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L'ère électrique. The Electric Age

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Olivier Asselin
, 
Silvestra Mariniello
, 
Andrea Oberhuber

Électrifications/Electrifications

At the End of the Hydro Rush: On the (De)integration of Canada’s Electric Power System1

Karl Froschauer

Texte intégral

Introduction

  • 1 Although the focus is on (de-)integration, all tables and research findings differ; a more extensi (...)
  • 2 This concept is defined by the Energy Resources Branch of National Resources Canada and the Electr (...)
  • 3 Cass-Beggs 1960; Dinsdale 1961; Ingledow 1966 and 1967; Macdonald 1974; NEB 1992a, 2.1–3.40.

1The all-Canadian vision of the 1960s and 1970s to interconnect utilities and to integrate large northern hydro projects into a federal electrical power system2 has over time become fragmented into several provincialcontinental visions. Why did the policy initiatives to interconnect such utilities within larger Canadian networks fail? National and regional initiatives failed despite joint federal-provincial studies showing them to be economically advantageous and environmentally less detrimental than leaving each province to develop its own system; nevertheless, provinces developed their remote hydro-electric resources early for their own ends, mainly for industry and export, and often with little regard for the Canadian interest.3 Surprisingly, in a nation that used to take pride in being bound together by national infrastructures, in the free trade years of 1989 and 1995, even before regional or national transmission or coordinated generation plans were in place, Canadian governments allowed electricity trade reciprocity to be included in free trade agreements and increased their efforts to integrate provincial transmission systems with US utilities so that provincial electricity surpluses have been put to continental, rather than Canadian, use.

2This paper breaks out of the mould of the usual analysis of a single provincial case in the area of electricity policy studies by addressing interprovincial relations, and by both theorizing and demonstrating how during Canada’s hydro rush (1960s–1990s), extensive federal and provincial initiatives to integrate some of the world’s largest hydroelectric projects into national or regional power networks failed because of federal and interprovincial conflict. As one would expect, other countries’ history of electricity development is not merely repeated in each province, but rather, Canada’s own social, political, and economic development history has left its imprint on Canada’s hydroelectric policy and its peculiar outcome.

3Informed by Canada’s development history, insights of the new Canadian economists, such as Janine Brodie (national policies and regional outcomes), Michel Duquette (centralized energy policies and defensive continental integration), and Laura Macdonald (locations of resistance in an era of fragmenting state sovereignty), allow an understanding of Canada’s national, regional, and continental power system integration in the context of federal–provincial and interprovincial conflicts. Because development of hydroelectric power is the responsibility of the provinces and export that of the federal government, research findings in support of my argument (that Canada planned to integrate but subsequently de-integrated control of its electricity infrastructure) originate from both federal and provincial institutions. I will cite research originating from a number of sources: original archival material, including cabinet records, correspondence, memoranda, and records of private and public utilities; reports of national and regional electricity policy initiatives; reports from Natural Resources Canada, the National Energy Board, the Canadian Electricity Association, and Statistics Canada; select provincial case studies; select provincial regulatory commission documents; documents from major utilities; and relevant books.

Preliminary Explanation

4Why did federal and provincial policy initiatives to achieve national and regional integration of power systems fail? Why did the provinces first integrate and then start to dismantle the structure of their electricity supply activities in favour of stronger transborder integration with electricity business activities of utilities belonging to US regional transmission grids? These failed federal-provincial policy initiatives and these policy reversals (from integration to de-integration) came about because Canada’s peculiar path of de-centralized and continentally-biased development of hydroelectric infrastructure bears the imprint of Canada’s constitutional division of powers and its development history. Therefore, theoretical explanations of why Canada’s hydro expansion took this path should be informed by the history of previous federal and provincial infrastructure policies and their outcomes.

  • 4 Duquette 1995, 409.

5For instance, the historical perception of some provinces that being subjected to federal policies is akin to “internal colonialism” has in turn motivated them to escape the “heavy burden of federalism” by committing their industrial strategy to the logic of foreign markets.4 For example, provinces holding this view tend to react to federal electricity policy by escaping into a kind of defensive provincial continentalism, such as developing extra generating capacity for the US market. In addition, building a federal electricity infrastructure in Canada requires some form of cooperative centralization of planning and authority to coordinate, interconnect, and maintain the interdependent stages of electricity production. Unfortunately, provinces saw such centralization as an infringement on their sovereignty within Canada, as denying them development possibilities, and as internal colonialism to be overcome by provincial continentalism.

  • 5 Brodie 1997, 240.

6In addition, regional political differences tend to arise over “where” the electricity generating facility will be built, “where” surplus capacity is available and allocated regionally, and “where” administrative authority should be held.5 Other issues arise as well: Which province would get most of the construction jobs? Where would the electricity be sold— the neighbouring provinces or to the United States or both? Similar to planning federal infrastructures, initiating regional power systems requires that groups of provinces formulate policies, coordinate an extra-provincial authority over regional electricity policy, and establish a consensus about financing, ownership, risk sharing, and profit sharing. In Atlantic, eastern, and western policy initiatives, such issues were not resolved; therefore, like the attempt to create a national grid, the regional integration of provincial power systems failed.

  • 6 Dales 1957.
  • 7 Offe 1975.
  • 8 Dales 1957, 182.

7At the onset of the hydro rush, provincial governments, utilities, and analysts had assumed that new supplies of electricity would bring more comprehensive industrial diversification.6 Therefore, to advance this process, provincial government involvement initially included allocation of Crown rights to hydro sites and natural resources (even whole watersheds) for private-sector development, often to developers invited from abroad. In time, government involvement tended to change from merely allocating natural resources, including water-power rights, to intervening directly in the production of hydroelectricity to create private accumulation conditions in several regions and for a variety of industries.7 This rationale, similar to that of Dales, popular before and during the hydro rush, is that if hydro plants are built first and then an industrial market is created for the hydroelectricity, new supplies of electricity will provide the most powerful catalyst in the promotion of diversified manufacturing. 8Until the 1990s, industries in general supported such public sector pre-building of plants because it provided them with public electricity at or below cost, whereas private sector electricity was supplied with added-in profits.

