April Lindgren
CanWest News Service
January 21, 2004

Ontario’s Liberal government announced yesterday it is taking the first steps toward contracting for replacement power to prepare for its promised shutdown of the province’s five coal-fired electricity-generating plants by 2007.

Dwight Duncan, the Energy Minister, said he will have a new technical advisor in place next week who will oversee a competition to supply the province with 2,500 megawatts of power, through new generating plants, conservation measures, or a combination of both.

The actual request for proposals to replace one-third of the electricity now generated by coal is expected to be issued in February, Mr. Duncan said.

Ontario’s polluting coal-fired plants generate about 7,500 megawatts of power, including 1,200 from the Toronto-area Lakeview plant. Under a law passed by the previous Conservative government, the Lakeview site must by shut down by April, 2005.

"The phase-out of coal is a goal that we want to keep, and we’re beginning down that path today," Mr. Duncan told reporters, noting the government is also seeking up to 300 megawatts of renewable energy capacity to go into service as quickly as possible.

Mr. Duncan said that in addition to submitting plans for energy saving through conservation, private-sector bidders will propose to build gas-fired plants because they can be constructed quickly enough to meet the government’s 2005-2007 deadline.

The Minister said the companies will "enter into a contract" with the government or an agency of government to supply power at an agreed upon price.

NDP leader Howard Hampton attacked the Liberals for hiring a consultant to design and oversee the bidding process when, during last fall’s election campaign, they committed to not get into the consultant-hiring business.

"And this is going to be very expensive power. This will be produced by private, profit-driven companies," he said, arguing that the wholesale price will likely be 6¢ or more per kilowatt hour. Ontarians currently pay an artificially low 4.3¢ a kilowatt hour, a government-subsidized price that will rise to between 4.7¢ and 5.5¢ in April under a new pricing plan introduced by the Liberals.

Mr. Hampton said part of the higher cost will be driven by the companies’ need to borrow up to $2.5-billion to finance the plants.

"Keep in mind when a private, profit-driven company goes out and borrows this kind of money, they’ll pay a significantly higher interest rate than government would if government were building on a not-for-profit basis," Mr. Hampton said.

Tom Adams, executive director of the energy watchdog group Energy Probe, warned that plans for long-term electricity contracts might turn out badly as they did in California in 2000-2001.

Panicked officials there, he noted, signed long-term contracts when prices were at their peak, a move that resulted in the state paying twice as much as necessary for long-term power supplies.