High-priced hydro imports soaring .. I wonder why?

People wonder why Ontario is in such a hydro fix. It is years of mismanagement in addition to the abandoning of free market principles.

Ontario's deregulation plan was going somewhat smoothly, until there was public outrage over OPG's (Ontario Power Generation) chief executive officers pay. Her salary made her the most compensated civil servant (well, I guess technically not civil servant, since she was working for a crown corporation) in Ontario. People were mad at this, presumably because they don't understand that for the size of company, she was likely underpaid. For this and a couple other stupid reasons, Mr. Eves pulled the plug on Ontario deregulation.

But wait, there is more, he didn't reverse the initial phases of his plan, he just stopped it in its tracks. One large power plant had been built assuming the deregulation model would be completed (Transcanada Pipelines Plant near the Nova Chemicals Plant in Sarnia, which was not allowed to be a cogenerator, due to stupid regulations [this would have been more efficient and saved money] but that's another post).

Plants are forced to sell power at below the cost of production (when you include long term capital costs). This is fine when you are using public debt to finance the capital costs of power plants (such as the nuclear plants) that you can expect prices to just pay for day to day operations, and not cover a small profit margin and debt repayment.

This creates a situation, that if instead of building the plant in Sarnia, if TCPL had built the plant just across the river, they could make much more money on it, since they could sell power at a market rate to Ontario. This is what happened. 8000 megawatts of installed capacity have been built in New England since the late nineties, mostly in the form as peak power natural gas fired plants. The power from these plants is atrociously expensive, because they need to make a profit while operating only for hours a day during peak demand. This however, makes economic sense, because natural gas power plants are reasonably inexpensive compared to coal and nuclear, and can be started and stopped reasonably quickly.

Ontario play's in a deregulated market in the interprovincial/state power pool, while disadvantaging itself by not deregulation the local market. This leads me to my next point:

Importing power is not a bad thing, as long as consumers bear the economic cost of the more expensive power. This infact saves the capital cost of building extra powerplants.

If power rates above the board were allowed to jump, people would either decide to

a) consume less power
or
b) pay for it
or
c) build own peak power storage or generating capacity (such as solar panels, batteries, fuel cell/hydrolysis unit
If the Ontario government lacks the political will to force people to own up to over consumption, then the situation will continue. I have one question to ask supporters of the current subsidies on consumer electricity in Ontario: Do you support getting rid of the gasoline tax and then adding a rebate on top of the reduction paid out of public funds?

If you don't support both energy subsidies, your a hypocrite.