  • 9 Bourassa 1973, 1981, 1985b.
  • 10 EPIC 1996, 17, 67–68.
  • 11 Bell 1961; Bourassa 1981, 84–85.

8Another reason why provincial governments became more directly involved in all functions of electricity supply was that it allowed them to support the risky ventures of opening northern regions by starting economic development with the installation of major hydro facilities, such as those in the James Bay region and in the Nelson, Peace, and Churchill river areas.9 As will be shown, these power sites, remote from urban markets, were envisaged in 1962 by John Diefenbaker’s government as part of an integrated national system but were developed during the hydro rush primarily to serve provincial policy interests. These northern hydro generating plants are still among the largest hydro power projects in the world,10 and at the time of their construction part of the political justification in building them was future industrial need in the provinces and electricity import needs in the United States—the California “power hunger” in British Columbia and New York’s and New England’s electricity needs in Québec were common themes.11

  • 12 EPIC 1996, 26–27; Priddle 1989.

9Because public resistance, both at the federal and provincial level, could not stave off the contentious electricity export agenda and the acceleration of continental integration, resistance to Canadian hydroelectric capacity growth destined for export became international. Opponents at the provincial level were unable to fend off the agenda of continuing export and the accelerated integration with the United States, in part because the NEB hearings across the country were practically stopped when free trade took effect.12 Therefore, with that venue of protest difficult to pursue and the federal government increasingly losing sovereignty over energy policy, groups (e.g., the Cree with respect to James Bay) have taken their opposition outside Canadian borders to FERC (Federal Energy Regulatory Commission) hearings in Washington.

Table 1. Integration of Power Systems

Year

Integration of power systems that is initiated at the national and regional level and is actually carried through at the provincial level

1903

Ontario government by way of the “Act to Provide for the Construction of Municipal Power Works and the Transmission, Distribution and Supply of Electrical and Other Power and Energy” created the Ontario Power Commission. (Nelles 1974, p. 245).

1961, 1970s

In 1961, Walter Dinsdale, Prime Minister Diefenbaker’s minister of Northern Affairs and National Resources, and David Cass-Beggs, president of the Canadian Electricity Association, propose a National power network—or trans-Canada electrical interconnection which includes planning electrical power development and transmission on a national basis. This federal-provincial national power network initiative fails. In the 1970s, during the oil crisis period, the provinces initiate a national power network that also fails. (Cass-Beggs 1960; Dinsdale 1961; NEB 1992a, pp 2.1–2.12).

1960s to 1980s

Several federal and provincial initiatives to integrate provincial power systems into Atlantic, eastern, and western regional networks fail. (NEB 1992, pp. 3.1-3.40).

1961

BC government under the authority of BC Hydro integrates the power systems of the public BC Power Commission, the private BC Electric, and the Wenner-Gren BC Development Co. into a provincial power network.

1961

Manitoba government forms the Manitoba Hydro-Electric Board by merging two provincial utilities: the Manitoba Power Commission and Manitoba Hydro. Distribution of electricity to the inner area of Winnipeg is carried out by the municipally owned Winnipeg Hydro.

1963

During the Quiet Revolution, the public Hydro-Québec (established in 1944) takes over private electrical utilities to integrate the power system within the province.

1974

Newfoundland buys most Churchill Falls shares and Brinco’s remaining water rights. The Churchill Falls plant, however, remains integrated for the length of a 65-year power contract with the Hydro-Québec power system.

1970s to 1990s

Provinces obtain approval from the National Energy Board and the federal cabinet to build international power lines and to export electricity to the US.

10Having explained the failure to create a national electricity policy and regionally planned hydro networks, I will now provide evidence, first, of the outcomes of the initiative to develop national and regional power systems, and then the emergence, expansion, and restructuring of primarily hydro-based provincial power systems (see Table 1).

National Policy Initiatives

  • 13 Hughes 1974; Ingledow 1966 and 1967; EPIC 1996, 89.
  • 14 Cass-Beggs 1960.
  • 15 Brodie 1997, 254.
  • 16 Cass-Beggs 1960; Dinsdale 1961.
  • 17 House of Commons, 8 October 1963.
  • 18 Canada, Cabinet Conclusion, 24 September 1963.
  • 19 House of Commons, 8 October 1963.

11In the 1960s, new long-distance transmission technology offered the potential for creating a major force for interprovincial integration of provincial power systems and providing Canadian economic advantages.13 In the 1960s and 1970s two initiatives to formulate a federal power grid policy were undertaken, one by the federal government and one by the provinces. Both failed. The Diefenbaker government in 1961 suggested that large blocks of anticipated surplus electricity from remote northern hydroelectric projects in Newfoundland, Québec, Manitoba, and British Columbia could be made available to the more industrialized areas of Canada. Influencing the Diefenbaker government, David Cass-Beggs, president of the Canadian Electrical Association, envisaged a national power grid as a common carrier to transmit that energy.14 Diefenbaker’s cabinet discussed plans for the creation of a national power grid from Vancouver, British Columbia, to Corner Brook, Newfoundland, invited all premiers to participate in discussion, set up a federal-provincial working committee (including most of Canada’s electricity elite), hosted a first ministers’ meeting in 1962, and engaged engineering consultants to assess the benefits of such a national grid as opposed to individual provincial electricity networks. The Diefenbaker government emphasized a new electricity strategy based on northern and peripheral development,15 with the surplus mostly directed to Canada’s industrial centre.16 The Lester B. Pearson cabinet revised Diefenbaker’s national grid policy in 1963 by devising a national-continental policy, which could be read as supportive of either position or both.17 More supportive of the continental position than Diefenbaker, Pearson’s Liberal government adopted an electricity policy that allowed the continental integration of electricity networks to begin, favouring electricity exports for up to twenty-five years.18 Mitchell Sharp, Pearson’s minister of trade and commerce, emphasized early development of large low-cost northern power sources for export opportunities and of interconnection with US utilities, and relegated the national power grid to secondary status.19

