Meeting with US Consulate Officials

I met this morning with three officials from the US Consulate: Mitchell
Optican (Political and Economic Affairs Consul ), Patrick Santillo (Trade
Consul) and Peter Dykeman (Trade
Specialist). They expressed the view
that, from their perspective, there was a very real risk that restructuring
in Ontario will not proceed quickly because of the political complications
coming out of California. However, the Consulate has also made a decision
to do what it can to protect US commercial interests here - the two
interests they identified were those of Enron and
Sithe. They were eager to explore whether
there was an interim step or half way measure that would protect our
interests while allowing the government to play out the political agenda of
proceeding (and being seen to proceed) cautiously. I suggested that the only
such measure would be a scenario under which the IMO administered spot
market (including the market for wholesale industrials) opened this November
and the retail market followed in the Spring. There are arguments in favour
of this approach : greater confidence in IMO system readiness compared to the
distributor EBT/CIS systems; greater commitment of the IMO to market opening;
likely support from OPG to this since it could secure access to NY and
proceed with FERC marketer authorization application; it would enhance OPG's
announced divestiture program re 4000 MW; and consumers/distributors could
be protected through a smoothed price plus a deferral account mechanism
pending full retail access. I
explained OPG's position in NY where OPG had obtained a waiver of the NYISO
tariff's "reciprocity" provisions on the basis of Dave Goulding's assurances
in February 2001 that the market would open this year. They understood and
agreed that it was easier and preferable for the Consulate to raise with the
gov't the real potential that OPG's access may be lost unless the wholesale
market opens this year. I have committed to
outlining a plan that focusses on wholesale market opening this Fall and
providing it to them next week. The model will obviously have to be
consistent with the "four guiding principles" enunciated by the Premier and
Minister of Energy: "protecting consumers and offering choice", creating a
strong business climate with a reliable supply of electricity", "protecting
the environment", and "encouraging new ways of doing business and supporting
the search for alternative sources of
power".

We are meeting again on Thursday to discuss with the Consul General
"Poncho" Huddle. They are prepared to: a) get it included in Governor
Pataki's statements when he meets with Harris at a NY/Ontario economic
summit in Niagara Falls/Buffalo in late June, b) have the new Ambassador
include it in an early speech in Toronto, and speak to the Premier and
others, and c) press the issue with their own contacts in Energy and Finance
in
Ontario.
Please give
me a call if you have any questions. I will develop the model with input
from Paul and Garrett and Seabron Adamson/Kevin Wellenius.