July 2001 IBEW Journal
This is the second article in a two-part series on the effects of deregulation in North America.
Utility deregulation in Canada is most unpopular in those provinces that found out too late it is not free-market paradise.
Much like the U.S. route to deregulation, Canada is experimenting with utility restructuring on a province-by-province basis. And the provinces farthest along in the process of opening their markets are finding the promised cost savings have not materialized. On the contrary, consumer prices are rising particularly in Alberta, where once reliably low retail costs have skyrocketed since the market was opened on January 1, 2001.
Making it all the more painful is the fact that Canada has historically benefited from some of the cheapest power in the world. But thanks to the recent fascination with deregulation, Canadians can no longer rely on that once-bankable truth.
Alberta is Canada's California-minus the rolling blackouts, at least for now.
Much like California, Alberta has been enduring a free-market free-for-all that is seeing power suppliers lining their pockets while retail prices hit the roof. The province's ruling conservative government officially deregulated on January 1 and in the month of January, prices doubled. But problems started before then with officials going so far as to discourage residents from turning on their Christmas lights.
Alberta has not achieved the glorious goals deregulation's architects touted. A power surplus has become an energy shortage and made Alberta dependent on electricity from neighboring regulated provinces. The experiment has caused residents to pay among the highest rates in North America and transferred hundreds of millions of dollars from consumers to power companies.
Many business owners who promoted deregulation are now the government's most vocal critics, struggling under the cost of doing business. Many consumer and industrial groups, including the IBEW, warned two years ago that the province's deregulation plan was flawed.
"I could have picked three monkeys from the Calgary Zoo and they could have done a better job with deregulation than this government," Dan Macnamara, executive director of the Industrial Power Consumers and Co-Generators Association of Alberta, told Canadian magazine Report on Business. His organization's member companies consume 50 percent of the province's power.
The provincial government has been issuing checks from full budget coffers to compensate for the spike in retail prices to minimize the public outcry over the high prices. Also aiding the province is the fact that its heavy use of coal prevents it from being dependent on hydroelectricity.
Alberta's troubles probably will get worse before they get better. Like other provinces and states contemplating the uncertain environment of deregulation in the late 1990s, Alberta saw virtually no investment in generation during those years. Now plans for increasing generating capacity are moving forward, but no plants are expected to come online soon enough to relieve the crisis in the near future.
Like California, Alberta has flourished in the recent dot-com explosion. But the very nature of the e-world contributed significantly to problems. While government was plotting electricity deregulation, private industry in the computer world thrived. Demand for electricity shot up as Internet businesses took off. It has been estimated that some Internet web-hosting centers consume as much electricity as eight 40-story office buildings. Alberta's demand has steadily climbed in the past 10 years, growing at 4 percent annually.
Deregulation has created some opportunities in Alberta. Before deregulation, municipal employers and IBEW locals provided electricity and maintenance only for certain service areas, such as a city limit. Deregulation lifted regional monopolies, opening the door for IBEW employers to complete for business in a range of areas and industries, according to John Briegel, business manager of Local 254, Calgary.
The conservative Ontario government has been slowly treading toward a deregulated power market. After years of exhaustive studies, officials announced the province's electricity market will open to competition in May 2002. This date has been moved back several times as government deregulators prepare the logistical framework for the open market, working through license applications from generators, wholesalers, retailers and distributors.
Provincial officials insist that delays in implementing utility restructuring are merely due to practical considerations, not hesitation resulting from the chaos deregulation has caused elsewhere. The province's hydro industry boasts a supply reserve. Ontario also has a variety of power-producing options, including water, nuclear and fossil fuels, protecting it from over-reliance on one form of energy. But even government officials concede that once the market opens, consumer prices will rise.
In preparation for the shift, the electric utility market has been under constant change. Province-owned behemoth Ontario Hydro, a so-called "crown corporation," was dismantled and Ontario's 350 small municipal power providers were required to incorporate. It is expected when the flurry of consolidation activity is over, the number of local distribution utilities in Ontario will be under 50.
Though it has been a tumultuous period in Ontario and the total impact may yet be felt, sales and mergers have to this point resulted in a net membership gain for the IBEW. Although changes continue daily, the prospective outlook for IBEW utility workers is positive, said Local 636, Toronto, Business Manager J.R. Wacheski.
British Columbia's provincial utility, BC Hydro, is making money hand over fist in the short-supply market of the Western United States and Canada. Record profits will eliminate the need for price hikes-BC Hydro has guaranteed customers no rate increases in the near future. BC Hydro's revenues of $1.45 billion (U.S. currency) in the year that ended September 30, 2000, far exceed the $380 million of the previous year.
But while the province witnesses the horrors of Alberta and California, British Columbia is still contemplating some form of utility restructuring.
In a sophisticated effort to stop deregulation in its tracks, members of the Office of Professional Employees International Union (OPEIU) and IBEW employed by BC Hydro have launched an aggressive campaign against deregulation titled "It's Our Dam Power." Using Alberta and California as poster children for deregulation gone wrong, the groups have produced a web site, radio spots and an interactive CD-ROM aimed at defeating the nascent movement toward deregulation.
The groups also charge BC Hydro with draining the province's precious reservoirs in a mad grab for profits from the sale of power to California. The California Independent System Operator, which runs that state's power grid, has accused BC Hydro of market manipulation and profit gouging.
The conservative government is actively considering its options for deregulation and the endeavor has drawn criticism for its behind-closed-doors approach.
IBEW Local 37, Fredericton, has been instrumental in helping keep deregulation out of the province by actively lobbying against it, both at the grassroots and provincial levels. Local 37 Business Manager John Cole credits the public role of the IBEW in fighting deregulation. Among other moves in the past two years, the local presented a detailed report to the provincial legislature based on the largely negative U.S. experience with restructuring.
The effort has not gone unnoticed by the citizens of New Brunswick. "We have changed the public's opinion," said Brother Cole, who is also a member of the IBEW International Executive Council from the 8th district. "Definitely."
Both in Canada and the United States, the nature of the deregulation experiment has also significantly changed the role of the IBEW.
IBEW members, whose involvement with utilities was once limited to contract negotiations and work-related issues, have by pure necessity and instinct for self-preservation been forced into political roles, advocating that consumer reliability and adequate supply should not be victims in the uncertain laissez-faire terrain of deregulation. IBEW members are sharing information with each other and the public to warn against the dangers of utility restructuring.
How the other Canadian provinces are handling deregulation
The province is not moving forward with deregulation, as it enjoys the lucrative business of selling power from Hydro Quebec-the province-owned utility-to the United States.
The province deregulated its wholesale power market, but Manitoba Hydro is still a government-owned corporation. Observers do not expect Manitoba to privatize either the hydro or natural gas utilities.
The province privatized its generating and distribution utility several years ago, but regulators have not made formal moves toward full utility deregulation.
Prince Edward Island
The province acquires power from New Brunswick, so its fortunes are tied to its neighbor which is considering deregulation. The P.E.I. government is not considering deregulation.
The province is proceeding cautiously by reviewing its own electric industry regulations and laws. It is also watching how deregulation unfolds elsewhere.
The wholesale market is open to competing suppliers, but SaskPower, the provincial-owned utility, dominates the retail market.