The Free Trade Agreement (FTA) handed the United States guaranteed access to Canadian oil and gas. During the 1988 election, the Canadian Manufacturers and Exporters Association (CMEA) was one of the most aggressive promoters of the agreement—a deal that virtually wrote in stone that Canadian prices for natural gas would be determined by peak American demand.
There
is a delicious free trade irony in the energy deregulation fiascos that erupted
recently in California and Alberta—especially in the stunned disbelief coming
from business.
Here
we have Jayson Myers, chief economist for the Canadian Manufacturers and
Exporters Association (CMFA) on Alberta’s skyrocketing natural gas prices:
“I think it’s a major crisis. If companies have to cut costs, there will be
an impact on their employment.”
Earth
to Mr. Myers: What did he think the free trade deal was all about? The FTA
handed the United States guaranteed access to Canadian oil and gas. During the
1988 election, the CMFA was one of the most aggressive promoters of the
agreement—a deal that virtually wrote in stone that Canadian prices for
natural gas would be determined by peak American demand.
But,
of course, it doesn’t stop there: it’s the nature of ideology that the more
you swallow, the hungrier you get. Having given the United States guaranteed
access to our oil and gas (we can’t reduce exports to increase domestic supply
or use differential pricing), the Canadian government and the provinces are
hell-bent on giving up all regulatory influence over electricity prices through
massive deregulation.
In
California, the North American pioneer in electricity deregulation, prices have
actually tripled in many areas and doubled in most, prompting the politicians to
scramble for their political lives and put a cap on prices.
This desperate effort to shut the barn door after the horses have escaped has brought once-powerful corporations to the brink of bankruptcy: Pacific Gas and Electric and Edison face the prospect of eating $8 billion in energy costs they can’t pass on to consumers. Kaiser Aluminum has shut its two U.S. smelters because it can make more money by selling their electricity, and several fertilizer companies have shut down plants. Major shortages of those products are predicted for next year.
Ralph Klein is having night sweats over his political future, too, as his deregulation experiment careens out of control. The Alberta Power Pool auction of electricity last December pushed generation prices from $40 per megawatt hour to more than $130
The Industrial Power Consumers Association is in full panic mode: “For some of my members it is catastrophic, said President Dan Macnamera. “These new price levels are downright scary”
Ontario’s move to a deregulated market and the dismantling of Ontario Hydro has prompted power generators and marketers to talk openly about getting substantially higher prices in adjacent American jurisdictions. This will inevitably result in higher prices in Ontario. Its a neoliberal article of faith that deregulation increases choice and reduces prices. In practice, it is doing neither, but when the medicine fails, the prescription is always to prescribe even stronger medicine. Canadian governments are thus pursuing even more deregulation through more trade deals.
First, there is the Agreement on Internal Trade (AIT), and then there is the services negotiations at the WTO which would make global energy deregulation literally irreversible. AIT negotiators were slated to present provincial trade ministers with an energy chapter in February. If agreed to, it will most likely lead to what is called “retail wheeling”—in effect, creating electricity spot markets in every province and a virtual futures market for electricity speculators. This is a formula for wild price volatility, and would make the goal of long-term price stability virtually unachievable.
And what the AIT is hinting at, the WTO agreement on services---the GATS—will make irreversible. The US. released its services negotiating position on energy on Dec.21, 2000. It is clear the Americans intend to press with all their might for new WTO rules over energy. They are proposing: “Non-discriminatory third-party access to and interconnection with energy networks and grids, where they are dominated by government entities or dominant suppliers.” In other words, the California model applied worldwide. This announcement, made just before Christmas, was like the Grinch who stole Christmas for hard-pressed Californians threatened with the potential collapse of their entire electrical system. Yet, with no appreciation of the irony involved, the U.S. claims this new energy regime will make energy supplies “reliable” and ---benefit residential consumers and social services, as well as employment.”
Canada is apparently supporting the U.S. position.
Electricity
and gas, however, are not just products like toasters and light bulbs. They are
critical elements in the functioning of the economy. If you list all the factors
that contribute to competitiveness and to economic stability, predictable energy
prices rank high on the list. Actively pursuing policies that create price
volatility is ideology run amok. #
(Murray Dobbin, is a freelance writer and best-selling author based in Vancouver, and a member of the CCPA’s Board of directors.