Joe Schneider
Bloomberg.com
February 27, 2004

Ontario won’t guarantee long-term contracts for builders of new electricity plants because taxpayers shouldn’t assume risks for power producers, Energy Minister Dwight Duncan said.

"You can’t come in here and argue you’re a capitalist and then look for a risk-free option," Duncan said in an interview. "If you haven’t got the stomach to take a little bit of risk, you’re not going to make it here. So don’t waste my time and don’t waste your time."

Ontario needs to attract new power plants to make up for lost generation as the province shuts down coal-fired generators to reduce pollution. Duncan had promised to idle coal-fired plants, which produce one-fourth of the electricity in the province, by the end of 2007.

The minister wouldn’t repeat that commitment in the interview, saying only that he doesn’t want to extend the phase-out period and wants to improve air quality in the province.

A delay in the closure of coal-fired plants won’t come as a surprise, said Tom Adams, executive director of Toronto-based researcher Energy Probe. "We’re having a very difficult time keeping the lights on in this province even with all our coal plants running," Adams said. "If you take the coal plants out of the picture, reliable power becomes a long-lost memory."

Guarantee wanted

Such companies as TransAlta Corp., Canada’s biggest private power producer, have said Ontario must guarantee long-term contracts or break up the government-owned Ontario Power Generation Inc. to attract new plants. TransAlta Chief Executive Stephen Snyder declined to comment on Duncan’s latest comments.

Companies hesitated to build new generators in Ontario after the government, then controlled by the Progressive Conservative Party, backed off from selling electric utility Hydro One Inc. and capped retail electricity prices at 4.3 cents a kilowatt.

The province as of the end of January had spent C$852 million ($635 million) to reimburse power buyers for the difference between market prices and the cap price.

Duncan’s Liberal Party plans to raise the price cap on April 1 to 4.7 cents for each of the first 750 kilowatts used in a month and to 5.5 cents a kilowatt for consumption above that.

"You have to create investor confidence and you have to create consumer confidence," Duncan said. "If you keep the consumers happy then you won’t have situations like you had with the previous government where policy was changing every six hours, you know, to reflect the most recent phone call that the member from Duck North got."

Seeking new plants

Ontario is seeking 2,500 megawatts of new generation, enough electricity for about 2 million homes, in a request for proposals sent to power producers. Duncan said he expects to receive proposals exceeding that request without guaranteeing any long- term contracts.

"That’s certainly the right instinct," Adams said. "We don’t want to do a California where they bought $20 billion of power for $40 billion on contracts that extended for 10 or more years."

Duncan also rejected requests from power producers to sell Ontario Power Generation plants to create a more competitive market. Ontario Power Generation produces 70 percent of the electricity in the province.

Ontario won’t replace one publicly owned dominant power generator with a privately owned one, Duncan said.