The Municipal Electrical Utilities' role in buying and selling power

Ontario's Municipal Electrical Utilities (MEUs) are the front-line providers of electricity services for most of the consumers in Ontario. MEUs serve 2.8 million customers (about 70 per cent of all power sold in Ontario). The new regulatory regime resulting from Ontario's Energy Competition Act (1998) will significantly impact MEUs. The changes aim to consolidate and rationalize the point of sale provision of power to Ontario customers and increase the efficiency of the sector. The Energy Competition Act (1998) creates a competitive electricity marketplace and provides mechanisms for its operation, but it is the MEUs which will bear the risk of market failures. Some of the changes which will be most important to MEUs are: (1) incorporation, (2) default supplier, and (3) oversight by the OEB. It is the author's view that the move towards open markets in electricity is unlikely to enlarge the decision making power of MEUs. On the contrary, the legislative scheme creates a complex regulatory environment wherein the distribution corporation must strictly comply with the OEB's requirements and public policy concerns in exercising its functions. As the MEUs essentially serve as a buffer in the newly opened retail markets, they must find ways to minimize their risk of market failures or spread the cost so as to remain viable commercial entities. They must also devise new information systems prior to the opening of the new market to deal with customer and default consumer pricing, billing and transfer of customers to and from retailers. Municipal utilities will also have to consider restructuring of their own operations, including determining which businesses should be pursued through competitive affiliates