September 24, 2002

Ministry of Energy, Science and Technology
Office of the Minister
Hearst Block
900 Bay Street
Toronto, ON
M7A 2E1

Attention: Honourable John Baird, Minister of Energy

Dear Minister Baird:

Re:  The Critical Path of the Ontario Electricity Market

"California, Here We Come"

The scene is chaotic.  Cost of power during the month of May was in the area of 2.4 cents. Prices have now risen to 8 cents and there is no indication of the price lowering to the market opening price. Increases are 2.5 to 3.3 times the original market opening values.

The LDC's, Hydro One, OPG, etc. are now required to pay dividends, interest, as well as taxes, over and above their former hydro costs.

At this point in time, there are two major concerns:

• Effect on our customers
  Customers cannot afford the rising electricity prices in their budgets (fixed income or sales).  We have one manufacturing business in Pembroke which operated for only one day during the month and the cost of power for that particular month was $1,200.  This would add $0.16 per unit, almost doubling his raw product @ $0.18. We know of another case where a fast food outlet's bill increased by $1,000.00.  This would require the customers to increase the product price by $1.00 per unit, if he were to maintain the same margin.
  
  To compound the problem, the customer's bill is held up for approximately 24 days prior to billing, as the LDC will not have the cost of power to enable invoicing. In other words, if the customer is to recognize a high cost, they do not see it until a month after the fact; thus, making it very difficult to take remedial action.  This skyrocketing cost of energy affects everything from laundromats, home cooking and water heating.
   
• Effect on the local distribution company
  The LDC is not only faced with being on the 'front line' with complaints from their customers, but they are also responsible for collecting on unpaid accounts for standard supply customers and retailers plus supplying prudentials.  If their accounts are not paid, customers face disconnection as LDC's cannot carry the risk and debt, as they could in the past.  Relatively speaking, all business and customers are on fixed incomes.  In many cases, this new income requirement is just not there to pay these bills.
  
  The LDC is the focal point.  Will Hydro One, Ottawa River Power Corporation or Hydro Ottawa, etc. survive, being the bill collector, tax collector and guarantor to the supplier and retailer?

There must be corrective action now. Action must be taken not one month from today, but now. Generation costs are completely out of control.

Coupled with the outrageous generation costs, the General Service Rate structure for over 50 kw on marginal industry is driving businesses into bankruptcy.  Not all of Ontario's industry and business are capable of operating for twelve months of the year or 160 hours a month.  Businesses are going to be forced to close with the cost of power being the major factor. Industries are unable to compete nationally and internationally with the exorbitant cost of power. One may respond to this scenario by suggesting the installation of interval meters, enabling the business to operate during off peak times.  Delivery of the interval meters are three to four months. Who is going to absorb the cost of the meter, as well as the extra billing costs?

Customers who have electric heating in their homes are not going to be able to afford the necessity of heat in the winter months.  Can you imagine the cost to heat a home @ $0.08/kwh?  The distinction between luxury and necessity is no longer valid in this scenario.

The spiral effect is astounding. In order to stay afloat, businesses will have to raise their prices, thus resulting in the rate of inflation skyrocketing.   The Federal Government sees energy costs rising, recognizes inflation and, in turn, raises interest rates.

Premier Eves is quoted as saying, "Our government has been able to successfully deal with very difficult issues in the energy sector. I have every confidence that Minister Baird will continue that strong performance, overseeing such issues as a continuing stable energy market and the restructuring of Hydro One."

We trust the recent split in energy portfolios will facilitate the appropriate action to be taken by our Government in this extremely volatile situation. Remedial steps must be taken to avoid the bankruptcy of businesses and individuals in the Province of Ontario. This same effect will be recognized on all social housing budgets as well.

I look forward to receiving your comments.

Yours sincerely,

Murray L. Moore

President

MLM/mtd

Cc:  Sean Conway, MPP
       Honorable Norm Sterling
       Charlie Macaluso, CEO, EDA
       Howard Hampton, Leader of the NDP
       Canadian Federation of Independent Business
       Association of Municipalities of Ontario (AMO)     
       Pembroke Daily Observer
       Almonte Gazette
       Eganville Leader
       Cobden Sun