SAULT STE. MARIE, ONT. and TORONTO -- - McGuinty unveils costly hydro plan

SAULT STE. MARIE, ONT. and TORONTO -- Ontario Liberal Leader Dalton McGuinty says the province will have to borrow the money to build new electricity-generating plants, an ambitious proposal that could cost billions of dollars.

Mr. McGuinty said the investment would be needed to avoid a repetition of the massive power blackout of Aug. 14, and the lengthy delay in restoring the electricity system.

"If the blackout drove home anything, it's how vulnerable we are in terms of our inability to generate a sufficient supply of electricity inside Ontario," he told reporters in North Bay yesterday. "So let's build more generation."

No new public sources of electricity generation have been constructed in Ontario during the past 13 years, Mr. McGuinty said. "We're going to have to borrow money for that."

Although the blackout occurred shortly before the election was called on Sept. 2, and although Mr. McGuinty's Liberals have a substantial lead in popularity polls, he had travelled the province for four weeks before yesterday without spelling out how he would prevent a recurrence of the power failure.

Mr. McGuinty also changed past Liberal policy on electricity yesterday by rejecting private participation, stressing that a Liberal government would be committed to public ownership.

"All public hydro assets will remain in public hands," including all generating stations and the electricity grid, he said.

Previously, he had looked to the private sector to build new generating capacity.

But potential investments have dried up over the past 18 months, after the Tory government closed its recently opened market for retail electricity and reimposed a rate cap of 4.3 cents per kilowatt-hour.

The Liberals say they would expand the existing hydro installation at Niagara Falls, build new gas-fired generating plants, and construct small hydro-electric stations around the province on rivers where the government has rights.

In addition, Mr. McGuinty said, "we are going to establish a renewable portfolio standard that would see 5-per-cent clean and green electricity being generated by the year 2007, 10-per-cent by the year 2010." By that, he said he means solar power, wind power and harnessing methane gas from garbage dumps.

Industry sources say it would be costly -- from $10-billion to $15-billion -- to replace the 8,000 megawatts currently supplied by Ontario's five coal-fired plants, which Mr. McGuinty intends to shut down within four years.

As well, there are concerns about the availability and affordability of natural gas.

Ian MacLellan, marketing vice-president at Energyshop.com in Richmond Hill, Ont., said natural-gas prices are expected to rise until at least 2008, which is the earliest possible date that the Mackenzie Valley pipeline, a northern megaproject, could be completed.

Mr. MacLellan said that at current prices, gas-fired generation would cost as much as seven cents a kilowatt-hour to supply, including both the capital construction costs and the continuing costs of buying the natural gas.

The costs of constructing the plants are high. For example, a gas-generation unit opened this year by TransAlta in Sarnia to provide 658 megawatts cost $400-million.

The Liberals say they would do it by getting Ontario Power Generation or the Ontario Electricity Financing Corporation to borrow the money. Electricity costs would not go up, Mr. McGuinty insisted.

He said he would cap prices until technology is available to encourage conservation by giving consumers cheaper rates for using electricity during off-peak periods. The Electricity Distributors Association has told him that would take until at least 2006, he said.

The Progressive Conservatives also say they would keep the price freeze in place until 2006 and would create green-power bonds to stimulate investment in environmentally sensitive sources of electricity.

The New Democrats, who have made power generation a key plank in their campaign, would cancel any privatization and roll back planned deregulation, as well as promoting renewable energy.

Tom Adams of the electricity watchdog Energy Probe said that, "in their heart of hearts," neither the Liberals nor the Conservatives have a plan for ensuring the energy supply.