Three prongs, none grounded

The Ontario Legislature was dissolved on Monday, which at least put an end to a long-running no-news item that infested local radio and television through the August silly season. Elections have been called for October 2.

Nobody in another province would admit it for a moment, but there is a reason to envy Ontarians, buried about halfway through the province’s Election Act. Section 53 of the Act allows a voter to take a look at his ballot, realize the choice in front of him ranges from the comically inept to the truly dire, and hand it back to the Deputy Returning Officer, who must record that the elector appeared at the poll and declined to vote.

That suggests itself as a useful remedy next month in an election that may ultimately turn on the question of electricity. For when half the province (and rather more than 80% of its people) were blacked out on August 14, the problems of the power grid finally put themselves in peoples’ faces.

When the lights came back on on the American side of the line, those whose eyes went straight to their navels concerned themselves with the state of the transmission grid and its possible vulnerability, both to technical defect and to people with nasty ideas in their heads. In Ontario — where a sort of “deregulation” had allowed power costs to rise drastically in 2002, and the government stepped in with a rate freeze — the worry was about generating capacity.

In a way that’s not terribly surprising in the province where a private bacteriological laboratory correctly reported the contamination of the Walkerton municipal well, the municipal authority did nothing, and the chattering class deduced that private labs were no good. The power failure was traced to problems in the transmission system, not to a lack of generating capacity, but still Ontarians have gone into a funk about where their next ampere is coming from.

The fact is that the whole system, from turbine to outlet, has to work, and it has to work all the time. Economist Robert Samuelson, in a Washington Post column, sensibly pointed out that power generation is a small fraction (2-3%) of the U.S. economy (the numbers are similar in Canada: about 2.7% according to figures released last May). Efficiencies in power generation work on that small fraction of the economy; but reliable power is an essential condition for the rest of that economy. When it comes to power generation, the reliable is measurably — about fifty times — better than the efficient.

That is something that has escaped the power-privatizers, who declaim about the low power costs we will all get if the system is wholly deregulated. Cheap ain’t exactly the point: a good system is running all the time, and we venture to say the electricity it produces is worth more.

One interpretation of what’s wrong has it that owners of electrical generation or transmission systems will have a proprietary interest in keeping those systems in shape — unlike public power authorities, who, with access to tax money, have no incentive to husband their finances in that way. The argument, though, depends on applying the market all the way down the line; the Californian experience, of deregulating power supply but capping retail electricity rates, showed the folly of part-measures.

For this to work, there would have to be a public consensus that the whole system should be handed over to the private sector. The Thatcher government did that, with mixed success, in Britain, but it had a unique political opportunity at a time and in a country where a large part of the public was tired of state ownership. There is no such political opportunity in Ontario this month.

The other interpretation is that putting the electrical supply in private hands is a failure itself. Certainly the co-operation between proprietors that a modern power grid needs is antithetical to competition between them, and the opportunities for power generators to game the system are numerous.

The last decade is rife with examples of utilities that have — in the name of efficiency — become steadily less reliable even as they have become more profitable. Free-market doctrinaires cover their eyes and pretend it’s not happening, but modern economies are underpinned by things like power and transportation networks, and the “creative destruction” of the business cycle has no business tearing up roads and yanking down power lines.

So there is a reasonable case to be made that a public-utility model of electricity generation can be boxed into making reliability its principal goal, just as the old Ontario Hydro was boxed into making cheap electricity its principal goal. But that will take large-scale public investment, the cost of which must pass through to the electricity user, or we will have another Hydro on our hands. The difficulties in keeping the system’s financial integrity in the face of political pressure for low power rates are obvious.

Still, it would be better to have reliable public power at cost — its real cost — than to have subsidized power consumption, no planning at all, and a transmission system where neglect accumulates until something finally gives.

The standard-bearers for the idea of a publicly owned system are naturally the Ontario New Democrats, but just as naturally no modern left-of-centre party can resist nostalgia for the good old days of statism. (How they summon up nostalgia for the days of Sir Adam Beck and Sir James Whitney is another story.) Credit Premier Ernie Eves for one sharp move: he called an election three weeks after the August 14 power failure, when Howard Hampton thought political points could be made on bringing back Ontario Hydro, which for taxpayers could be as popular as resurrecting Marie-Antoinette.

For those keeping score, the Conservatives would keep the current price freeze on electricity rates, look for a 10% cut in government power usage, and build a few new natural gas and nuclear power plants while closing coal-fired ones. The Liberals have a platform of getting out of coal, conserving energy, and developing “green” sources that make them look like New Democrats in no hurry at all.

The New Democrats suppose the province could simultaneously (a) reliably supply electrical power, at cost, without running up another massive debt on the same scale as Hydro did; (b) close coal-fired generation plants or convert them to natural gas by 2007; (c) find a 40% saving in the province’s energy consumption through building retrofits and public education; and (d) never build another nuke. Tack on the novel concept that carbon-dioxide reductions under the Kyoto agreement will reduce respiratory disease in Ontario and it’s little wonder publicly-owned power appeals strongly to wishful thinkers.

But that is not its advantage: security of supply is. Hydro provided that, most of the time, at a cost that proved to be unreasonable. The way-station of OPG, Hydro One, and privately and municipally owned generators doesn’t, at a cost that is proving to be just as unreasonable.

A choice has to be made — either private ownership with strict but sensible regulation and worthwhile returns to the owners, or public power at its real cost. The pity is that none of the three parties seem prepared to discuss which we should choose.