  • 20 Canada, Cabinet Conclusions, 22 August 1964.
  • 21 Canada, Cabinet, 9 March 1962.
  • 22 Premiers’ Conference 1962; Canada, Cabinet, 9 March 1962; Bourassa 1981, 1985.
  • 23 Canada, Cabinet Conclusions 16 February 1962; Le Devoir 5 May 1965.

12The following year, 1964, Sharp told his cabinet colleagues that “the various provinces and private interests were proceeding in a completely unco-ordinated manner in developing energy facilities.”20 In fact, the more powerful provinces pursued strategies that militated against formation of a federal power grid. Ontario pursued the nuclear power option; British Columbia expected the benefits from its Columbia River project to finance the Peace River development21 and dreamed of exports to California from Peace River plants; Québec became involved in the development of Churchill Falls with Brinco (British Newfoundland Company) and planned in the 1970s to become the “Kuwait of the North”; and Manitoba hoped to export power to the United States from the Nelson River plants over federally-financed power lines.22 Insisting on constitutional grounds that hydroelectric development falls under provincial rather than federal jurisdiction, Québec in particular did not participate in the 1960s federal-provincial national power grid discussions and subsequently denied Labrador the right to wheel (transport for a fee) electricity across Québec transmission lines.23 Among the provinces, the issue of whether provincial transmission lines that would become part of the national power grid should be co-operatively, federally, or provincially owned remained unresolved.

  • 24 NEB 1992a, 2.5.

13In 1967, when the Ingledow report, commissioned by the Diefenbaker government and favouring a federal power network, was released, the Nelson River (Manitoba) and Churchill River (Labrador) projects—in part developed for export to the United States rather than to supply the federal power grid—had already moved ahead as independent initiatives.24 Such early development of northern water power for long-term exports and southward interconnection with the United States made interprovincial connections a secondary concern.

  • 25 NEB 1992a, 2.8.

14Nevertheless, in 1974 during the oil crisis, the provinces themselves, including Québec, undertook a second initiative to develop a federal power grid. The Interprovincial Advisory Council on Energy (an independent advisory body composed of provincial government officials to consider energy issues) and engineering reports cited replacement of oil generation by less costly hydro generation, the reduction in capacity reserve, the diverse use of the same generators in different time zones, and the security of supply as benefits of a federal power network.25 However, in 1978, this second initiative for a federal power grid failed, for a number of contentious issues remained unresolved: the unwillingness of provinces to delegate at least some authority to an extra-provincial body, provincial veto rights over federal grid projects, federal-provincial jurisdictional ambiguities over interprovincial electricity trade, the sharing of costs and benefits, the co-ordination of international electricity trade, and the type and location of new generating facilities (NEB 1992a, 2.12). The same year, the advisory council suggested that a federal power grid was premature and that regional initiatives appeared more promising (NEB 1992a, 2.11). Thus, first the federal government and then the provincial governments went through considerable efforts to develop an integrated national power system but postponed its development and recommended a more modest integration of several provincial power systems into a number of regional grids.

Regional Power Grid Initiatives

  • 26 NEB 1992a, 3.1–3.24.

15According to several engineering studies, integrating several provincial power systems to form regional networks was technically feasible and economically and environmentally advantageous, for instance, by substituting non-renewable oil- or gas-fired electricity generating facilities in some provinces with renewable hydroelectric generation, which is abundant in Labrador, Québec, Manitoba, and British Columbia (EPIC 1996, 14, 78–79; NEB 1992a). A substantial degree of coordination of planning between utilities—mainly in generation facility planning, operations, and maintenance—to reduce investment requirements is needed so system development and operations are optimized (EPIC 1996, 78; NEB 1992a). However, just as with a national system, a political consensus is required for decisions on the establishment of an extra-provincial regional authority to arrange such interprovincial substitution of non-renewable energy sources, on the management of such a network, on the location and timing of new generating facilities, on the ownership of the transmission system, on the export of hydroelectricity to the United States, and on the degree of transborder integration, if any, with the United States, if such regional initiatives are to be successful. Three groups of provinces undertook initiatives to develop regional power systems in the 1970s and the early 1980s: Québec, Newfoundland, and other Atlantic provinces considered an eastern grid; New Brunswick, Nova Scotia, Prince Edward Island, and the federal government negotiated a Maritime grid; and British Columbia, Alberta, Saskatchewan, and Manitoba investigated the potential for a western grid.26 All these initiatives foundered because of the failure to find the necessary consensus.

  • 27 NEB 1992, 3.6–3.12.
  • 28 Hydro-Québec, Power Contract 12 May 1969, 16; Vancouver Sun, 10 March 1998.

