Ontario Hydro Symposium

Lawrence Solomon

February 10, 1994

Eighty years ago, Adam Beck, who began the great enterprise we call Hydro, argued for an electrified transportation sector…In 1915, he organized a march on the legislature to present a resolution asking the provincial government for a subsidy of $3500 per mile for his municipal Hydro railway scheme. By the 1930s, Hydro was operating electric railways in this province.

But Beck didn’t want to stop at transportation. This visionary foresaw a Greater Hydro that ran all of the province’s utilities – not only electricity but also the gas and water utilities, not only transportation but also communications – telegraph and telephone.

Beck said: “If all these systems were joined under central control, say of the Hydro-Electric, one staff could serve all purposes.” He said this to 700 municipal delegates in 1914. It was here he made his famous remark:

“Nothing is too big for us. Nothing is too expensive to imagine. Nothing is visionary.”

The electric railways disappeared in the 30’s, amid scandal and bankruptcy. And the scandals in Hydro’s power business have continued, almost uninterrupted, to this day. Hydro has almost never been out of the public light, requiring Royal Commissions upon Select Committees upon Standing Committees upon DSP Planning Hearing … the controversy and public suspicion surrounding Hydro has never ended.  But I’m confident they will end soon, as Hydro is restructured along the lines occurring around the world – toward a more decentralized model that keeps as a monopoly only that which must stay a monopoly – the grid – and which frees up the generating stations to permit them to compete.  The restructuring is occurring everywhere, but it is most advanced in the U.K., where a coal and nuclear based system very much like Hydro’s was reorganized into one state-owned nuclear generating company, two private non-nuclear generating companies, a National Grid Company, and 12 regional electric distribution monopolies.

What a result! Environmentalists cheered as the restructuring ended nuclear expansion, and even retired some existing stations. They cheered more as numerous coal plants were retired. And again as these outdated technologies began to be replaced by high-efficiency gas technologies and even a little bit of renewables – exactly what environmentalists had argued for years would be most economical. Along with the retirements, the UK has been experiencing the biggest building boom in the power sector since the days of OPEC – and all of it is sustainable technology that is displacing the unsustainable.  Business cheered as well – who wouldn’t, when power rates for 75% of businesses were slashed 10% in the first year, and nearly one-third saved 33% or more. UK industry now pays less for its power than does Germany and many other counterparts in the industrialized countries. And UK industry is no longer subsidized.

UK domestic users are also better off than many of their continental colleagues, with only Irish, Dutch and Greek householders paying less.

And it’s getting even better.

Negotiation completed in the UK last summer involving the 12 distributors, National Power, PowerGen, and British Coal have resulted in a deal to lower rates by 5 per cent over the next five years.  Under the deal, the cost of power sold to the distributors will fall by 17 per cent over the next 5 years – that means a 25 per cent drop in wholesale prices over the eight years following privatization.  Because of the UK’s success, it – and not the US system – is becoming the dominant model for reform throughout the world.  But the UK also provides us with cautions to observe; and I urge Mr. Strong to avoid the errors made by Mrs. Thatcher, for whom ideology was sometimes more important than reality.  When the financial community told her the nuclear plants couldn’t be privatized, she balked, saying of business, “they will take them.”  But Thatcher took a U-turn when they refused, not because they were anti-nuclear, but because they were pro-survival, and the accounts showed nuclear power, alone among the UK’s power assets, to be unsustainable.

Mr. Strong should privatize the rest but keep the nuclear plants in public hands – and watch their value grow – that’s exactly what happened in the UK, where nuclear power’s costs came down and production went up under competition. Nuclear is no longer the laughing stock – and enormous public drain – it once was. Hydro might not be able to build new reactors because they’re still not competitive, but it may be able to recoup much of its loss, and bring back respect for our Candu fleet.

Courage, Mr. Strong! Stick with your agenda and promote and nurture a competitive system. If you do, the consumer, industry, and the environment will all be winners.

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