they would not be able to meet the November date,” says Bruce Boland, executive vice president of commercial operations with Ontario Power Generation (OPG, www.ontariopowergeneration.com), the generation company formed by the three-way split of the old monopoly, Ontario Hydro. (An IMO is the same as an ISO, independent services operator, here in the States, and it is responsible for maintaining balance of the electricity grid system.)
But fret not, for the market will open sooner rather than later; it’s just a matter of working out the kinks that so many other markets have had to face. Boland speculates that it will be only a three- to six-month delay. “The government is committed to opening the market as soon as possible,” he adds.
Ontario’s New and Improved
Electricity Market
“Open access allows customers to see the market base prices at any given point in time, and it allows them to adjust their consumption and make decisions about electricity use based on prices that actually reflect the cost of that use,” explains Boland.
Prices in Ontario are already generally lower than the jurisdictions that surround the market, including Michigan, Ohio, Pennsylvania, New York and the New England area. “And we expect to continue to be very competitively priced,” Boland says.
Ontario’s open market will also increase the types of services that power generators will provide. OPG, for example, has recently developed a number of management products and energy service products that help customers track their energy loads and fully understand their energy usage to get the best price for their needs.
On the downside, however, cost savings will be affected by stranded costs (investments made by utility companies that cannot be recovered in the deregulated environment). The calculated debt for Ontario is slightly less than US$5.4 billion. So some of the generation earnings will be dedicated to paying down the overall stranded debt, and there will also be a DRC (debt retirement charge) — typically called a CTC (competitive transition charge) in the United States. The DRC rate works out to be approximately .7 cents (Canadian) per kilowatt-hour.
Another cost concern that may arise from opening up the market is the influx of U.S. competition. Because Ontario is connected with the U.S. Northeast — markets that typically have higher prices — the market dynamics may import some of those higher prices into Ontario.
The outcome of opening up the market, however, is sure to be a positive one, Boland says. “In the short term, everyone goes through growing pains as you move through an old monopoly regime to a new competitive regime,” he adds. “But in the long term, we will develop a market that will create favorable investment opportunities and attract capital that will lead to a healthy and growing infrastructure.”
— Tracy Heath
