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Trade Rules Increase Risk of Hydro Privatization

Steven Shrybman

December 01, 2010

A Legal Opinion Concerning the Impact of International Trade Disciplines on the Privatization and Restructuring of Ontario’s Electricity Sector

This legal opinion, prepared for the Ontario New Democratic Party, examines the impact of Canada’s international trade obligations on energy policy and regulation in the wake of provincial efforts to privatize and de-regulate the electric power system of the province.

The opinion reveals how Canada’s international trade obligations impose significant constraints on public policy and law concerning Ontario’s electricity sector. These undermine the capacity of Ontario governments to achieve broader societal objectives such as environmental protection, or community economic development, and will frustrate efforts by provincial regulators to ensure system reliability and stable affordable energy prices.

In simple terms, the trade in goods, services and investment disciplines of both North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO) establish an extensive catalogue of regulatory measures that may not either be established or maintained by federal, provincial or municipal governments. Yet, many of these government actions are precisely those needed to ensure that Ontario’s privatization scheme not become, as it has in California and Alberta, an uncontrolled experiment in which supply reliability and affordable service become the first casualties.

Given the experience other jurisdictions, most notably California and Alberta, it is now widely acknowledged that adopting a market competition model for the electricity sector is a risky business that jeopardizes security of supply and the interests of both retail and business consumers. The opinion demonstrates how the constraints imposed by Canada’s obligations under NAFTA and WTO will significantly exacerbate these risks if Ontario proceeds further with plans to privatize and de-regulate its electricity sector.


Steven Shrybman