Historically, the generation, transmission and distribution of electricity in most provinces have been held in the hands of provincial and municipal governments in Canada. But more recently, the high costs and risks involved in the development of new energy infrastructures and the maintenance and management of existing ones has lent a sympathetic plea to private sector involvement. Ontario's notorious power outage in August of 2003 certainly brought to light the shortcomings of the current power system and an urgency to secure a consistent and reliable supply to accommodate future demand.
Canada is no stranger to private sector involvement in electricity, though it's in an infancy stage with the broader push towards deregulation and privatisation, rather than public-private partnerships. That's because there are two unique characteristics of electricity supply that favour privatisation. First, the output of any one station cannot be distinguished from any other, and second, supply must exactly match demand as electricity cannot be stored. In order to ensure an ongoing and sufficient supply of electricity and, therefore, a reasonable price, the government attempts to create an environment that promotes competition in generation - though it's not an easy task, as successful deregulation of the industry requires a well-developed set of market rules and substantial regulatory support. Nevertheless, industry deregulation is expected to act as a catalyst towards the construction of generation facilities by private sector consortiums. In January 2001, Alberta deregulated under the division of generation, transmission and distribution of electricity into three distinct functions. Alberta, however, is unique in Canada since it never had a single vertically integrated, provincially owned monopoly. It more closely resembles the U.S. model, with several vertically integrated firms operating as franchise monopolies under cost-of-service regulation, together with an integrated transmission network.48 Ontario is in the process of ironing out the wrinkles in its electricity infrastructure, with initial steps looking to incorporate private supply through renewable energy sources, while B.C. is starting to include some small independent hydro operators into its ranks.
In spite of the movement towards privatisation in electricity, there is still plenty of scope in Canada for P3 models. For example, B.C. Hydro in February 2003 undertook a core service review and concluded that there were three areas ripe for public-private partnerships: customer services, computing information services and fleet vehicle services. Following a competitive process, B.C. Hydro contracted a private consortium to provide a wide array of services, from customer - such as billing and metering - to a human resource network, to computing and information consulting, to payroll and to accounts payable.
Looking beyond Canadian borders, countries with deregulation in full swing still employ P3 models in many aspects of the sector. For instance, Australia's deregulated energy sector saw 28 proposed new power stations commissioned for 2003, of which four were structured as P3s. The U.S. is increasingly embracing P3s in energy conservation and alternative power generation models. In March of this year, the U.S. Deputy Secretary of Energy opened negotiations for 21 public-private partnerships in the development of wind energy technology. The new partnerships are aimed at reducing wind powered electricity generation costs at low speed sites through new design approaches and component developments. P3s are even cropping up in electricity transmission. In a milestone deal in the State of California, the U.S. Department of Energy (DOE) is drawing upon the expertise of a private partner to build and operate a new transmission line that would alleviate the transmission bottleneck between northern and southern California - probably considered to be the most notorious grid bottleneck in the country and takes much of the blame for California's recent power crises. The bottom line is that although there is an increasing global push towards privatisation in the electricity market, Canadian governments should not overlook partnership opportunities with the private sector to develop and maintain generation facilities and transmission lines.