Why lock chaos into place?

January 1, 2001

Deregulation of electricity markets in California and Alberta has resulted in brown-outs, huge price increases for electricity users, and possibilities of future shortages that could send prices sky-high. Are people in BC prepared for the same? There are mighty forces that want to see an integrated electricity market for the continent--a move that would mirror what has happened to natural gas prices. Unless Canadian governments take strong and firm action to prevent this, we could lose the advantages of having BC Hydro in the public sector.

While the current focus in BC is on gas prices, there are good reasons to worry about a similar pattern developing for electricity prices. The main difference between these two industries now is that gas markets are competitive and are controlled by the private sector in BC (after the privatization of BC Gas in 1989), while electricity production and distribution is still a regulated public monopoly. This public monopoly has ensured stable, low prices--an asset that could draw businesses looking for a predictable energy supply to BC.

The deregulation and privatization of electricity is occurring rapidly throughout North America, and many argue that BC must move in the same direction in order to accommodate export markets. But a debate about whether electricity should be deregulated could become irrelevant if the US proposal for the international treatment of energy succeeds in the current discussions for changes at the World Trade Organization's (WTO) negotiations on services, the General Agreement on Trade in Services (GATS).

The US submissions to the WTO on energy services deregulation simply assume that deregulation is always beneficial to all classes of consumers because it lowers prices and ensures a reliable supply. This assertion is frequently false, as the California experience makes clear. In a province like BC, where electricity supply is reliable and the costs are low, any international regulatory changes that could force the disintegration of the public monopoly should be an issue of high political priority.

The US proposal to the GATS specifically calls for measures that will provide secure access to energy outside national boundaries. Parts of the US, like California, need much more energy than they produce at reasonable prices. The solution to this "problem" for the US would be to create GATS rules that would extend and lock into place the deregulation agenda.

The ultimate goal of the US is to have all energy markets, including electricity, deregulated and government monopolies eliminated. All of this would lead to market pricing, something crucial to private energy companies and to a country that needs to import energy. While the US claims that it is not insisting on private ownership of all resources, what it is proposing will be just as bad. This is because the US proposal will nullify the benefits the public receives from government owned services. The deregulation of all energy markets through the GATS risks destroying our ability to maintain a stable domestic electricity system.

In the current GATS agreement there is no specific language on energy services. However, the US wants to see various types of services related to energy consolidated in one section and the definition of what will be covered extended considerably. The definition is important because various types of activities crucial to an integrated electrical system, such as the transmission, storage (dams) and distributions systems, will be seen as an unfair trading practice if they are not available for use by private foreign corporations.

This could have serious negative implications for BC Hydro, a system that is efficient, relatively clean and low-cost mainly because all of the functions for producing and distributing electricity are integrated. By classifying the transmission, distribution, and storage systems as services that are distinct and separate from the generation of electricity, the GATS would be able to force their deregulation. What this means in a practical sense is that BC Hydro would no longer have exclusive use of its major assets, but would have to allow private, foreign providers access to them.

The federal government appears to have little interest in heeding provincial concerns on energy--perhaps because Ontario and Alberta have gone so far in the deregulation of electricity. BC and Quebec are in a prime position to make energy deregulation an issue. They should seek to protect their citizens and industries from locking in US-style deregulation through the GATS. BC must also re-examine its electricity export policy--the hunger for export markets is clouding its vision of how to manage energy in the public interest.