Old Ideas Fading At SaskPower

Commentary, Energy, Frontier Centre, Saskatchewan, Uncategorized

The mother of Canada’s social democratic movement is changing her ways.

In 1944, Saskatchewan became the first jurisdiction in North America to elect an explicitly socialist government; it became a leader in implementing old-age pensions, baby bonuses and Medicare. Other provinces and the federal government soon followed suit.

But the downside was the attempt to create jobs through publicly owned enterprises. Crown corporations of all kinds and sizes manufactured boots and boxes, sold insurance, ran bus companies, operated radio stations and engaged in other activities outside the core business of government. The kinds of expertise and business acumen that lead to success in the competitive marketplace simply do not flourish in the political sector, so most of the provincial enterprises flopped and were eventually liquidated or sold.

The remainder, mostly utility monopolies, still chug along in low gear. But the forces of deregulation and new technology are forcing the Saskatchewan government to make these enterprises more responsive to market forces, and thereby more productive.

For instance, last fall, SaskTel, the telecommunications monopoly, finally lost its insulated cocoon when it became subject to CRTC regulation. A federal rule passed in 1993 mandates long-distance competition. The good people of Saskatchewan now have a chance to benefit from that policy, which has lowered rates by 70% in the rest of Canada. Analysts also expect a fall in prices for local service, which was freed up only last year. In June, SaskTel proved that the new regulatory framework encourages innovation when it launched an Internet auction service marketing a myriad of goods and services.

Even more amazing are developments at SaskPower, the electricity monopoly. Five years ago, the Crown corporation called for tenders to produce electricity in natural gas generators. Co-generation, as it is called, has the potential to produce power that is far cheaper than the juice provided by conventional sources. Since bidders were restricted to selling only 25 megawatts each, the new project failed and had to be put on hold. Lawsuits from the disappointed companies are still winding their way through the legal system.

After a period of upheaval and controversy that saw the departure of Jack Messer, the SPC president who was a most influential advocate of change, the company has revived its plans for co-generation. This time round, SaskPower is simply stating that it wants to be supplied with 150 additional MWs from one or more vendors. It hopes to avoid the expense of building new conventional generating plants and of refitting its older facilities. The utility, operating on thinner margins of generating capacity every year, faces the prospect of power shortages.

SaskPower’s new look includes the Meridian Cogeneration Project in Lloydminster, for which Husky Oil and TransAlta, a private Calgary-based electricity producer, provided the capital investment. The Crown corporation has signed contracts to buy 210 MWs a year for 25 years, starting at the end of 1999. It has also admitted that it could not build and operate a new plant as cheaply.

Although outright privatization conflicts too much with the government’s core philosophy, the change in attitude at least allows SaskPower to buy from plants it doesn’t own. "We’re positioning ourselves for competition in the event that it comes," says new president John Wright. Government electric companies in Québec, Ontario, Manitoba and B.C. have already learned that the price of admission to the U.S. market is to opening up their own captive markets to American suppliers.

The Minister in charge, Dwaine Lingenfelter, says that SaskPower is ready to take a "much less insular approach" to power generation.

It’s taken a couple of generations, but marketplace realities are displacing the old ideas of state control and ownership.