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Green Zombie

Tom Adams — Special to Financial Post — October 31, 2012

56,000 documents reveal Ontario’s energy disaster

After Ontario Premier Dalton McGuinty started handing out billions, green carpetbaggers around the world smelled the money and came running.

Over the course of his nine years as premier of Ontario, Dalton McGuinty’s electricity policies gradually transformed from a loose grab bag of good intentions into a zombie. Today, ­McGuinty’s zombie, green on the outside only, grows by the day, feeding on rivers of future ratepayer cash. A preliminary analysis of 56,000 documents that the government recently released reveals that the government’s handling of the energy file is a disaster.

Consider how dramatically McGuinty’s early electricity record contrasts with his changed priorities as his premiership wound down.

When running for election in 2003, McGuinty promised to continue the Ontario electricity rate freeze that Tory premier Ernie Eves had introduced in November of 2002. The Eves rate freeze had a superficial appeal to some voters, but was weakening the power system. Once elected, McGuinty quickly reversed his electoral promise and cancelled the rate freeze. Dwight Duncan explained simply, clearly and honestly that consumers had to pay the real cost of energy, that deficit financing electricity was irresponsible.

Once he was elected, McGuinty’s electoral demagoguery gave way to his issues-management style of government. His first electric flip-flop was driven by what he saw as pragmatism.

Cancelling the freeze allowed OPG’s finances to stabilize. Soon after its cancellation, electricity demand in Ontario peaked and has declined steadily since.

The widespread public acceptance of the rate increase that followed the lifting of the freeze signalled to policy entrepreneurs that more rate inflation was a workable target.

But getting rid of the rate freeze created a gap — what rate to charge for power? The approach that McGuinty and his then energy minister, Dwight Duncan, fastened onto was to use a combination of government-determined and regulated prices.

Before Eves had started to play politics in setting power rates, his predecessor, premier Mike Harris, had been trying to encourage private investment in the power system by way of a competitive market. McGuinty derided Harris as lacking a plan for the power system. McGuinty’s move to non-market prices for electricity drove the final nail in the coffin that was holding the remains of Harris’s competitive-market experiment.

In taking command of pricing, McGuinty didn’t set out to orchestrate a power grab. Following his issues-management style of government, he needed more power to perform the fix he thought he needed.

During the October 2003 election, McGuinty had played up the popular but fatuous claim that a blackout in August 2003 was directly caused by Harris. Harris’s ideological opponents coalesced around the claim that Harris had allowed underinvestment in new infrastructure in Ontario and that this had caused the blackout. Although there was some truth to the concern about too little investment, the root causes of the August 2003 blackout were related primarily to transmission maintenance, protection and control designs, and communication between grid control centres around the U.S. Midwest and connected systems.

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