16In the mid-1970s, with petroleum prices escalating, most utilities in Atlantic Canada, isolated from major sources of hydroelectric power, were highly dependent on oil-fired generation. In 1975, the premiers of the four Atlantic provinces agreed with the Premier of Québec to identify energy surpluses, such as surplus hydroelectricity from Québec, in the region as replacements for the least efficient oil-fired generating units in the region. The study by the Committee on Interconnections between Québec and the Atlantic Provinces found there would be economic and technical benefits at little cost to the participating provinces; yet in 1976, Québec, preferring to sell surplus power to the United States, made no sales of the types suggested to the Maritime provinces.27 As a result, Newfoundland planned to reopen the problematic Churchill Falls power contract (underpriced for sixty-five years at 2.8 mills per kWh—equal to $.0028 kWh—and exported at up to ten times the purchase price).28 Therefore, all provinces participating in the Eastern grid initiative decided to take part in the second initiative to develop a national power grid under discussion at the time.

  • 29 NEB 1992a, 3.12–3.24.
  • 30 NEB 1992a, 3.19.
  • 31 NEB 1992a.

17In the proposal for a Maritime grid, another regional grid under consideration from 1976 to 1979, the federal government negotiated with New Brunswick, Nova Scotia, and Prince Edward Island to establish the Maritime Energy Corporation jointly to research, plan, co-ordinate, and own the entire Maritime bulk generation and transmission system.29 Disagreements arose over financing, federal or provincial control of the Point Lepreau nuclear plant in New Brunswick, the priority of the Fundy tidal project in Nova Scotia, the ownership of transmission lines, the interconnection of the provincial power systems, and federal compensation payments for some loss of provincial autonomy over electricity policy.30 The election of an anti-nuclear government in Prince Edward Island, the question of proportionate sharing of risks, and New Brunswick’s fears that joining a Maritime grid might limit its benefits from its external sales to Québec and the state of Maine, further complicated discussions.31 The Maritime Energy Corporation was not established.

  • 32 NEB 1992a, 3.1–3.3.

18In 1979, Alberta, Saskatchewan, and Manitoba agreed, after British Columbia withdrew (because it felt interconnection was insufficiently beneficial to the province), to the Western Electric Power Grid study and considered, among other undertakings, the replacement of coal-fired thermal plants with hydroelectricity from the Nelson River in Manitoba.32 The study projected savings of $150 million from western grid interconnection. These initiatives were postponed in 1982 and failed to be realized for several reasons: the collapse of the Alberta and Saskatchewan “oil boom” of the 1970s into the “oil bust” in the early 1980s reduced commitments of new provincial governments to a common power grid, the employment benefits in constructing generating facilities accruing to Manitoba rather than to Saskatchewan or to Alberta, Manitoba’s proposed reclaiming of its generating capacity sooner than initially anticipated, the scepticism of utilities about regional benefits, and Manitoba Hydro’s signing of a contract with Northern States Power of Minneapolis for its Limestone power project in 1984. The western grid was not developed.

19The federal and provincial governments continued to opt for more exports rather than for greater integration of surplus capacities on a Canada-wide or inter-provincial regional basis. There remains, to this day, in Canada both provincial resistance to federal “centralizing” national plans and an inability among the provinces themselves to decide co-operatively on the kind of extra-provincial authority that, as an alternative, would control either a federal grid or regional power grids involving more than one neighbouring province (not always on equal terms, as in Newfoundland’s Churchill Falls contract with Hydro-Québec). At the same time as national coordination of provincial power systems planning failed and interprovincial coordination remained weak, the provinces expanded their power systems to serve industry and to continue exports, thereby strengthening their integration with US regional power grids.

Provincial Power System Expansions

20Provincial governments by (supposedly in the public interest) pursuing their own electricity policies took over private utilities, especially at the beginning of the hydro rush in the 1960s, to bring together generation, transmission, and distribution and vertically integrated these activities in public utilities, but in the 1990s started to de-integrate the provincial electrical power systems. To gain a better insight into these policy reversals (such as that from integration to de-integration), I will discuss the provincial governments’ changing involvement with the provincial electricity supply in several areas of problematic interactions: (1) the initial entrusting to the private sector of establishing power systems based primarily on hydro power, (2) the expectation of easy access to the US electricity market, (3) the restructuring pressures as repercussions from electricity trade reciprocity with the United States, and (4) the resistance by Canadian communities to hydroelectric development and, more specifically, to exports.

Privatization Reversals

21Provinces hold Crown rights to the use of water flow in rivers and, therefore, many provide licences that allocate user rights to water powers (rapids, waterfalls) to private or to public investors for the production of electricity. Relying predominantly on hydro rather than fossil fuels for generation, governments initially entrusted the private sector with establishing all required stages of the hydro power systems, but then governments progressively took over most of the system to integrate the functions of the provincial electricity supply.

  • 33 Froschauer 2005.

22In each province with major hydroelectric resources, nationalization (or better provincialization) of hydroelectric dam sites occurred after initial provincial government lease or sale of water powers to the private sector for development did not achieve the provinces’ goals. In 1906, the Ontario government took the first steps in providing energy to Ontario’s small-town industry from Niagara Falls.33 Elsewhere, such government interventions to provide service by public hydro commissions in rural areas and to remote industries began in Québec and British Columbia in the 1940s and in other provinces mostly from the 1950s to the 1970s.

  • 34 Froschauer 2005.
  • 35 Froschauer 2005.
  • 36 Bolduc 1979, 265.
  • 37 Bolduc 1979, 268–269.
  • 38 Brinco 1972, 1.
  • 39 Smith 1975, 376.
  • 40 Wenner-Gren 1957.

