Karen Howlett
Globe and Mail
July 18, 2006

The sweltering heat blanketing much of Southern Ontario pushed electricity consumption to its highest level this summer, forcing the province to rely on power from the United States.

Demand for power peaked at 25,898 megawatts yesterday afternoon, within striking distance of the record high of 26,160 megawatts in July, 2005.

The province’s electricity manager issued an emergency alert at 1:15 p.m., saying it had maxed out its own generating capacity and would be importing power from Michigan, New York and Quebec.

"The only thing that’s saving Ontario today is the importation of very expensive electricity from outside of the province," New Democrat Leader Howard Hampton said.

The province met the demand for electricity, thanks in part to a breeze yesterday afternoon that powered Ontario’s wind generators.

But the summer’s first big heat – the thermometer reached about 33 C in Toronto, a touch shy of the record of 34.4 set in 2002 – was a reminder of how the weather can push the system to the brink.

A report prepared by the Ontario Energy Board for the province’s electricity manager singles out the 10 worst days between May 1, 2005, and Oct. 31, 2005.

The report describes how the provincial Independent Electricity System Operator (IESO) coped with a series of challenges, including sweltering heat that caused demand to soar well above supply, congested transmission lines that made it difficult to deliver electricity, and generator breakdowns or labour disruptions that played havoc with its supply forecasts.

"It was certainly a summer that we’d never want to see again," said Terry Young at the IESO.

But industry observers say there is a real possibility the province could see a replay of last summer. The 101-page report by the energy board’s market-surveillance panel exposes just how fragile the province’s system has become.

Lack of long-term planning by previous governments has left Ontario facing a severe electricity shortage and relying on imported power from neighbouring states on many days.

"We are in virtually the same shape we were in last summer and that is very worrying," said Tom Adams, executive director of Toronto energy watchdog Energy Probe.

Mr. Young acknowledged that last summer confirmed a trend that has been emerging over the past five years: Demand for electricity in Ontario now peaks in the summer, when air conditioners are running full blast, rather than in the winter months.

Most of the worst days last year – those that resulted in the highest prices paid by the IESO to power-generating companies – were in the summer, when temperatures exceeded 30 C on 25 days. Electricity prices for the province were 60 per cent higher on average than in the summer of 2004.

So far this year, the province has had only a couple of bad days, including yesterday. The cost of buying electricity has averaged only 4.96 cents a kilowatt hour since Jan. 1 – well below the 5.8 cents to 6.7 cents that consumers pay, depending on consumption.

But on many days last summer, the cost of buying electricity on the open market far exceeded what the government charges consumers. Electricity generators offer to sell power to the IESO at a certain price, and the IESO accepts the cheapest offers first.

But when demand for electricity rises and power supplies become more scarce, the IESO is forced to pay higher prices.

Yesterday, the price peaked at 14 cents a kilowatt hour at 3 p.m.

The report also reveals that the IESO paid millions of dollars in fees last summer to import power from Michigan and New York and to keep generators running on days when demand soared.

Between May 1 and Oct. 31, it paid $400-million in fees, compared with $190-million in the same period in 2004. These fees included guarantees to importers to ensure that they sold their power to Ontario rather than to another jurisdiction.

The IESO’s Mr. Young said the manager has recently reduced some of the uncertainty associated with importing power by locking in purchase agreements a day ahead instead of the same day. This increases the certainty that the power will be available when the province needs it, he said.

To address the province’s electricity shortage, Premier Dalton McGuinty has an ambitious plan that includes spending up to $40-billion on nuclear power plants.

But it will take at least a decade before a new reactor is up and running, and Mr. Hampton criticizes the government for not doing enough to bring on new sources of power sooner or encourage consumers to use less electricity.

"Part of the nub of what the OEB report is saying is that the market doesn’t work very well at all."