I certainly commend you on your analysis of the Ontario power pricing situation. This is not the first time that Ontario has gotten itself into a debacle with electric power generation. The accumulation of a $32-billion debt was the result of an earlier debacle. The Ontario situation illustrates the negative side of power regulation. Paying producers $0.80/kW-hr for solar-PV electric power is a case in point.

The premier of Ontario is reluctant to entertain ideas on any kind of power de-regulation, no matter how small. Repealing the prohibition on private power lines across private property lines could have allowed neighbours to have co-operated on their own unsubsidized, off-grid,small--site pwer generation technologies. Politically, Ontario has to allow power prices to rise very gradually for the home market to avoid a voter backlash. Under present economic conditions, business and industry can barely afford massive price hikes. The Government of Ontario and the energy regulator have literally painted themselves into a corner with their brand of power regulation.

The price of electricity is largely cost-driven. Instead of trying to hide the costs with a sily shell game, it's time we leveled with consumers and explained the facts. I think the public actually has a surprisingly solid grasp of basic economics, but regulators and politicians continue to play the populist card.

[Rant On] Either electricity is abundant and cheap, or it's expensive and scarce (or could be made abundant and expensive), but it can't be scarce and cheap. Talking about conservation while keeping prices artificially low just confuses the public. So does trying to hide the real cost. [/Rant Off]

Wind power development between Quebec's hydroelectric power dams and James Bay and Hudson Bay could convert the humid summer air to mist, with the potential to increase rainfall over the watershed region of the power dams. Except there is no way that Quebec dare import wind power technology . . . the secessionist sector of the Quebec population would be in an uproar.

Electric power in Ontario and the development of electric power technology in Ontario will become a political hot potato in the years ahead.

The sad part is our federal government has AECL on the auction block trying to sell it off, apparently because they viewed as a money loser being federally subsidized to keep them viable every year. Even though they have some of the world's leading edge nuclear reactor technology, they suffer annual losses because not enough reactors are being made. AECL priced themselves out of the bidding for new reactors at Darlington this past year, along with Areva. Had either of them played a little negotiation to lower their bid prices for construction , the Ontario government would have been more than happy to order more reactors, but apparent greed ruled the day as they stuck to their guns, and with several alternative generation sources competing with them, they haven’t yet learned to tighten their own belts an settle for less money.

Yes, this thing with AECL sounds crazy, and it evidently is crazy, although selling it off and letting somebody take the fall is OK as long as that firm stays in business. Given my intuition about nuclear, I suspect that Canada needs AECL, and you are right about AECL and Areva cooperating, which almost certainly would have been possible if - as you say - greed had not ruled the day. Greed and stupidity on someone's part I suspect. When are these high flyers going to smarten up?

It's almost too easy to compare present events with AECL to the time when a federal government of the same party trashed out deHaviland/AVRoe and the Arrow fighter-bomber program, also in Ontario. They claim it is "market must rule" philosophy, but is pretty hard to avoid calling it pure spite and envy by the western and rural conservatives then and now, with a healthy mix of western oilmans desire to kill an energy competitor.

The City of Toronto got away with selling off assets and drawing on cash reserves over the last decade to address their structural budget deficits ever since the provincial Conservatives downloaded social services to municipalities over ten years ago. But in Toronto the cupboard is now practically bare, so spending cuts and higher taxes are their only choices left, and will soon be the only choices for our provincial and federal governments.

How do you spell Ponzi Scheme? Version B.gov.

"debt...Clearly intended to be eroded away by inflation before the capital became due..", Hooray, a source of free money scheme too.

Still looks like a Ponzi or a bait and switch to me. "Clearly intended" to be venal in either case. .

Furthermore, the story of Ontario Hydro should be no surprise given the economic rules that are foisted on our electricity systems have always been extremely political. Governments are allowed to distort free markets with their own rules whenever they see fit to stimulate some sector of the economy, and when it comes to electricity, it's the whole economy. You may call them legalized Ponzi schemes, but just look how many big US and other corporations have enthusiastically jumped on these pork-barrel trains over the years.

A corporation has to act in the perceived best interests of its shareholders and cannot just refuse an incentive their competitor will accept. It is a sordid business. An incentive by government can look very much like a bribe from outside of government.

The travesty was when as Len says the Conservatives in power in 2000 decided to break up Ontario Hydro, privatize portions of it, and book the debt onto ratepayers bills long before the debt was due to be paid back at lower value. Had this not happened, over time Ontario's taxpayers would have absorbed the debt which is NO DIFFERENT than taxpayers absorbing the tax revenue losses from those untold numbers of tax incentives doled out to lure individual companies.

