Rate cap redux

As reported yesterday, Ontario Energy Minister Dwight Duncan will spend the next 30 days drafting a new energy policy that will involve lifting the 4.3 cent hydro rate cap that Ernie Eves put into place when the deregulation of the energy market blew up in his face. And our faces. This Globe and Mail article points out a few things to take into account.

Since the wholesale market opened on May 1, 2002, the average price has been about 5.8 cents per kwh, but the government will want to pad that a bit to cover the cost of imported electricity and to entice investors to build generation plants.

There are many ways this price increase can be mitigated so that a fixed-income pensioner in a one-bedroom flat and using little power is not treated the same as energy wastrels living in monster homes with heated pools and all the mod cons.

As well, there are emergency conservation measures that can be put in place immediately. For example, California had short-term success with a scheme that provided 20-per-cent rebates on bills to customers who cut their energy usage by 20 per cent.

Beyond this, the Liberals will need to introduce measures that provide for long-term efficient use of electricity by residential and business users.

The easing of the pain for low-income/fixed-income households is called for, at least in the short term, so a scaled rate that charges more for increasing use is a good idea. Heavy users who have to pay more will have the incentive to conserve, which, given the looming supply problems the province faces as outlined in this Toronto Star article, is certainly called for. In the long term, allowing the price to rise should make new energy sources more practical.

Of course the question I have is why not reregulate the whole system. One of the things I give credit to Howard Hampton for is the way he stayed focussed on that issue throughout the election campaign. And I agreed with him. The Tories should never have gone down this road in the first place. It looks increasingly as though the private sector wins and the rest of us lose on this deal.