Presentation to the Standing Committee on Resource Development

Lawrence Solomon

January 22, 1992

I am grateful for the opportunity to comment on the proposed amendments to the Power Corporation Act, because this Act has had a profound effect on the Ontario economy.

Each of you should have a copy of a study entitled .Cross Border Electricity Rates: Ontario’s Loss of Competitiveness.. I would like to ask you to turn to the first graph, which compares Toronto electricity rates to the U.S. average.

Until 1978, the U.S. and Ontario had very similar electricity structures, both being monopolized sectors.

Some parts of the U.S. – those with abundant hydroelectricity – had lower cost electricity than Ontario, but most U.S. utilities charged more for their power than did Ontario Hydro, because most did not have significant water resources. Overall, the U.S. charged much more for power than did Ontario Hydro.

In 1978, the U.S. federal government, under the Carter administration, passed anti-monopoly legislation that affected the equivalents to the Power Corporation Act in the 50 U.S. states. The monopoly utilities challenged this legislation in the courts, and eventually lost when in the mid-1980s the U.S. Supreme Court ruled that the federal anti-monopoly legislation was constitutional. As a result, the various state equivalents to the Power Corporation Act had to be amended to allow competition.

The graph we’re looking at shows the result. With competition now allowed, vast amounts of cheap and clean power began to flood the

U. S. market. Coal and nuclear power expansion from the utilities were stopped dead in their tracks. Replacing these expensive and environmentally damaging technologies were safer and more economic technologies: renewable technologies such as windmills, but most of all, high efficiency gas technologies.

The economy was ahead and the environment was ahead.

Now let’s look at the graph to see what happened in Ontario over that same period, during which Ontario’s Power Corporation Act retained all of Hydro’s monopoly powers.

As you can see, Hydro’s rates increased dramatically. They will need to continue their dramatic increase if the utility is to avoid taxpayer bailouts. Bill 118 – if passed as is – will only speed the utility’s decline.

Thank you.

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