Energy Monopoly Driving Up Costs, Prof says
April 18, 2007 - News Release
Consumers would be paying significantly less for their electricity if Ontario had more players generating power, says a University of Guelph economist who conducted a ground-breaking study on the restructuring of the province’s electricity market.
Talat Genc’s research concluded that if the government-owned, Ontario Power Generation (OPG) were to divide its capacity among just two other independent suppliers the annual costs of power would drop by 21 per cent. Ontario Power Generation (OPG) - the province’s largest electricity supplier - currently owns 77 per cent of the generation capacity in the province and the remaining is split between two other providers.
“The aim of deregulation is to have many players,” said Genc. “Having more players makes for a more competitive market, which means prices will go down. And a change in market price affects the end prices consumers take on.”
Genc’s study, which is to be published in Energy Economics next year, is based on comparing the outcomes of Ontario’s current electricity market structure with the market structure that would have existed if a policy created in 2001, aimed at reducing OPG’s monopoly, hadn’t been quashed by the government in 2003.
Ontario was at the beginning stages of deregulating the electricity market when an assessment report by the National Energy Board in 2001 stipulated that the capacity of OPG should be reduced to 35 per cent over the next decade by selling off portions to independent suppliers. This policy stuck until 2003 when the Liberals came into power and declined to sell off any of the province’s electricity-generating capacity.
If the policy had remained, two-thirds of OPG’s capacity would have been sold, allowing for five electricity suppliers instead of the current three, said Genc. It also would have created a level playing field and opened up opportunities for other interested suppliers to join the market. In the end, electricity prices would be cheaper and the power supply would be more dependable, he said.
“If there are only three players and one goes down, that can have a significant impact and can lead to blackouts or brownouts. Having more players means healthier improvements overall for the consumer.”
Contact
Prof. Talat Genc
Department of Economics
tgenc@uoguelph.ca
519-824-4120, Ext. 56106
For media questions, contact Communications and Public Affairs: Lori Bona Hunt, 519-824-4120, Ext. 53338, or Deirdre Healey, Ext. 56982.
