Montreal, August 15, 2005 • No 157




Harry Valentine is a free-marketeer living in Eastern Ontario.




by Harry Valentine


          The February 2003 edition of this column warned that the behaviour of the Ontario government was going to result in power brownouts and rolling blackouts in that province. That actually started happening toward the end of the first week of August this summer. A brownout is a reduction in line voltage and if it is minor, it will only affect sensitive electronic equipment. Traffic control lights in several locations stopped functioning during recent brownouts, while a few regions actually experienced rolling blackouts (no electricity) that lasted for up to several hours.


          The Ontario Premier subsequently announced that electric power shortages could continue over the next three years. At that time, new power generation is expected to come on line just as the Ontario electorate is due to head to the polls. People who are well acquainted with electric power generation in Ontario have indicated that up to 50% of the state-owned utility's generating capacity may have to be retired over the next fifteen years. Ontario has the largest government-owned power utility in North America, one that has repeatedly been criticized for well over 30 years for wasteful and extravagant practices. By the early 1990's, the utility's accumulated debt stood at $32 billion.

Firmly committed to power regulation

          By the end of 2002, Ontario's former government enacted a deregulation farce that backfired almost immediately following its inception. The present government remains firmly committed to power regulation, which enables it to keep residential power rates artificially low. Public pressure groups that lobby for continued power regulation as a way of maintaining low residential power rates have been formed. Commercial power users in Ontario pay the full market cost for electric power and cover premium costs when expensive electric power is imported from the USA. While commercial power rates may indirectly cross-subsidize low residential rates, the viability and competitiveness of numerous small industries is now beginning to be compromised by Ontario's escalating commercial power rates.

          Toward the end of July, 2005, both the former CEO of Ontario Hydro as well as the province's Energy minister revealed that higher commercial power prices may be inevitable. As a result, smaller industries in central and Southern Ontario that operate tight profit margins may have little choice but to relocate to regions where lower commercial power prices prevail. An earlier edition in this series revealed how government regulators actually caused industrial job losses by preventing commercial power users from generating their own cost-effective electric power and distributing it amongst themselves. The regulation that forbids the connection of private power lines across adjacent private property lines was ultimately at fault in this case.

          That regulation could, however, allow landlords who own several large buildings on one extended property, to install off-grid co-generation power technology on that property and for exclusive use in all buildings on that property. An example of this may be a natural gas fired turbine engine that generates electricity while its hot exhaust raises steam in a boiler. Alternatively, a steam engine burning any of a range of fuels could be used. During winter, all buildings on the property would be heated by reject heat from either system. During summer, exhaust steam from either engine could energize a steam-vacuum refrigeration system that uses water as a refrigerant, cooling it to below 10-degrees C so that it may be used to cool all the large buildings.

"The introduction of large-scale, off-grid cogeneration power may initially escape notice by pro-regulation public pressure groups, especially if the high-density rental housing market benefits from lower overall energy costs. However, such benefits would be of no relevance to state officials who reject the concept of private property rights and of private contractual agreements."

          Industries, businesses and other commercial establishments that operate from such locations could have low power rates. Likewise, owners of several large, high-rise apartment complexes that are located on a single property may opt to generate off-grid power on their property to provide heat, air-conditioning and power at competitive rental rates to all units. Owners of smaller buildings may also generate off-grid electric power on their premises, using such evolving technology as solid state thermo-acoustic engines that can produce up to 2-Kw of electric power at over 30% efficiency from heat sources. Larger units capable of producing up to 100-Kw are currently under development. Heat rejected from these units could be used to heat buildings during winter and activate new-generation absorption air-conditioning systems during summer.

Having access to lower energy costs

          The development of large-scale, off-grid power cogeneration technology built on private property and used exclusively on that property, could reduce the overall economic impact of any attack made to the power grid. The development of off-grid industrial and commercial districts could attract smaller industries that operate close to the bottom line and that may otherwise leave Ontario in search of lower power rates elsewhere. The introduction of large-scale, off-grid cogeneration power may initially escape notice by pro-regulation public pressure groups, especially if the high-density rental housing market benefits from lower overall energy costs. However, such benefits would be of no relevance to state officials who reject the concept of private property rights and of private contractual agreements.

          They are likely to be hostile to large-scale off-grid power being cogenerated on private property for internal use. An expansion of the regulatory regime that could turn peaceful, productive people into criminals is to be expected. Such regulations can easily be signed into law without any prior debate before any democratically elected body. A procession of state officials would then be ready to literally goose-step on to private property to violate private property rights and assert state authority in areas of peaceful, productive endeavour where no such assertion (abuse) of state power would even be warranted. Maintaining control over the electric power market to ensure low residential power rates and support for the government, may ultimately justify such state intrusion.

          In the future, private homeowners will have access to lower energy costs as new-generation, high efficiency micro- and mini-power technologies enter the market. Some of these technologies could be used in single homes while other types may be best shared amongst groups of homeowners. It is this latter group that may need to initiate a constitutional challenge in order to obtain the freedom to connect private wires across property lines. Many off-grid homes already exist across Canada and the USA. However, owners of such homes could face charges under the Competition Act since the provider of the electric power is also the sole customer of that power. Despite entire regions facing future power shortages, competition bureau officials who act to curtail off-grid power could ultimately threaten the economic future of these regions.