Words Can Be Electric - Are Ontarians paying attention?

We have the continuing saga of electrical utility deregulation surfacing in Alberta.

The headline in the Calgary Herald "TransCanada says power line would foster competition" alerts us to this.

We see words and phrases from the old days of deregulation return as TransCanada argues in favour of a major expansion of electrical grid capacity.

"What transmission does for a load is it gives access to competition, you can get your generation from many different sources,..."

I think I see at least two issues at play here.

There is a focus on the introduction of Bill 50 which allows the provincial government to use a hurry-up process to place transmission lines where the engineers think the lines will provide the most efficient transmission of electricity.

That has advantages for sure. However, the government sullied the process by doing silly things like hiring securities firms to spy on rural citizens asking the government to prove its case before going ahead with construction on their farms.

The government perhaps knew it shouldn't trust these rural folks simply because by and large it was rural folks responsible for electing this government. That level of distrust of rural folks can't help but generate an equal level of distrust directed at the government from these same rural folks.

However, I'm not sure that's the biggest issue. I think the biggest issue is more electrifying and that is cash.

When the electrical utility was deregulated, the argument was that the retail sale of electricity would be made by many unregulated sales people instead of a few regulated and vertically integrated power generators.

The argument was that this would give consumers choice over whom they bought their electricity from. With a limited supply of energy, some argued that this would only drive up prices as more retailers bid on an unregulated commodity in short supply. Albertans were assured that this was a good thing as those increased prices would attract generators to the market, creating a greater supply and work to hold down prices in the long run.

The trouble is there was a much greater return on investment by simply charging more for the available commodity than there might be for taking the risk of adding more supply and driving down prices. Consumers are more concerned about security of supply than high prices. Consumers could always put off discretionary purchases such as food, medicine and a new car in favour of making sure the house stayed warm and the lights stayed on.

While new generating capacity has been added since the beginning of deregulation, it has not caught up to rising demand, thus assuring Albertans they have the bragging rights to the highest or near highest electrical energy costs in North America.

On the other hand, there have been some interesting opportunities for electrical energy retailers.

Now, let's suppose Alberta builds its much-needed grid expansion.

If it's done without decentralizing electrical generation to have generation as close as possible to consumption, it will have assured itself of inefficiency by having to transmit large amounts of energy over long distances.

The massive cost will be justified by the current shortage situation and because security of supply can literally be a life or death situation, Albertans will be told they have no choice but to support this expansion.

This massive cost will also justify building new large grid capacity for export out of Alberta, especially to the energy hungry southwestern United States. There may be transmission costs incurred to service those folks, to be sure.

However, ask any farmer or rancher or petroleum producer how that works. If that farmer, rancher or petroleum producer has to incur added costs to meet his or her particular situation, can he or she expect to recoup those added costs in international and inter-provincial fee market competition?

Has that ever happened yet? What are the chances it will happen now?

Grid expansion must be planned very carefully or Albertans could find themselves paying for that expansion in order to enable foreign consumers to compete with Albertans for access to electrical energy generated by Albertans to meet Albertan's needs.

The original quote: "What transmission does for a load is it gives access to competition, you can get your generation from many different sources,..."

So let's look at that quote again.

"What transmission does for a load is it gives access to competition, " Can't argue with that. Consumers have greater access to competing generation and retail sales because of increased grid capacity. But, which consumers ... Albertans or Albertans AND people in other provinces and other North Americans as well? Does that kind of competition help to hold prices at an affordable level?

"... you can get your generation from many different sources, ..." Is there really a better profit opportunity in building new generation versus charging more for existing generation? Is that profit opportunity further enhanced by having access to more demand or to having the same generating capacity spread more equitably around the existing demand?

What is there about this policy that really works for all Albertans? How is the implementation going to make sure that benefit comes to all Albertans?

I urge Ontarians to watch this unfold in Alberta as their deregulation is unfolding in Ontario. There may be things to learn.

Mike