Doug Alexander
Bloomberg.com
April 13, 2005

Ontario’s government approved plans to build two natural-gas plants worth at least C$869 million ($702 million) to increase its power supply, which may face shortages as the province closes coal plants.

Calpine Corp. and Mitsui & Co. will build a 1,005-megawatt plant and St. Clair Power, a partnership between Invenergy LLC and Stark Investments, will build a 570-megawatt plant, the Energy Ministry said in a statement. Both will be near Sarnia, Ontario, and will replace the area’s coal-fired generator, which will close within two years.

The plants will have enough electricity-generating capacity to power 1.6 million homes in Ontario, which will lose one- quarter of its power supply in 2007 when the government shuts down its five coal generators to cut pollution. The plants will replace 22 percent of that lost capacity.

The Calpine-Mitsui plant will cost $500 million and is expected to begin operating in 2008, Calpine spokeswoman Susan Dowse said in an interview. Calpine, based in San Jose, California, owns power plants in 21 U.S. states. Mitsui is Japan’s second-biggest trading company.

The St. Clair Power station will cost "in excess of C$250 million," Invenergy senior vice-president Kevin Smith said in an interview. The company is based in Chicago.

"This is going to be fairly expensive electricity," said Tom Adams, the executive director of Energy Probe, a research group that advocates energy conservation.

Higher natural-gas prices may make the generators costlier to run than the coal plants they’re designed to replace, he said in an interview. Gas prices at the AECO C hub in Alberta, the nation’s largest trading point, have gained 13 percent in the past year, according to Bloomberg data.

The Ontario government, led by Dalton McGuinty’s Liberal Party, also announced projects to increase power in Canada’s most populous province with the Greater Toronto Airports Authority and George Weston Ltd., respectively.

Toronto’s airport authority will get some money from the government for the cost of building a $143-million, 90-megawatt gas plant at Pearson International Airport, airport spokeswoman Connie Turner said in an interview .

The generator is under construction and will start operating later this year. The plant will make Canada’s busiest airport less dependent on outside power sources, Turner said.

George Weston, the food company controlled by Toronto billionaire Galen Weston, signed a contract with the government that gives it financial incentives for conserving 10 megawatts at 80 Loblaw stores.

The government hasn’t disclosed contract details for the projects.