John Heinzl
The Globe and Mail
August 18, 1997

Turmoil at Ontario Hydro could be the best thing that happened to the province’s independent power producers, who are poised to boost output in the wake of the utility’s decision to shut seven nuclear plants.

"We have a feeling . . . that the door may be opening to allow higher power sales," said Jim Liddell, vice-president with Potter Station Power Co. Inc. in Timmins, Ont. "We have the potential to double our output."

Potter Station, which operates a gas-fired generation plant in Northern Ontario, is one of about 40 independent power producers across the province. With debt-bloated Ontario Hydro planning to mothball seven of 19 nuclear reactors, private producers could soon be pumping out a lot more juice.

How much more will depend on Ontario Hydro’s power needs and on what steps the government takes to open up the industry to competition.

Independent plants produce between 6 and 9 per cent of electricity used in Ontario, generating about $500-million in annual revenue. They include small operators such as Potter Station, with revenue of about $20-million, and bigger players such as Northland Power Inc. of Toronto, which produces more than $100-million of power from three plants in Northern Ontario.

James Temerty, Northland’s chief executive officer, said Ontario Hydro appears eager to increase the amount of power it buys from the private sector. He said the utility contacted his company last week to ask whether additional capacity was available at its plants. "They’ll be talking to people like us all over the province," Mr. Temerty said. "We’re very bullish."

Northland Power, the largest Ontario-based independent, supplies about 250 megawatts into Ontario Hydro’s power grid — enough electricity to run a city of 250,000 residents. It would love to supply more, Mr. Temerty said, but for years Ontario Hydro has prevented it and other private outfits from doing so.

Independent producers are required to sell their electricity exclusively to the provincial utility under restrictive contracts that were negotiated several years ago. That arrangement has served to protect Ontario Hydro’s monopoly while putting a lid on growth of private electricity producers.

"What excess power we have, we just have to sit on it . . . even though in some cases there could be a neighbouring industry facility [or municipality] that could use the power," Mr. Temerty said. "It’s been frustrating."

Ontario Hydro plans to replace much of the power from reactors being closed at the Bruce and Pickering nuclear facilities with electricity generated from three fossil fuel plants — Nanticoke, Lambton and Lennox. The utility said it will also consider importing power from outside the province and buying more electricity from independent producers in Ontario.

"If you look over the next two years, we’ll be offering to purchase from the independents whatever power they have available," said Pat McNeil, a vice-president with the utility. But he said it will only purchase the additional power at a price that is "good for us."

What really has the independents salivating, however, is the prospect of deregulation, which would allow them to sell their power to whomever they please. "I think there’s a big opportunity for us," said Barry Chuddy, director of independent power project development at TransAlta Energy Corp. of Calgary, which operates three generating stations in Ontario. If deregulation happens, and most observers say it is only a matter of time, TransAlta would consider building additional plants in Ontario, he said.

The province is in the final stages of preparing a white paper on opening up the electricity market. Norman Rubin, director of nuclear research at Energy Probe, an Ontario Hydro watchdog, said the solution is to remove the shackles on independent producers and allow them to compete, just as retailers and other businesses do.

And, as a first step, he called on Ontario Hydro to drop lawsuits that have prevented municipalities from using alternate sources of power. Ontario Hydro should "get out of the way . . . the answer is to get rid of it," he said.

Jake Brooks, executive director of the Independent Power Producers Society of Ontario, said Alberta and, to a lesser extent, British Columbia and Quebec have already taken steps to open up their power markets. It’s time Ontario did the same, he said. "It’s about the most regressive access policy in the world. Ontario Hydro’s policy is ‘just say no to competition,’ " he said.

"Ontario Hydro has to just stop obstructing independent power."