Ontario May Face Power Shortfall In 2005

Even with 4,500 megawatts of added electrical capacity expected soon in Ontario, the most populous province in Canada could experience power shortfalls as early as 2005, Toronto-based Navigant Consulting warned.

"We are forecasting a reserve margin of approximately 13 per cent in 2005... This reserve margin level indicates that there is a risk to Ontario of higher market prices from tight supplies during peak periods," Navigant's managing director, John Dalton, said.

Two nuclear generators at Bruce Power northwest of Toronto are expected to back in operation before this summer delivering 2,000 megawatts. The restart of idled units at Ontario Power Generation's Pickering nuclear station should add 1,000 megawatts in late 2003.

In addition, Navigant said about 1,000 megawatts of independent generating capacity is currently under construction.

"Our forecast suggests that there will be a sufficient surplus in the markets that are interconnected with Ontario to maintain prices at reasonable levels," the report said.

"If this capacity isn't available due to higher than forecast load growth in these markets, or greater than anticipated retirements, there is a risk of significant price volatility in Ontario in the 2005 time frame unless deliberate efforts are made to increase supplies or reduce demand growth."

Ontario's electricity market opened for competition on May 1, but the California-style deregulation led to soaring prices and a public outcry, prompting the provincial government to cap prices for households and small businesses at 4.3 Canadian cents a kilowatt hour until May 2006.

Critics of the rate freeze say the government has sent a message to consumers that they can consume as much electricity as they want because the price is fixed. In addition, the reregulation of the market has fizzled any hope of new investment in power generation in the province, Canada's economic and industrial heartland.

Dalton said Ontario's "capacity deficit is particularly troubling" because the province has said it will remove the price cap in May 2006.

"Without sufficient generating capacity, there is a risk that the government will not remove this retail price freeze given the risk of price volatility."