Ontario interim market

Ontario's White Paper outlined the government's plan to restructure the electric power industry to an open market by the year 2000. Bill 35, when passed, will be the legislation required to start the process of electricity restructuring laid out in the White Paper. In the section dealing with the Independent Market Operator, the White Paper states that the Ontario government, as a transitional step to an open market, will introduce an element of competition into the industry by establishing an interim market for replacement power and impose a discipline on Ontario Hydro. Unfortunately, this transitional step did not live up to its billing and has had a minimal impact on both Ontario Hydro and the marketplace. Nevertheless, the experiment has provided a peek into the future of electricity and power pricing in Ontario, by making price information available and posted on the Internet. This paper examines how informative this experience has been and looks at the year just past in perspective. One of the notable developments was that the threat of a power shortage as a result of shutting down seven of Ontario Hydro's nuclear reactors, did not materialize. Ontario Hydro's fossil fuel generation plants were able to step into the breach and generate enough energy to make up for the reduction in nuclear production, and did so within the allowable limit for acid gas emissions. Some interesting developments in pricing electric power exported to the US in the summer of of 1998 are also reviewed for what they can teach us about the value of transparency and full price disclosure. 2 figs