23In Ontario, the first province to re-appropriate privatized water power, initially two US owners had speculated on the power franchise they held on the Ontario side of Niagara Falls to gain higher profits by monopolizing the water power rights from 1887 to 1901 and, by not constructing hydroelectric plants on the Canadian side of the falls, had delayed small-town Ontario manufacturers’ transition from steam to electricity for fourteen years.34 Although the province had subdivided the power rights, all three private utilities operating at the falls—the Canadian Niagara Power Company, the Ontario Power Company, and the Electrical Development Company (the only Canadian-owned company)—preferred to vertically integrate their plants in Ontario with their US transmission lines to US industrial markets. Southern Ontario manufacturers pressured the government to set up the public Ontario Power Commission (1906) and demanded the rerouting of some of Niagara’s power to Berlin (now Kitchener) instead of to Buffalo and the integration of the many separate units (generation, transmission, distribution) to form the public Ontario power system.35 Likewise, the Québec government sold or leased hydro sites to mostly private Anglophone and US owners from 1887 onwards, but in 1944 and 1963 the province took over major private utilities because they had not sufficiently equalized prices and had failed to provide industrial energy to strengthen economic growth in several regions of Québec.36 Before Hydro-Québec appropriated and integrated most of the private utilities in 1963, René Lévesque, minister of natural resources at the time, had emphasized the urgency of furnishing low-cost energy to the Abitibi, Gaspé, and Bas-Saint-Laurent regions and stressed that at the time Anglophone utilities employed too few Francophones.37 During 1953, the Newfoundland government granted all remaining hydro rights, including those of the Churchill River, to the private British Newfoundland Corporation (Brinco) in return for an investment guarantee of a minuscule $1.25 million in each five-year period.38 Brinco, however, sold Churchill Falls power, not to Newfoundland or to new industries based in Labrador, but to Hydro-Québec as part of a long-term contract, separating most hydroelectricity from application to raw materials in Labrador. In 1974, when Brinco wooed Hydro-Québec to buy power from its next project, Lower Churchill (or Gull Island), the Newfoundland government, to develop the power systems more in the interest of Newfoundland, intervened and bought back all water rights in Labrador from Brinco at a cost of $160 million.39 British Columbia’s initial privatization began in November 1956, when Swedish industrial promoter Axel Wenner-Gren obtained hydro, mineral, and forestry development rights extended over the “watershed of the Peace River and tributaries above Hudson Hope and the watershed of the Kitcheka River and its tributaries” and the partial watershed of the Parsnip River.40 The subsequent buy-back of hydro power rights was authorized on August 1, 1961, when the BC Legislature approved the Power Development Bill, which included the acquisition of the Wenner-Gren group’s Peace River Power Development Company and BC Electric. In the trend towards public ownership, several provinces followed a similar pattern of reversing privatization, as their goals were different from those of private power companies who failed to provide one or more of the integral functions of electricity supply because they found them insufficiently profitable.

  • 41 Dales 1957; Naylor 1975, vol. 2, 276.
  • 42 Bourassa 1981, 8.
  • 43 Hydro-Québec 1997, 2.

24In addition, the hydroelectricity-based industrial development goals fell short of policy expectations. In fact, the strategy of pre-building capacity and promoting secondary “industrialization by invitation” failed to achieve both the quantity and quality of industrial development that had been anticipated;41 therefore, provincial and federal governments approved increasing exports of additional amounts of surplus electricity to the United States. For instance, in Québec, initially, during the Quiet Revolution, Rene Levesque saw hydroelectricity supporting the rise of emergent industrialists within Québec to enable Quebeckers to become “masters in their own house”; then in the 1970s and 1980s, Robert Bourassa, supportive of US electricity policy, saw Québec’s becoming the “Kuwait of the North” or “l’Alberta de l’Est,”42 and for the first decade of this millennium, the Lucien Bouchard government envisaged Québec’s becoming a “major energy hub of North America.”43 Similar patterns are evident in other provinces. To facilitate exports in the 1970s and 1980s, despite public resistance, the federal cabinet and the National Energy Board legitimated this process by approving more and higher-volume electricity export licences.

  • 44 BC UC 1996, 2.
  • 45 US, FERC 1997, 3–5.

25As export difficulties remained, electricity became part of the free trade agreements with the United States and Mexico. However, such reciprocity in continental electricity trade had repercussions that brought US electricity policy reforms to Canada. Such neoliberal reforms, spawned earlier in Britain, were to bring competition to generation, to wholesale marketing, and, potentially, to retailing electricity, but it soon also brought US regulations, or “orders” as they are called by the Federal Energy Regulatory Commission (FERC) in Washington, DC, to the opening of Canadian transmission lines to US suppliers. This policy is intended in the United States to open transmission line access to electricity suppliers but is also intended, in effect, to break up private US “for profit” electricity monopolies that are vertically integrated, and so, as a result of the provinces’ increasing export dependence, has meant that public Canadian utilities providing “power at cost” (in some provinces, including costs of high-risk nuclear generation) must deal with this regulatory policy. Because of this US policy, and despite the decline in electricity exports to the United States (EPIC 1996, 81, 87; EPIC 1988, 36, 45), Canadian utilities wishing to sell electricity in a changed US electricity market have been required to apply to obtain “power marketing status” from FERC ; however, under reciprocity and US policy, which requires administrative separation of transmission from other functions, export-dependent Canadian utilities have been forced to restructure.44 This functional separation of electricity industry activities, it was hoped, would allow private electricity producers to generate electricity, possibly to supply the most lucrative markets, and potentially to undermine public generation. In other words, provinces have succumbed, in part, to US pressures to de-integrate the various stages of electricity supply, because US energy policy requires that provincial utilities exporting to the United States must break up their vertically integrated corporate structures, and that transmission and marketing of electricity should be exposed to competitive market pressures.45

Table 2. Chronology of De-integration Acts and Policies

Year

Acts and policies influencing de-integration

1980s

British government applies electricity market reforms. The system of England and Wales is exposed to the full menu of possible reforms: vertical de-integration, horizontal de-integration and competition in generation, competition in supply, re-regulation, and privatization (change in ownership)(Surrey 1996, p. 11).

