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The Privatization of the Power Industry By Shubha Balasubramanyam July 23, 2001.

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Presentation on theme: "The Privatization of the Power Industry By Shubha Balasubramanyam July 23, 2001."— Presentation transcript:

1 The Privatization of the Power Industry By Shubha Balasubramanyam July 23, 2001

2 Whats with the shirt? zThere was a fear of natural monopoly zPer capita use has grown so much that there are enough geographic regions to support competition zTransmission line technology has grown so there is more market area zBeing forced to build in the region means building in an area with higher costs

3 What is deregulation? zDeregulation is the process of getting rid of government control in an industry zIn Ontario there will be a spot market, and the ability to enter into contracts zThe spot market will be regulated by the IMO

4 Why mess with a good thing? zIn 1995, Ontario had the 3rd highest power price in Canada zCurrently 24 states and the district of Columbia are deregulated

5 Major examples zPennsylvania deregulated in Jan 1999 and prices decreased by 30% zUK deregulated in April 1990 and prices decreased by 26% zAustralia deregulated in 1994 and prices decreased by 24% zCalifornia deregulated in 1996 and prices went from 3¢/kW to $1/kW zAlberta prices went from 5¢/kW to 10¢/kW

6 How did it all begin? zIn November 1997, an official report was released on creating an open market zIn early 1998 a market design committee was created zIn November 1998, the electricity act was formed which ordered the breakup of Ontario Hydro

7 Something is to So, Me, Thing as Ontario Hydro is to... zOntario Hydro was split up into 5 companies: yOntario Power Generation ( yHydro One yIndependent Market Operator (IMO) yElectrical Safety Authority (ESA) yOntario Electricity Financial Corporation (OEFC)

8 Governments Vision zFour principles guiding government vision: 1. Protecting consumers and offering more choice 2. Creating strong business climate with a reliable supply of electricity 3. Protect our environment: new emission cap for electricity sector 4. Encourage new ways of doing business and support search for alternate forms of power

9 Taking the power from OPG zWithin 42 months of market opening, OPG must decontrol at least 4000 MW. This includes any fossil plants, and up to 1000 MW of hydroelectric zWithin 10 years, OPG can only control 35% of the total generating capacity in Ontario

10 Selling the power zElectricity cannot be stored zEvery company will enter bids into the spot market of how much they can produce, and how much they are willing to sell for. zThese bids are put in hourly for the production period in two hours zThe market clearing price is then set by the highest bid that is accepted to produce at that time

11 Price caps? zPrice caps are used so the previously government-owned company doesnt have an advantage zOPG will have MPMF zCould have the same negative effects as price caps - not allowing competition in zNumbers were calculated before gas price increase

12 Stop the smog! zDeregulation has often been beneficial environmentally - consumer desire for green energy zBy 2007 allowed emissions from electricity sector must be reduced by 50% for NOx and 25% for SO2 from 2000 levels. zLakeview must stop burning coal by April 2005.

13 Not enough power? zIMO requires a reserve margin of 18%-20% zOnt. has 25% excess power, not including Pickering A and Bruce A zLimit on import/export due to transmission constraints zCalifornia didnt have enough power, and there was a growing demand

14 Other fears zPrice of generation could increase zLimiting to spot market causes high consumer cost zLack of competition leading to gaming zPrices changing to reflect bordering regions

15 Other benefits zImproved customer service zIncrease in jobs zSafety

16 Major Players zPotential bidders: Dominion Energy, Orion/Constellation Energy, Reliant, PECO, TransCanada, Sithe Energy, TransAlta zKey marketers: Enron, Duke, TransCanada, Engage Energy, Sempra, Direct Energy, DTE

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