H E R T Z O G

Natural Gas Prices Go Through The Roof

CBC Radio One (national), January 7, 2002

By now, we should all be settling back into the warm and cozy fuzz of post-Christmas cheer.

But there’s a Ghost of Christmas Past waiting to haunt us — have you seen your latest gas bill?

Natural gas — you know, that efficient fuel that the gas company claims offers the cheapest heating?

Well, it’s cheap no longer.

Across Canada, consumers are going into shock as the price of natural gas goes through the roof.

The era of cheap natural gas is over, and the reasons why are a Christmas Tale gone wrong.

Do you remember, back in the ’70s and ’80’s, that thing called the National Energy Program?

We certainly enjoyed cheap gas back then.

“ The era of cheap natural gas is over, and the reasons why are a Christmas Tale gone wrong.”

Too cheap, said Canada’s energy industry.

We must pay the world price for natural gas, or it won’t have the money to explore for new reserves, or build new pipelines to deliver the product.

So it set to work to make sure that the free market, and not government, set the price of natural gas.

And it succeeded.

On October 31st, 1985, Brian Mulroney, Canada’s most popular Prime Minister, persuaded the three gas-producing western provinces to sign a deal.

Fittingly called the Halloween Agreement, it deregulated natural gas in Canada.

An interconnected, continent-wide energy market evolved. Canadian gas flowed east and south, but its price stayed stubbornly low.

Meanwhile, south of the border, US states were rushing to deregulate gas and electricity.

Electricity utilities discovered that they could burn cheap natural gas in gas turbines to generate electricity far cheaper than from nuclear power, and much cleaner than by burning coal.

Under deregulation, US energy companies began a frenzy of planning new gas-fired generation.

“ Wierd things happened. Speculators bought old power plants, demolished them, and built condos on the now-valuable real estate. Big generating plants were taken out of service for “maintenance.”

Wierd things happened. Speculators bought old power plants, demolished them, and built condos on the now-valuable real estate. Big generating plants were taken out of service for “maintenance.”

The price of natural gas started to rise.

But faced with fuel price uncertainty, and offered only short-term energy contracts, the US energy industry held off building any big new projects.

Under deregulation, the total electrical energy available in the US actually went down — and now California is in the middle of a major energy crisis.

The same disaster is taking place in Ontario and Alberta, where the Harris and Klein governments are rushing into electricity deregulation.

That’s why our natural gas bills are going through the roof. Whether we like it or not, we’ve been deregulated, thrown on the frantic mercies of an uncaring energy market.

It’s not just because of greedy California; it’s not Bill Gates’ fault; and it’s not just because of winter.

It’s the new law of supply and demand: He who has the supply, can demand whatever he can get.

And demand it they will. Like the Christmas turkey, our energy goose has been well and truly cooked.

That’s my Christmas Tale for this day, and it doesn’t have a happy ending — despite political bribes by provincial governments flush with windfall royalties from high energy prices.

Enjoy the holiday season — Oh, and don't forget to turn the thermostat down after the guests leave.

It’s going to be a long, cold, and very expensive winter.

In Victoria, I’m Stuart Hertzog