The Canadian Press
October 19, 2003

Toronto: Weighed down by a fistful of campaign promises and a bill to taxpayers that has already reached $630 million, Ontario’s incoming Liberal government will soon have its hands full trying to manage the complex hydro portfolio that bedevilled its predecessors.

From reliability of supply and the cost of the retail price cap to the future of the market itself, there is no shortage of electricity issues facing premier-designate Dalton McGuinty.

While McGuinty has indicated that education and health are his immediate priorities, the volatile energy field is one that could explode at any time – and the chances of that happening increase with each day the temperature falls.

"The Tories left these delayed-timer fuses going and the Liberals are going to get sorely tested within their first few months in office," said energy analyst Tom Adams.

"The bottom line is that the power system is a lot more broke than the Liberals anticipated. (They) are going to have to reconsider every element of their (energy) platform."

Despite its relatively low profile during the recent election campaign, McGuinty made several promises about electricity. Key among them is shutting down the province’s smog-spewing coal-fired generators by 2007.

That in itself is a huge task. Coal accounts for as much as one-third of the province’s generating capacity and power supplies are routinely stretched to the limit during extreme weather.

There are also questions about the future of the reactors at the publicly owned Pickering nuclear plant.

A Tory-appointed panel is due to report soon on the billion-dollar cost overruns and years of delays in which just one of the four mothballed reactors has returned to service. The industry is bracing for a scathing assessment that could mean the other three units remain permanently out of service.

However, the Ontario Clean Air Alliance argues that replacing coal by 2007 with hydro-electric, wind or natural-gas generation is perfectly viable.

"(Even) if you went to an all-gas option, that would phase out all the coal plants (and) raise rates by a total of three to five per cent," said the alliance’s Jack Gibbons, who planned to release his own report on Monday.

"That could be phased in at a rate increase over seven years of 0.4 to 0.7 per cent per year.”

McGuinty has also promised to keep the retail electricity price cap for households and other smaller users imposed a year ago by outgoing premier Ernie Eves in place until 2006, after which he plans to reregulate prices at higher, more realistic levels.

"I don’t see that as a viable strategy," said Adams, noting the freeze discourages conservation and new industry investment.

In the interim, the cost to taxpayers keeps rising and the future of the sector remains uncertain.

Under the Conservatives’ deregulation model, OPG was supposed to sell off a large chunk of its generating assets to private investors – a process known as decontrol – to encourage competition.

But the price cap effectively scuttled that process, along with OPG’s business plans.

Decontrol could also become an issue for Hydro One, the province’s publicly owned electricity grid whose impending sale was scuttled by Eves amid a public outcry.

While McGuinty has promised to keep Hydro One in public hands, the giant utility has also gobbled up numerous distribution utilities and many in the industry feel those should go back to their former municipal owners.

With all the uncertainty, the industry will be paying especially close attention to whom McGuinty appoints as energy minister and whether he makes major changes at the bureaucratic level.