End to hydro freeze urged

Ontario's new government should lift the electricity price freeze soon — certainly before 2006 when the freeze is now due to expire, says the Conference Board of Canada in two papers issued recently.

That means prices will rise in the near term, said Gilles Rhéaume, co-author of the papers. But the board argues that market signals are needed both to encourage consumers to conserve power, and to encourage generating firms to invest in more power plants.

"The longer you wait (before lifting the price freeze) the less conservation you're going to be seeing, the less investment in new generation you're going to be seeing," Rhéaume said in an interview. "The longer you wait, the worse it's going to be."

The board recognizes that higher prices could be a burden on low-income Canadians, said Rhéaume. To offset that burden, the board recommends offering a special tax credit to those with low incomes, in the same way they receive a GST rebate.

Most electricity industry observers agree that Ontario has too little generating capacity to serve existing demand. Some say the answer is to build new generating stations; others say the province should focus on reducing demand for power.

The board says the province should not revert to last year's market system, which left consumers wide open to fluctuating power prices if they hadn't signed long-term, fixed-price contracts.

The Toronto Star