September 18, 2013 – Ontario’s power sector needs an overhaul to address a long list of inefficiencies, and rising consumer prices, according to a new report from the C.D. Howe Institute. In “A New Blueprint for Ontario’s Electricity Market,” author A.J. Goulding presents a blueprint for an electricity market that would be responsive to price signals, reform the role of the Ontario Power Authority (OPA), and would operate free from ministerial meddling.
“An electricity market with independent institutions and long-term price signals will allow Ontario to best meet both its electricity needs and environmental objectives,” said the author.
“The Ontario power sector today has oversupply, a mismatch of generator capabilities and needs, rising prices to final consumers, a lack of transparency in prices, and volatile and contradictory policies,” said Goulding. Consequently, private-sector actors are unable to justify investment without some form of government-backed contract. As well, the government’s failure to rely on either sound planning or market principles has meant that the province has not procured generation capacity at low cost, on terms deliverable over the long run.
“The province’s current electricity surplus provides a window for thoughtful policy review,” said Goulding. “The government should establish a market that sends transparent and effective price signals of the need for new electricity generation capacity, and is technologically neutral, allowing it to take better advantage of low-cost sources.”
Goulding recommends the province:
- Insulate implementation agencies from policymakers, meaning that the government should not use ministerial directives to interfere with the day-to-day operation of key power sector institutions.
- Create a properly designed market for forward generation capacity to enable Ontario to increase reliance on market signals for new investment.
- Replace the Ontario Power Authority’s principal buyer role with newly created regional intermediaries, often referred to as “load serving entities”, that are closer to the customer
The C. D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. It is Canada’s trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based, and subject to definitive expert review. It is considered by many to be Canada’s most influential think tank.
Click here for the full report.
For more information contact: A.J. Goulding, President, London Economics International LLC, Adjunct Assistant Professor, Columbia University; or Benjamin Dachis, Senior Policy Analyst, C.D. Howe Institute, 416-865-1904, email: cdhowe@cdhowe.org