Doug Alexander
Bloomberg.com
July 22, 2005

Ontario is in its worst energy crunch in three years as a heat wave, record electricity demand and idled nuclear plants force Canada’s most populous province to rely on imported power.

Energy authorities this week asked residents to reduce consumption as temperatures climbed as high as 34 degrees Celsius (93 Fahrenheit), boosting demand from air conditioners. The maximum temperature in Toronto so far this month has averaged 30.3 degrees Celsius, or 3.5 degrees higher than the norm since 1971.

Suzanne Witlarge, a Toronto banker, has taken the warnings to heart. She turns off her air conditioner when she is at work and now sets the thermostat higher than usual when she is home.

"I’m concerned about a blackout," said Witlarge, 24, who works at Canadian Imperial Bank of Commerce’s headquarters in the city’s financial district. "They’ve said if people are consuming too much power there will be outages."

Temperatures were above normal in late June as well, prompting three warnings from the power grid operator to cut usage. This is the longest power shortfall ever, based on the number of days utilities have been forced to import electricity, said Tom Adams, executive director of Energy Probe, a public policy research group in Toronto.

"We’re hanging by a thread," Adams said. "What we’ve got is the confluence of a bunch of factors, many of which are self- inflicted, that have pushed us to the absolute limit of our ability to keep the lights on."

The closing of a coal-fired power plant near Toronto to reduce pollution, the shutdown of two nuclear reactors and the heat have contributed to the crisis, he said.

The shortage has been front-page news. The National Post on July 19 said "Ontario Faces Outages," while the Toronto Star, Canada’s biggest circulation newspaper, had a page-one story on the costs of buying electricity from the U.S. The Star has a chart on its Web page with the province’s daily power supply and usage.

Ontario’s provincial government spent the past seven years reorganizing its regulated electricity industry, changing rates to better reflect the cost of power and encouraging companies to build natural gas plants and non-polluting power projects such as wind turbines to replace coal plants.

The 1,140-megawatt Lakeview Generating Station near Toronto closed in April as part of Ontario Premier Dalton McGuinty’s election promise to eliminate coal as a power source by 2007 to reduce pollution. The government last month said it would keep the Nanticoke Generating Station, North America’s biggest coal plant, open until 2009 to ensure the province has enough power.

"We’ve been having the highest demands ever on the Ontario power system," said Paul Murphy, chief operating officer of the Independent Electricity System Operator, which oversees the power grid. "We’ve been managing to meet those demands but it’s really requiring all our resources, and we’ve been importing electricity from outside Ontario as well."

The hot and humid weather pushed Ontario’s power needs to a peak of 26,160 megawatts on July 13, forcing the province to import about 2,500 megawatts from Quebec, Manitoba and the U.S. The imports were at prices as high as C$1.23 a kilowatt-hour, or 25 times what homeowners pay under the government’s lowest subsidized rate.

While Ontario often imports power when it’s cheaper than running its own power plants, it rarely does so to keep up with demand, said Lisa Pearson, a spokeswoman for the system operator.

The province imported 4,273 megawatts during a heat wave on Sept. 20, 2002, reaching its import limit for the transmission system. The current shortage is the worst since then.

‘Critical’

"If this weather keeps up, it looks like we could be approaching a critical situation," said Matthew Kolodzie, senior vice president of utilities at Dominion Bond Rating Service, which follows Ontario’s energy market. "Things are getting tight. If you get another big plant down, there could be a problem."

Utility companies have been told to put off repairs. Ontario Power Generation, the government-owned utility, on July 18 restarted a 515-megawatt reactor at its Pickering plant east of Toronto that had been idled for 3 1/2 months for unexpected repairs. An 840-megawatt reactor at a nuclear plant on Lake Huron owned by Bruce Power LP has been out of service since May 8 and won’t be restarted until early August. Combined, the two generators produce enough power for about 1.3 million homes.

New Plants Needed

Ontario today has 30,114 megawatts of generation capacity. The biggest share is nuclear power, representing about 36 percent of total supply. Hydro-electricity accounts for 26 percent, while coal is 21 percent and oil and gas runs 17 percent.

Toronto could face rolling blackouts during heavy demand to stop transmission facilities from overloading, the grid operator said in a 10-year forecast released July 8.

They hope to avoid a repeat of the Aug. 13, 2003, blackout, when 50 million people in Ontario and eight U.S. states lost power after an unexpected shutdown of an Ohio generator.

"New generating and transmission facilities, particularly in the Toronto area, are urgently required over the next decade in order to meet the expected demands for electricity," the system operator’s chief executive, Dave Goulding, said in a statement.