Ontario awards deals for power

TORONTO, ONTARIO - The Ontario government has awarded contracts to two U.S.-based groups to build nearly 1,600 megawatts of generating capacity in the Sarnia area.

But Energy Minister Dwight Duncan wouldn't say how much the winners will be paid for their power, or what the effect will be on consumer prices.

The announcement also lacked plans for large-scale generators in the Toronto area, which is thirsty for power.

The province said more deals are in the offing, however. The original request for proposals said the government is seeking 2,500 megawatts of capacity.

Duncan refused to disclose prices to be paid to the successful bidders, citing the deals that haven't been announced, or to say how user prices could be affected.

The winners of the bidding contest are:

Greenfield Energy Centre, a partnership between U.S. energy giant Calpine Corp. and Japanese behemoth Mitsui and Co. Ltd. The joint venture will build a 1,015-megawatt gas-fired plant near Sarnia. St. Clair Power, a partnership between Chicago-based Invenergy Holdings Canada and Stark Investments of Milwaukee. The two will build a 570-megawatt gas-fired plant, also near Sarnia.

The Greater Toronto Airport Authority. It's already building a 117-megawatt gas-fired facility and has won a contract for 90 megawatts.

Loblaw Properties Ltd., which has won a contract for 10 megawatts for agreeing to cut power use on demand.

Loblaw is installing equipment that will allow the company to dim lighting about 30 per cent in 80 Ontario stores and will be paid for saving energy rather than producing it.

The list of winners left some observers scratching their heads, because the biggest names in the Ontario power industry weren't included.

"It was a bit surprising, the major players who aren't there," said John McNeil, energy consultant with Barker, Dunn & Rossi. "Where's Brascan? Where's Northland Power? Where's TransCanada? Where's Sithe?"

Toronto was supposed to be a focus of new power development, because demand is growing and the Lakeview coal-fired generating station in Mississauga is due to close this month.

The province is scrambling to add new generators because the Liberal government has promised to close all Ontario's coal-fired plants, which produce 7,500 megawatts of power, by the end of 2007.

The province uses more than 25,000 megawatts when the weather is very hot or very cold.

Duncan, asked whether he'll keep the coal promise, insisted the province is "working to that goal as energetically and aggressively as we can."

Conservative critic John O'Toole said the Liberals are far from replacing the 7,500 megawatts promised for closing.

Doing without coal-fired plants will "put Ontario at risk," he said.

Duncan was vague about the complicated pricing arrangements of the new contracts.

The successful bidders will be guaranteed floor payments if market prices are very low. The payments, which will come from special charges against consumers, won't cover all the generators' costs but will limit the losses. If prices climb beyond a certain point, the successful bidders must refund 95 per cent of the excess revenue. But Duncan wouldn't reveal either floor or ceiling prices.

The contracting arrangements have nettled TransAlta Corp. which operates a 575-megawatt generating plant near Sarnia. The plant, completed in 2003, operates without a floor price.

"You could build a photocopy of our plant across the street from it, and the new plant would have an advantage over our plant, which is essentially what has happened," said TransAlta spokesman Tim Richter.

The company has been asking Duncan for similar operating terms for its plant, Richter said.

New Democratic Party leader Howard Hampton called the announcement "embarrassing," arguing its terms don't fill the 2,500 megawatts called for in the request for proposals.

"This is privatized power, privatized electricity," he told the Legislature. "It is very expensive power, and, when you read the fine print, it turns out to be overwhelmingly American power."

Hampton was especially critical of Calpine, which profited unduly from the California electricity crisis in 2000, he said.

"They calmly walked away with a fortune while California consumers re-mortgaged their homes and filed for bankruptcy in response to electricity rates that jumped, in some cases, up to 3,500 per cent," he said.

"Minister, Calpine Corp. should be in jail."

Katharine Potter of Calpine said in an interview from San Jose, Calif., that the company's actions were "180 degrees opposite" of Hampton's characterization.

Calpine had little generating capacity in California when the crisis hit, and was the first company to get two new generators into service to meet demand, she said.

The company never withheld power from the market, she said, and at times operated plants at a loss.

Dave Butters, president of the Association of Power Producers of Ontario, said the announcement is "good news for the province and good news for power producers: some interesting proposals and some new players, which is good news," Butters said.

Dave Martin of Greenpeace Canada said the province is falling short of replacing the coal plants with new generation. The solution is to cut demand, he said in an interview.

"They need to take a serious look at conservation and demand management."