April Lindgren
The Ottawa Citizen
April 22, 2003

TORONTO – After insisting for years the provincial government should abandon the business of generating electricity, Ontario’s governing Conservatives are looking to make major investments in power plants to counter looming electricity shortages.

Provincially owned Ontario Power Generation recently announced a 50-50 partnership with TransCanada PipeLines Ltd. to assess the viability of building a new gas-fuelled generating plant at a downtown Toronto site already owned by OPG.

The Tory government, in a press release late last year, also said it will "direct OPG to proceed with the Beck tunnel project, an expansion of the Sir Adam Beck generating station at Niagara Falls."

The projects come at a time when OPG is also under orders, as part of Ontario’s electricity restructuring plan, to reduce its share of power generation to 35 per cent of the total by 2012.

The OPG currently generates more than 70 per cent of all the power produced in the province.

"It may be somewhat inconsistent (with the requirement that OPG reduce its share of the generating market), but when you are in a period of time when you have a shortage of generation, you’ve got to do what you’ve got to do," Toronto energy-sector lawyer Peter Budd said.

The two initiatives come in the aftermath of Premier Ernie Eves’s decision last November to freeze electricity prices that soared during Ontario’s brief experiment with an open market for electricity generation. Mr. Eves also pledged to issue more than $350 million in initial rebates to consumers.

In the meantime, the Independent Market Operator responsible for tracking supply and demand has warned Ontario could face blackouts or brownouts over the next 18 months if the province is hit by extremely cold or warm temperatures.

Until recently, the Tories have steadfastly argued OPG should get out of the power plant building business because its earlier bungled efforts resulted in a $38-billion debt.

Critics of the new strategy say taxpayers could be on the hook for more uneconomical investments.

"It’s not like OPG has demonstrated any particular skills in investing in power projects," says Tom Adams, executive director of the watchdog group Energy Probe.

"This is just a panic move" in the face of potential power shortages, says Mr. Adams, who points to the $1-billion cost overrun and major delays in the refurbishment of the Pickering A nuclear plant as just one example of OPG bungling.

Mr. Adams says there are risks associated with both the latest OPG projects. The profitability of the proposed new gas plant in Toronto is highly dependent on the price of natural gas relative to electricity prices, he notes.

And the proposal to build another tunnel to channel more water through turbines at the Beck generating station in Niagara Falls is risky because it depends on water flows that in turn depend on the weather as well as cross-border agreements between Canada and the United States.

Skeptics also predict taxpayers – or the Crown corporations they own – can expect to end up carrying more debt as a result of OPG’s forays into the generating market, adventures that won’t come cheap.

Meanwhile, OPG is already generating much less profit than anticipated. Earnings were only $61 million at the end of OPG’s third quarter in September, far short of the $480 million the Tories anticipated in their budget plan.

In 2001-2002, OPG earnings were a disappointing $179 million, significantly less than the $520 million projected in the annual provincial budget.