1989

Canadian electricity provisions included in the Canada-US Free Trade Agreement (FTA) and become effective 1 January 1989.

1990

FTA results in amendment of Canadian NEB Act to reduce electricity export regulations, such as export “permits, which will not require a public hearing or Governor in Council approval; blanket permits, granted for a duration of up to sixteen years, allow utilities, such as Hydro-Québec and BC Hydro, to sign their own short-term (three to five year) contracts with US customers without prior approval by the NEB (EPIC 1996, p. 27; Priddle 1989, p. 5; NEB 1994a, p. 19).

1992

US Congress passes the Energy Policy Act to provide The Federal Energy Regulatory Commission (FERC) with the “power to order transmission-owning utilities to provide access and wheeling to others” (NEB 1994a, pp. 17–18).

1995

Electricity provisions included in North American Free Trade Agreement (NA FTA) become effective 1 January 1995.

1996

Natural Resources Canada and the Canadian Electricity Association report that Canada’s NEB “has no jurisdiction over imports of electricity” nor over the wheeling (transport for a fee) of electricity between provinces, that is “when power from one province simply enters the grid of another province, there is no federal regulation” (EPIC 1996, pp. 26–7).

1996–7

FERC issues “rules that prohibits owners and operators of monopoly transmission facilities from denying transmission access, or offering only inferior access, to other power suppliers in order to favor the monopolists’ access.” As a first step “not corporate divestiture” (privatization), but strict administrative separation (unbundling) “of wholesale generation and transmission services is necessary to implement non-discriminatory open access transmission,” so wholesale customers can shop for competitively-priced power. US FERC Order No. 888-A (issued 24 April 1996 and 3 March 1997), pp. 1, 3, 5, 31.

1996–99

Provincial governments’ amendments to their electric utility acts coincide with US FERC ’s transmission and de-integration policy. Provincial utilities (who usually are or have become members of US regional transmission groups), (1) apply for and receive power marketing status in the US from FERC, (2) de-integrate generation, transmission and distribution functions, (3) and announce their open transmission system policies.

26To retain and enhance access to the US electricity market in the 1980s and 1990s, Canada has included electricity in the provisions of the free trade agreements and has restructured major utilities and re-regulated the transmission system in keeping with the demands of these agreements and with US regulatory requirements (Table 2).

Provincial Continentalism

  • 46 Watkins 1997.

27Provincial continentalism is a political term to describe those who advocate closer integration of the Canadian and US economies through free trade, energy-sharing, and other such policies. In recent decades, advocates of a closer integration of the US and Canadian economies have won out over those who preferred a more national approach to Canada’s economy and a multilateral approach to Canada’s trading relations. In the 1980s, the Mulroney Progressive Conservative government adopted the “free market” orientations of Britain and the United States, which culminated in the Canada-US Free Trade Agreement (FTA) and within a few years the North American Free Trade Agreement (NA FTA), which includes Mexico.46 Electricity was included in the provisions of these free trade agreements. Soon after signing the FTA, Canada’s National Energy Board (NEB) deregulated export licensing in Canada; however, the US Federal Energy Regulatory Commission (FERC) increasingly regulated not only the US electricity industry but also Canadian vendors selling electricity in the United States, and it influenced provincial regulation over transmission services offered in Canada.

  • 47 EPIC 1996, 26–27.
  • 48 EPIC 1996, 26–27.
  • 49 Canada, NEB 1994a, 19; EPIC 1996, 26–27.

28How did this come about? Because Canada’s National Energy Board has no jurisdiction over electricity imports from the United States or over the wheeling of electricity through provincial transmission lines,47 and so in this area, provincial utilities are increasingly subject to US wheeling and US de-integration policy. Although Canada’s NEB “advises the federal government on the development and use of energy resources,” certifies international and interprovincial power lines, and provides permits and licences for export, the board regulates neither imports from the United States (“has no jurisdiction over imports of electricity”) nor the wheeling (transport for a fee) of electricity between provinces; that is, “when power from one province simply enters the grid of another province, there is no federal regulation.”48 To reduce export regulations, the National Energy Board Act, as amended in 1990, “will not require a public hearing or Governor in Council [federal cabinet] approval” but will grant long-term blanket permits that allow utilities to reduce the number of export applications reviewed by the NEB. Such blanket permits, granted for a duration of up to sixteen years, have allowed utilities, such as Hydro-Québec and BC Hydro, to sign their own short-term (three- to five-year) contracts with US customers without prior approval by the NEB.49 As a result, provinces deal more directly, and under less Canadian regulation, with US customers and, in the absence of federal electricity transport and restructuring policy, provincial utilities are increasingly subject to US wheeling and de-integration policy (see Table 3).

Table 3. De-integration Chronology of Provincial Power Systems and Utilities

Year

De-integration of generation, transmission, and distribution in the electrical power systems of several provinces

1996–7

“On January 1, 1996, the Electric Utilities Act came into effect in Alberta.” It proposes a new market-oriented structure; “under the new structure, the functions of generation, transmission and distribution will be treated separately for accounting, regulatory and functional purposes.” Transmission and distribution systems remain monopolies regulated by the Alberta Energy and Utilities Board (EPIC 1996, p. 31).

1996–7

BC Hydro, in keeping with the de-integration policy, establishes BC Power Supply, and BC Hydro Transmission and Distribution as distinct and separately accountable business units. In 1996, BC Hydro opens access to its transmission system to Alberta and to states in the US (EPIC 1996, p. 31). Until agreement is reached in September 1997, BC Hydro’s chair, Brian Smith, makes concessions to meet FERC requirement on weekly visits to FERC until BC ’s open transmission services and tariffs equal those south of the border. Powerex, BC Hydro’s power marketing arm obtains an NEB permit valid until 2008, and permit exports from all points across the country (CEA 1999, p. 10).

