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Utilities gear up to be market-ready by fall (6/01)

Ready or not, Ontario's electricity market will be open to competition next May. Fortunately, spokespeople for the industry say they will be ready on time, if not earlier.
Ready or not, Ontario's electricity market will be open to competition next May.

Fortunately, spokespeople for the industry say they will be ready on time, if not earlier.

"I think we're diligently doing everything we can to be ready for the market," says David Wills, general manager of North Bay Hydro, echoing comments of other spokesmen.

"Our target is to be market-ready this fall," Will says, noting the difficulty to date is getting the technology in place and working, and co-ordinating the different roles and responsibilities of the various agencies, distributors, retailers and generators.

"A lot of groups need to work together to make this happen," he adds, mentioning the Ontario Energy Board (OEB), the Independent Electrical Market Operator (IMO), Hydro One and even software manufacturers.
Thunder Bay Hydro's general manager, Larry Hebert, concurs.

"Some stuff is not in place yet," Hebert says, as his utility, like others, is waiting for information from the OEB, IMO or Hydro One.

"We're well positioned."

Thunder Bay Hydro is selling its billing and settlement services to other utilities throughout Northern Ontario, he says.

Both, however, expressed reservations about what will happen once the market is opened in May 2002, the deadline set earlier this year by the provincial government.

Wills says consumers do not have a good understanding of what is happening, how it will affect them or that local distributors will no longer be able to protect them from price fluctuations. Ontarians have had their hydro rates frozen for eight years.

"I would assume in five to 10 years consumers will know a lot more about electricity," Wills says.

Hebert also anticipates a period of market confusion, not just for individual consumers, but for industry as well.
"In the long run, competition should bring rates down," Hebert says. But in the short term, "a significant number of companies could be put in jeopardy." The disarray will depend on how quickly serious competition occurs and new generating capacity comes on stream, he says.

There has been interest in starting new generating projects in northwestern Ontario, including a small co-generation project between Lakehead University and a hospital, he says, but little action as of yet.

The five-member Northwestern Energy Association, which includes Thunder Bay Hydro, is interested in the sale of Ontario Power Generation's Atikokan and Thunder Bay generating plants, he says.

According to the Ministry of Energy, Science and Technology, new generation projects already total $3 billion and will add more than 3,000 megawatts of capacity to the market. Included in that total is a facility in Hearst that will use wood waste to generate 35 megawatts and a hydroelectric facility in Manitouwadge creating five megawatts.

Shane Pospisil, communications officer for the ministry, says provincial utilities in Manitoba and Quebec are also watching the Ontario market as a potential buyer of their surplus capacity, and other companies have expressed interest and are developing their business plans.

"There's a flurry of activity behind the scenes," that will result in projects, he says.

Setting a definitive date for the market to open has created a time frame for those companies to operate.

The ministry, while acknowledging prices are likely to rise in the short term, says the province will not face the economic turmoil occurring in Alberta and California with deregulation. Ontario has a strong surplus to ensure price increases do not get out of hand, Pospisil says.

Great Lakes Power Ltd., the province's largest independent producer and distributor of electricity, is looking for partners to help expand, says president Mike McEwan. But that growth need not be in Ontario, he adds.

The company generates 330 megawatts of hydroelectric power in Ontario and services about 43,000 customers over a 12,800-square-kilometre area.

Great Lakes Power also has interests in power plants in Quebec and the United States.

Tax changes as well as an open market, however, were factors in the company's decision to redevelop the 45-megawatt High Falls hydroelectric generating station on the Michipicoten River, McEwan says, as well as in investing in improvements to its other hydro generating stations to increase capacity by 10 per cent.

The opening of the market, however, creates other issues that need to be addressed, he adds.

Public and worker safety and the environment could face undue pressures, and steps should be taken to ensure standards are still adhered to under an open market.