Ontario power users say prices will rise over 50 percent

- Electricity prices in Ontario will rise by 30 to 53 per cent by 2008 if the Liberal government follows through with current plans to overhaul the power system, the province's biggest power users say.

And if that happens, they warned a Legislature committee, some of the province's biggest industries could start pulling money and jobs out of Ontario.

The sharply higher electricity prices will throw cold water on the economy, said Mary Ellen Richardson, president of the Association of Major Power Consumers of Ontario (AMPCO). It includes many of the province's biggest manufacturing, mining and forestry companies.

A power price rise on the scale AMPCO fears will reduce economic output by 1.4 per cent and kill 140,000 jobs, Richardson told the committee.

A variety of government policies are likely to push the price up, she said. These include:

The Liberals' plan to close coal-burning generating stations. Most of their output will likely be replaced by natural gas-fired generators, which are more costly to operate, according to AMPCO.

Plans to change the price charged by Ontario Power Generation. OPG is paid 3.8 cents a kilowatt-hour for the bulk of its production, which helps dampen prices in Ontario. A new pricing formula is in the works, however, and Richardson said she had heard the price might increase to 5 cents.

The provincial Liberals have introduced legislation to set up a new body, the Ontario Power Authority, to devise a long-term power plan for the province, and to contract for the power to be delivered. Some expenses will be passed on to customers.

A spokesperson for Energy Minister Dwight Duncan said last night the Liberal government is determined to keep political gamesmanship out of electricity pricing. "The government is committed to taking political intervention out of the electricity market, we don't want to control prices." Ontario's industrial economy was established on the basis of reliable, low-cost electrical power, major consumers said, but that's no longer the case.

"Ontario now has electricity rates higher than most competing jurisdictions in North America," Richardson said. Closing the coal plants should be put on hold, she added.

"Don't eliminate an abundant and cost-competitive source of supply such as coal: Clean it up. We can reduce our emissions dramatically using existing technologies. We should use those plants, we should clean them up and we should keep an abundant fuel supply in the mix," she said.

Ontario's high prices have a real impact on companies operating on both sides of the Canada-U.S. border, Darren MacDonald told the committee.

His company, Gerdau Ameristeel, has 11 North American steel plants that recycle scrap steel into other products. Two are in Cambridge and Whitby, with a combined total of 873 workers.

"Ontario is poised to become the highest-cost operating location in our portfolio," MacDonald told the committee.

Duncan's spokesperson said major electricity consumers predicted wholesale prices would rise last year when they in fact fell by nearly 19 per cent.

But Tom Adams, executive director of Energy Probe, said setting up a central power authority to contract for power is dangerous because it will inevitably be subject to intense pressure to depress prices artificially.

"The pressures of the short term are likely to always outweigh the necessity of covering the cost."

Ontario Hydro rang up a $38 billion debt when it acted as the province's power monopoly, he pointed out. And central authorities in Britain, France and California have fared poorly.

Ontario could bounce back more quickly than it did after last summer's power failure in the event of another electricity crisis, Premier Dalton McGuinty said recently.

"Are we totally immune from blackouts now? No, we are not," he said at the opening of Hydro One's new $125-million grid control centre in Barrie. "But we are in a much better position to control the spread of a blackout."