Bob, who responsibly signed those notes indemnifying the rate payers? Not the bureaucrats and politicians who are never on the hook. What is easier than giving away other peoples money and then taking a bow? Was this a social benefit, for all as you see it? No, I see it as dishonestly not allowing rates to go up by simply not paying the bills as they accrued? In this drama government seems to have played all the roles. Irresponsibly.

I do not agree that this was no different than tax incentives. Legislatures are in the business of setting tax rates. They should not be concomitantly setting electricity rates and running the electricity business.

What planet are you living on Don? This is precisely what happens all the time in North America because our electricity industry regulators are put in place by government to begin with! And the regulators dictate rates in case you haven't noticed.

Like I have already said, electricity rates are extremely political in North America so don't expect anything less than a constant government hand in setting the rules for them. I'll repeat the old Ontario Hydro was a crown-owned corporation.

This is what we've been accustomed to in Ontario for decades. Call it socialism if you wish, but there are loads of examples at the provincial (or state) and federal government level where ALL taxpayers foot the bills for government designed and administered social programs and government owned businesses.

Some politicians sitting in office in Washington have even been rumored (heaven forbid) to have police records in their past for committing crimes before getting elected. Don't really know if this is true or not, but I'll bet it's very possible.

But it’s your notion that governments can run business as well or better than those not in government that I can’t swallow. (I can’t say that I have ever heard a politician make that claim.)

They don’t believe that anymore even in China.

Anecdote: All this talk about Hydo reminds me of an ordeal I had in Sarnia many years ago. Hydro asked for a trouble shooter to come to their chemical plant in Sarnia. And I was elected. They also asked me to hand carry a small part they needed along with documentation. Now I don’t remember who all those officials were at the border but there were several kinds, I suppose federal, provincial, and maybe two kinds of police.

Why was I coming to Canada/Ontario? I told them. Then you are here to work in Canada? Why can’t a Canadian do it? Do you have a permit to work in Canada?

I showed them the package and documents for the part I was carrying. They said I could not bring any parts into Canada. (In Detroit I had seen steady streams of cars going back and forth to Winsor.)

They thoroghly searched my stuff as I have never before or since been searched. They found three new tee shirts (still in their wrapper). Why are you bringing these into Canada? You cannot import clothes to Canada (at that time underwear and work clothes were cheaper in the US.

I was told that I must have a document certifying that whatever I was going to do in Canada could not be done by a Canadian. And another document certifying that the part I was carrying could not be obtained in Canada.

Well I think I had to leave my car at the customs station, less the tee shirts – Eventually Hydro sent a car for me. The next day Hydro people retrieved the part. The plant folks were all very gracious and whatever I did or told them solved the problem and I believe I only spent one or two nights there. It had to do with making plastic for golf balls!!

A humorous side note: During my hours at the customs station I noticed men in small boats crossing from Michigan and coming ashore. “Oh, those are Indians, they go back and forth all the time. And they don’t recognize national borders. “

When I went to troubleshoot at a Winnipeg (Ste Boniface? )refinery and to startup a refinery at Saskatoon (had a great time) I took no new clothes, no packages and carefully avoided using the word “work.” But I did get screwed coming and going converting currency = I never did see how I could be charged 10% each way?

Don, I don’t believe this to be true in a sweeping general sense since obviously there are far more examples of businesses that governments would fail miserably at running, like for example the multibillion dollar steel industry in my home town of Hamilton. There are some businesses however best left up to the government running, like the public health care we have in Canada. If it became fully privatized as you have in the US, the public in Canada would never tolerate millions of people left without the ability to afford health care insurance, and the untold thousands that go bankrupt and have to sell their homes to pay for hospital services. The tradeoff here of course is less efficiency with rationed services i.e. long waiting lists in many surgery cases, and less leading-edge medical technologies.

Oddly enough the decision by the Conservative government in Ontario to split up Ontario Hydro in 2000, and privatize large parts of it, was done for exactly the reason that the private sector should be able to do a much more efficient job of cost control. It was also a means for a “deregulation experiment” on the wholesale market side of electricity for generator companies, now separated from local distribution companies in Ontario. Significantly lower costs expected however remain to be seen yet.

I will also grant you the massive headaches trying to cross our common border for business purposes, in BOTH directions. It has always been plagued by massive frustration and the politics of customs officials, whose rules all come from the feds. Since 9/11 in 2001 these headaches have been made worse in some instances because of homeland security concerns. Did I mention too the latter was all precipitated by Washington, not the Canadians.

On the subject of this article, if the Global Adjustment is an unfair measure in Ontario that will lead to a political time bomb, you can bet your bottom dollar that the ruling party in Ontario's government will eventually come up with a way to diffuse it before it blows up. The government of Ontario has a rich history in tinkering with the rules our electricity industry must follow, and with consumer price regulation, so just watch them do something to deal with the Global Adjustment problem down the road.