Rajiv Sekhri/Reuters
San Diego Union-Tribune
February 16, 2004

Ontario’s new energy minister Dwight Duncan, about five months on the job, is a man on a mission to mend the province’s power-strapped electricity sector even though experts warn that there is no quick fix.

Duncan, a key member of Ontario’s new Liberal government, says he has had about 150 meetings since November with investors who may be interested in generating electricity in Ontario. Ontario power supply cannot meet demand during peak months, forcing the province to rely on expensive imports.

Duncan has one of the most daunting tasks in the new government, which swept to victory in October – setting straight a debt-ridden power sector that was deregulated and reregulated under the rule of the Conservatives.

Ontario is Canada’s most populous province and its biggest electricity user. The Conservatives introduced competition in the sector, and then froze prices in 2002, choking any hopes of investment in new power plants.

"I can certainly appreciate (investors’) nervousness on the flipping and flopping and fumbling of the previous government," Duncan told Reuters in a recent interview.

But Duncan didn’t say if he would offer fixed-price contracts to investors willing to build new stations, something that would assure them a guaranteed price for the power they produce and a return on the billions invested in new plants.

Industry experts say fixed-price contracts are crucial to lure new generation into the province.

"The spot market, in isolation, would not be sufficient for people to secure funding for new generation projects," said Duncan Hawthorne, chief executive of Bruce Power, a nuclear power producer in Ontario. "My hope is that the government will create (an) entity that is capable of entering into such contracts."

Hawthorne recently said Bruce might consider restarting two nuclear reactors or building a new one.

Genevieve Lavallee, an analyst with Dominion Bond Rating Service, said: "If I were a company, there is no way I would invest money without having some sort of assurance that I would be able to get back a minimum return, at the least."

Duncan insisted there were "no guarantees." He added: "If you want to make money you have got to take a risk. I want to create a climate where (investors) feel confident but I am not going to give away the store away either."

The Liberals have promised to scrap polluting coal-fired power stations by 2007, a pledge that some power analysts view as virtually impossible – coal generates about a quarter of Ontario’s electricity. But Duncan has already started work on a plan to create 2,500 megawatts of electricity as soon as 2005 and no later than 2007 from a combination of new, non-coal based plants and conservation. He also wants to develop an additional 300 megawatts of renewable energy.

"Our concern is clean air," he said. "What I can offer investors is a market of 12 million people who need a lot of electricity."

Ontario has capacity to produce up to 29,000 megawatts of power daily, but with plants down for maintenance, out of service or shut for repair, it imports electricity when demand reaches close to 25,000 megawatts, a level common during peak summer and winter months. Power needs are growing at about 400 megawatts a year.

Tom Adams, with electricity watchdog group Energy Probe, said he thinks Duncan’s new legislation will involve more centralizaton of Ontario’s power industry. "Ontario appears poised to repeat the power experience of California. We are in a power crisis and are likely to get stuck with crisis prices." ($1-$1.32 Canadian)