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Tuesday, April 5, 2011

Privatization of Canada's electrical grid accelerating - Business - CBC News

Privatization of Canada's electrical grid accelerating - Business - CBC News: "Canadians tend to think of power generation as a public utility — a crucial piece of infrastructure that governments are duty-bound to provide and oversee. But in Canada, the responsibility of managing the electricity grid is no longer a question of public trust; increasingly, it's a matter of private enterprise.

And with the country facing increasing demand for electricity and a need for massive investments to upgrade an aging power grid, governments eager to avoid tax hikes are helping to accelerate the trend.

'It used to be all large, Crown-owned utilities, but governments are moving towards this [privatized] model in concerted ways,' says Kent Brown, who heads up BluEarth Renewables Inc. The Calgary-based company is just one of many private firms now involved with supplying Canada's growing electricity needs."

Private Industry is better able to manage the risk. They're great at managing their assets and procuring power because we need to come in on time and on budget," Brown says. Despite the high startup costs, the appeal of that the electrical sector holds for private investors is that power plants are generally long-term assets that will spin out cash for decades.
As lawyer Harbell points out, a well-maintained power plant can have a useful life of more than 50 years. "They're not exactly trendy investments, but they pay," he says.
"Pension funds want to have their dollars engaged for the long term, and these assets are fairly safe places for them."

Bottom line

Ultimately, Canada's power system needs upgrading. And with governments tightening their belts for the new age of austerity in the wake of the stimulus money spent to pull the economy out of recession, it's unlikely the country will turn back from privatization, experts say.
"Canada is in a bit of a mess in trying to update its existing grid, which was based on this public utility model," Thomas says.
"You can't go back to the old publicly owned utility model at this point."
A pedestrian stands under a hydro tower in downtown Toronto in November 2002. Electricity costs rose dramatically that year after the Harris government tried to create a freer electricity market.

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