Electricity Laws May Break Trade Rules, Lawyer says NAFTA, WTO Policies and Treaties Involved; Queen's Park Official Rejects Arguments

Ontario's new electricity laws run afoul of international trade rules and could trigger challenges from investors or governments in the United States or Mexico, according to a legal opinion commissioned by an energy workers' union.

The Society of Energy Professionals commissioned the opinion from Barry Appleton, a Toronto-based trade lawyer.

The society represents nuclear scientists, engineers and plant operators.

An array of trade rules govern electricity, Appleton said in his opinion, and the Liberal government's new legislation, passed in December, violates a number of them.

For example, Ontario issued a request for proposals for new sources of electricity generation, but required the facilities to be in Ontario. That breaks trade rules by discriminating against foreign suppliers.

Ontario's decision to close down all coal-fired generators by 2007 is open to a challenge from U.S. coal companies, which supply the province's coal-burning generators.

Coal companies can argue the province is discriminating in favour of locally produced renewable-energy sources such as wind or biomass.

Ontario's system of regulating electricity prices for householders and small businesses sets domestic prices lower than export prices, possibly breaking trade rules.

In an interview, Appleton said Ontario faced a 'complicated smorgasbord' of trade rules and treaties, including the North America Free Trade Agreement and the World Trade Organization, some of which it failed to take into account when reforming the province's electricity system.

Under NAFTA, the U.S. government or U.S. investors can call Canada before a tribunal to complain of discriminatory treatment, Appleton said. The tribunal can award financial penalties to investors or force the revision of unfair rules, he said.

That in turn could cause constitutional problems in Canada, because the federal government would be called before the tribunal, but the rules in question have been written by Ontario.

Andrew M