One of the tics of governments in trouble in Canada: our long-term plan is tough but it’s honest. Indeed, it’s the only responsible plan on the table, if only because I’m telling you it will cost you more.
Canadian politics defer generously to domestic planners, systems analysts, and engineers. (Americans, of course, are thought to be more skeptical when government calls for sacrifice; only their generals seem exempt.) The Ontario government of Dalton McGuinty has made a high art of limiting Ontario’s options by presuming to know the future and by not behaving like the heedless hedonists of the past. The most recent and most expensive example of this style of government has been electricity policy.
Last week, Minister of Finance Dwight Duncan announced that electricity rates will go up 46% over the next five years. Period. The only matter to debate and satirize was his plan to add one $billions to its structural deficit in order to provide some cushion for electricity consumers. Click on: http://news.ontario.ca/mof/en/2010/11/ontario-introduces-electricity-cost-relief.html
The prospect of nearly doubling the price of electricity since the turn of the century is shrugged off with three bald assertions: (1) we have to be honest with ourselves and pay the “true cost of power,” (2) the system we inherited was “virtually crumbling,” and (3) our plan will cost billions but it will generate green power, 50,000 jobs, and—besides—hundreds of experts have been consulted. (Generals pretty well use the same arguments in Washington.)
The staying power of these arguments is a tribute to political fashion, not the absence of alternatives.
Fifteen years ago, Ontario’s electricity system was working through a substantial surplus of base and interruptible electricity supply, but it knew that new investment would eventually be required. (Ontario is one of the biggest and fastest growing industrial jurisdictions in North America.) Two broad approaches were available to ensure affordable long-term supply: progressively devolve responsibility and decision-making to the marketplace or further politicize the provision and pricing of electricity. With a majority government and all the regulatory and institutional apparatus in place to move to competition and private-sector risk-taking, the McGuinty government—decision after decision—decided to make the decisions in government.
The “true cost of power” today effectively represents the outcome of government policies and government notions about how to invest in the future.
However, the government didn’t have to produce detailed “policy directives” to tell others how to do their jobs. Necessary, defensible capital improvements could have been approved by independent regulation and standard good practices in licensed electricity distributors, transmitters, and generators. And, rather than micromanaging the electricity system, the government also had credible alternatives to fight climate change. A carbon tax, for instance, and a renewable energy set aside provision for power purchases by utilities would also generate new green supply and vigorous competitive pressure to do it efficiently.
The market-based approach that was only legislated in 1998 collapsed when the Progressive Conservative government abandoned privatization and froze rates. It would have taken sustained political will to get that approach back on track. However, markets do work all around us and generate goods every bit as vital as electricity—natural gas home heating, shelter itself, air and rail transportation, for example.
The decision to replace the discipline of the market with the insights of ministers of energy was freely taken. Let’s not bow down to the idea that the government is only being honest about what it had to do. It had choices, and future governments may well look at those choices again.
If Ontario is to keep its brand as an open, innovative society, its political system ought to be able to think about more than one big idea at a time.
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