1996–7

In 1996, Manitoba Hydro joins the Mid-Continent Area Power Pool; the same year, Manitoba Hydro announces the formation of “disctinctly accountable business units: Power Supply, Transmission and Distribution, and Customer Service.” The Manitoba Hydro Act, 1997, (1) accommodates US regulatory requirements for allowing power suppliers access to wholesale electricity customers on the interconnected Manitoba and mid-continental grid; (2) increases the authority of Manitoba Hydro to conduct more business activities in the US electricity market; and (3) permits the building of future hydro plants solely for exporting electricity to the US (Manitoba Hydro 1997).

1996–7

In 1996, the Québec government unveils “Energy at the Service of Québec,” its new energy policy, stating that the “Act respecting the Régie de l’énergie” (December 1996) will regulate generation, transmission, and distribution of electricity,” in particular its division TransÉnergie “broadens access by its customers to transmission systems peripheral to Québec.” 1 May 1997, Hydro-Québec opens “the wholesale market and the electricity transmission system to third parties”. Hydro-Québec’s subsidiary, Hydro-Québec Energy Services (US) applies to FERC in Washington to sell in the US and since November 1997 “has been licensed to sell electricity at market based prices in the United States” (Hydro-Québec 1997, p. 1).

1998–9

The Ontario government proclaims the Ontario Energy Competition Act (Bill 35) in October 1998 which proposes that on 1 April 1999 Ontario Hydro be broken up into a generating company (Ontario Power Generating, OPG), a transmission and distribution services company (Ontario Hydro Services Company, OHSC), and a transmission network operating unit. Ontario Hydro plans to reduce the provincial market share of OPG (which owns all of Ontario Hydro’s 78 generating stations with 30,000+ MW) from 85 percent to 35 percent by the year 2010, while placing no limits on exports over upgraded OHSC -owned transmission lines to markets outside the province and to the $300 billion per year US market. On 1 January 1998 the Toronto Hydro Electric Commission is formed as a “partner” in Ontario’s competitive marketplace (CEA 1999, p. 26).

Resistance

29With sovereignty over electricity policy fragmented between the federal and provincial governments—under conditions of increasing electricity trade reciprocity with the United States, with Washington increasing its influence over transmission policy in Canada—and the National Energy Board hearings eliminated for export permits to ease “free trade” in electricity the 1990s, the sites of resistance to building hydroelectric projects for export and continental electricity trade now include locations not only inside but frequently outside Canada. Resistance to Canadian electricity policy in locations outside the country is part of the internationalization of resistance as Canadian federal sovereignty over electricity policy is weakened.

  • 50 EPIC 1996, 33.

30Until the late 1980s, when federal public hearings were held in cities across the country before electricity was licensed for export, the continuing transfers of electricity to the United States faced public resistance by First Nations Peoples, who are most affected through flooding of large areas of land by large hydroelectric developments. Such resistance by First Nations Peoples, as well as by environmentalists and others, took place to avoid or mitigate extensive environmental impacts from dam projects, which “include the effect on the local climate, vegetation, fish and wild life caused by the creation or expansion of a reservoir and the construction of a dam and generating station. Water levels and flows are affected above and below the dam, as are the nutrient content and temperatures of water bodies.”50 Along with environmentalists, others, including representatives of political parties, fishermen, neighbouring provinces who wished to obtain some of the electricity destined for export, those affected by transmission lines, and other concerned groups expressed their concern about building additional capacities for export.

  • 51 Coon Come 1997.

31In protests near the proposed mega-project sites, in provincial courts, at provincial public hearings, and at hearings by FERC in Washington when Canadian utilities presented their case to attain power marketing status in the United States, First Nations representatives, environmental groups, some labour unions, and other groups have made known their resistance to hydro developments. The northern locations of the large hydroelectric projects are in the homes of First Nations, who resist, in part, because they bear most of the environmental impact of hydro projects built for electricity export. Therefore, they have challenged such developments in the provincial courts, made their case until the late 1980s at public hearings of the NEB, while it was still located in Ottawa (it is now located in Calgary) and held hearings across the country, and in the 1990s, they have challenged export policy at FERC hearings in Washington, DC. For instance, in November 1997 Grand Chief Matthew Coon Come objected to selling power in the uncertain short-term US Northeast electricity market, saying, “We did not sign the James Bay and Northern Quebec Agreement so they could export Great Whale River electricity to the United States and play on the energy spot market.”51 The Innu Nation in Labrador protested at the power site itself in March 1998 against Premier Bouchard’s and Premier Tobin’s exclusion of them from their considerations about building the $12 billion Lower Churchill Falls project.

Conclusion

  • 52 Thomas 1996, 255.

32Unlike in other countries (e.g., France) where the federal government has the primary influence over electricity policy, in Canada over the last hundred years most aspects of decision-making of the hydroelectric infrastructure has come primarily under provincial and secondarily under federal government influence.52 Federal government influence extends only to a weakened interprovincial and international trade policy in electricity. This is in contrast to the early 1960s, when in order to plan the national power network, the federal government invited and held federal–provincial meetings with all premiers (except Québec’s) and the electricity elite (including utility executives, energy ministry officials, and experts from across the country), and provincial utilities provided electricity network information to engineering consultants, who carefully researched the benefits of planning and building a nationwide electricity supply and compared it to each province’s developing its own system. However, despite considerable cooperative efforts in planning, policy formulation, analysis of existing power systems, federal government subsidies for regional studies, and negotiations, both national and regional initiates to integrate provincial power systems in Canada through extra-provincial authority failed politically. Provincial utilities, as Québec and other provinces have done, have come to trade electricity across provincial-US state boundaries (at times at the expense of a neighbouring province) by simply treating their neighbouring province similar to US states as potentially profitable external markets.

