The Post-Staples State: The Political Economy of Canada’s Primary Industries

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Provincial State Ownership, Mega-projects and Network Reorganization

The energy policy regime for Canada’s “permeable Fordism” was also shaped by the particular Canadian articulation of power and politics. Though there was a lot of institutional development, the basic political contours remained the same as the formative regime. The electricity regimes would be province centred and the federal government would regulate international electricity trade, but not interprovincial electricity trade. The substantial difference, however, was that the basic instrument of energy policy moved from private’ light and power’ companies to provincial hydros that shouldered the responsibilities as a natural monopoly for the whole province.

The new epistemic public ownership model reflected stemmed from the postwar British model of nationalized utility (Murphy 1952) or, if you will, the diffusion to other provinces of a modernized version of the Ontario Hydro model- a vertically integrated state-owned company that produced, transmitted and sometimes distributed electricity. Both the scale of the projected capital investments and the level of long-term risk associated with them necessitated substantive public involvement. Provincial governments stepped in to plan and implement these investments. Since Canada did not have a politically cohesive utility financial sector to redefine or shape the paradigm to include its long-term needs and the general thrust of creating ‘provincial hydros’ had broad political support, there was little future for private hydro utility capital in the postwar paradigm. Private capital could not be the instrument to carry out an expanded program of investment, reorganize networks to eliminate inequities and at the same time, push the cheap power policy to its very limits.

The provincial state rose to dominance over formerly private utility capital and of former municipal structures. So important was the idea of the primacy of states over capital that the Government of Manitoba was able to successfully rewrite the terms of the Natural Resources Transfer Agreements so that it could unilaterally change the historical resource claims of capital–a move that would substantially aid the ideologically conservative Liberal-Progressive Government in its leverage to take over the Nebitt-Thomson affiliate that dominated the provincial hydro sector, and also a quasi constitutional change that was justified in terms of provincial equality: if the Ontario Hydro-Electric Commission could use its power to break or change supply contracts as leverage to drive private and foreign capital out of the sector, then Manitoba could use powers to expropriate resource rights for the same purposes. (Netherton 1993)

The ‘provincial hydros’ dominated the new policy regime. Equipped with easy access to financial markets (as provincial governments guaranteed their bonds) they turned the regime into investment machines. Indeed, during the boom in public energy investment, the many hydro utilities had annual investment expenditures that rivalled that of the provincial governments that owned them. A second source of authority for the utilities in the policy regime was simply that they had monopoly over the technical expertise needed to manage the design and construction of the new energy systems. In particular, new developments in transmission technology was instrumental in incorporating remote hydro resources as sources for urban Canada’s energy needs. When a federal policy initiative to create a national grid failed, Ottawa outlined a 1962 National Power Policy that reversed the traditional domestic market protection by encouraging a ‘prebuild strategy ‘in which provinces would develop large scale northern hydro projects for export so that they would be ready for Canadian demand as it occurred.

Ottawa itself became an integral player in the provincial supply side policy. Federal attention began to focus on having its CANDU nuclear technology used in provincial energy policies. Generous federal financial support for the new technology coupled with industrial Ontario’s chronic energy shortage provided the essential formula for the initial diffusion of the CANDU for power purposes. (Bothwell 1988; Doern, Morrison and Dorman 2001) The Ontario nuclear commitment reduced the province’s reliance on coal, and, as well, substantially altered hydro strategies. Manitoba hydroelectric energy strategy, for example, initially assumed that the province’s planned northern hydro strategy would use its Nelson River power to supply southern Ontario energy demand. (Netherton 1993) Increasingly, its would emerge as a prebuild continental staple. Conversely, the Government of Newfoundland and Labrador worked to see the hydro resources in Labrador developed for export to American markets, only to be confined to the Québec market under the terms of the infamous 1969 Churchill Falls Contract, discussed below.

Regime development occurred in stages. The provinces of Manitoba, Québec and British Columbia, as well as the new province of Newfoundland and Labrador became more concerned with planning and implementing long-term hydroelectric development strategies, a process that saw each of these provinces take responsibility for the provincialization of fragmented local networks and gradually investment in electricity generation capacity. A second stage saw the major hydro provinces place existing private hydro producers under public ownership. (Blais 1979; Froschauer 1999) There were exceptions. The private monopoly on the Island of Newfoundland kept its monopoly, perhaps due to the fiscal and financial weakness of the former colony. A second major exception was that for the most part provincial governments did not take over the private industrial producers and in the case of Aluminum producers, allowed an expansion of private hydro development for industrial purposes, often isolated from the emerging provincial networks.

In provinces without an abundance of energy or that relied on a mixture of fuels and technologies (hydro, thermal generation from coal, petroleum, natural gas and later nuclear power) such as Ontario, Nova Scotia, New Brunswick, and Saskatchewan, the provincial energy policy regimes were variations of the universal postwar model, retaining their provincial boundaries and assumptions of provincial self reliance. Prince Edward Island, like Newfoundland, kept a local private monopoly and Alberta maintained the regionally based mixed system developed in the formative paradigm.

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