  • 53 It appears that in common market policies under free trade, the US tends to pursue a nineteenth ce (...)

33The new Canadian political economy approach provides significant insights into understanding the national, regional, and provincial nature of Canadian infrastructure development. What this approach makes evident is that the social, political, and economic legacy of Canada has left its imprint on Canadian national development. The tensions over federal policy initiatives with Québec and other provinces, the Constitutional authority over resource development held by the provinces, the legacy of uneven industrial development, and trade relations with the powerful US neighbour are reflected in Canada’s history of electricity policy.53 In Canada, attempts to initiate large-scale electricity network integration on a national, or even regional, scale failed because such electricity policy formulations in Canada have a history of tensions between federal and provincial governments and between neighbouring provinces (e.g., the Labrador transmission dispute).

34The federal and provincial policies of encouraging larger generating plants for longer exports, however, did not mean that access to US electricity markets was assured. In fact, access difficulties to markets in California, New York, and other US states; the protectionism of US coal interests involved in electricity production; and the cancellation of Québec-US utility contracts contributed to provincial support for the free trade agreements. With free trade, what had started with electricity exports to US utilities became re-conceptualized as electricity trade reciprocity in transborder regional power networks. After the FTA was signed, US electricity market reforms made the US market more suitable for smaller generating plants and shorter exports—the opposite of what provincial governments had planned for and Québec and Newfoundland are still planning for in the Lower Churchill project. In the 1990s, free trade, reciprocity in electricity trade, and the export agenda resulted in closer integration of the US and Canadian electricity networks. This continentalism, dominated by the US economy, would be consistent with reduced involvement by Ottawa. However, subsequent to the Ontario electricity blackout in 2003, which originated in the US and Quebec’s desire in 2006 to meet Kyoto requirements, the recent history of attempting to integrate electricity systems inter-provincially remains highly relevant.

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Notes de fin

1 Although the focus is on (de-)integration, all tables and research findings differ; a more extensive version of the ideas in this article can be found in the book by K. Froschauer (1999), White Gold: Hydroelectric Power in Canada (Vancouver: UBC Press).

2 This concept is defined by the Energy Resources Branch of National Resources Canada and the Electricity Association of Canada: “The electric power system in Canada consists of three interrelated functions: the generating system which produces power, the transmission network which conducts the flow of power from the point of generation to the point of distribution, and the distribution system which delivers the power to consumers. In most provinces, all three of these interrelated functions are provided by one or a few major electric utilities” (EPIC 1996, 89). As this article argues, major utilities are being de-integrated; therefore these interrelated functions are incorporated into different business units or successor companies whereby the structure and mode of operation of utilities has drastically changed. Each unit is to operate according to the profit mode, with the transmission system operating like a regulated network of roads allowing the reciprocal wheeling of electricity by different sellers of this energy commodity.

3 Cass-Beggs 1960; Dinsdale 1961; Ingledow 1966 and 1967; Macdonald 1974; NEB 1992a, 2.1–3.40.

4 Duquette 1995, 409.

5 Brodie 1997, 240.

6 Dales 1957.

7 Offe 1975.

8 Dales 1957, 182.

9 Bourassa 1973, 1981, 1985b.

10 EPIC 1996, 17, 67–68.

11 Bell 1961; Bourassa 1981, 84–85.

12 EPIC 1996, 26–27; Priddle 1989.

13 Hughes 1974; Ingledow 1966 and 1967; EPIC 1996, 89.

14 Cass-Beggs 1960.

15 Brodie 1997, 254.

16 Cass-Beggs 1960; Dinsdale 1961.

17 House of Commons, 8 October 1963.

18 Canada, Cabinet Conclusion, 24 September 1963.

19 House of Commons, 8 October 1963.

20 Canada, Cabinet Conclusions, 22 August 1964.

21 Canada, Cabinet, 9 March 1962.

22 Premiers’ Conference 1962; Canada, Cabinet, 9 March 1962; Bourassa 1981, 1985.

23 Canada, Cabinet Conclusions 16 February 1962; Le Devoir 5 May 1965.

24 NEB 1992a, 2.5.

25 NEB 1992a, 2.8.

26 NEB 1992a, 3.1–3.24.

27 NEB 1992, 3.6–3.12.

28 Hydro-Québec, Power Contract 12 May 1969, 16; Vancouver Sun, 10 March 1998.

29 NEB 1992a, 3.12–3.24.

30 NEB 1992a, 3.19.

31 NEB 1992a.

32 NEB 1992a, 3.1–3.3.

33 Froschauer 2005.

34 Froschauer 2005.

35 Froschauer 2005.

36 Bolduc 1979, 265.

37 Bolduc 1979, 268–269.

38 Brinco 1972, 1.

39 Smith 1975, 376.

40 Wenner-Gren 1957.

41 Dales 1957; Naylor 1975, vol. 2, 276.

42 Bourassa 1981, 8.

43 Hydro-Québec 1997, 2.

44 BC UC 1996, 2.

45 US, FERC 1997, 3–5.

46 Watkins 1997.

47 EPIC 1996, 26–27.

48 EPIC 1996, 26–27.

49 Canada, NEB 1994a, 19; EPIC 1996, 26–27.

50 EPIC 1996, 33.

51 Coon Come 1997.

52 Thomas 1996, 255.

53 It appears that in common market policies under free trade, the US tends to pursue a nineteenth century axis politics—where other countries are expected to rotate about the axis of the most powerful—rather than attempting multilateral equality (including rotating presidencies and democratic legitimation) for the twenty-first century which European countries in their common market attempt in their international relations. Der Spiegel 1999, No. 30, p. 148.

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