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The big news out of Queen’s Park today is that while the Liberals thought they had complied with The Speaker’s request for documents pertaining to the Oakville and Mississauga gas plant cancellations (if you can call hundreds of blank pages complying with anything), there appears to have been an Oops!

Turns out now, the Ontario Power Authority (OPA) has discovered 20,000 more pages of documents connected to the cancellations.

In a nutshell, the Liberal government cancelled the plants because the people in Oakville and Mississauga–who NEED the power–didn’t want them, and an election was coming. So, now the government has decided to move them, guess where, rural locations, and then build the capacity it needs in the form of new transmission lines, new gas lines, whatever, so the resource hinterland of rural Ontario can feed Toronto.

How much is this costing you? Plenty.

Here is a summary from Ottawa Wind Concerns friend Robert Lyman, a former director in the federal government who was involved in energy policy.

ONTARIO ELECTRICITY RATEPAYERS – PAYING FOR POLITICS

Over the past year, there have been a series of announcements by Brad Duguid, Ontario Minister of Energy and his successor, Chris Bentley, about the construction of electricity generation projects in the province. Those announcements have all been related closely to the October 7, 2011 provincial election, which the Liberals won with a minority. Unfortunately, few citizens have understood the implications of the announcements.

This may have changed due to the work of two experts: Parker Gallant, a retired banker who has devoted several years to monitoring and reporting on the financial performance of Ontario’s electrical energy Crown Corporations and Bruce Sharp, an electrical engineer. You can read their excellent analyses in the online version of the Financial Post (“Ontario’ Power Trip: The $733 million gas boondoggle” by Bruce Sharp, and “Atikokan Conversion – Another Seat Saver for the Liberals!” by Parker Gallant). Their analyses are obscured, however, by the complexity of the subject matter. I will attempt to make it clearer.

Atikokan

In the period leading up to the 2011 provincial election, there were a number of announcements concerning electrical energy generation in the Atikokan area:

  • On September 11, 2011, Brad Duguid announced that the existing 200 MW Atikokan coal plant would be convert to biomass. Subsequent announcements promised that the contractor, Aecon, would complete the conversion for $170 million and that there would be 200 construction jobs for two years.
  • Chris Bentley subsequently announced that the Ontario Power Authority had contracted for the supply of 200 MW of electrical energy from wind turbines and solar generation.

These announcements were well received by the residents of Atikokan. In the 2011 election, MPP Bill Mauro of Thunder Bay Atikokan beat out the NDP candidate by 39% to 37%; this was less than 500 votes.

 

Subsequent analysis by Parker Gallant revealed some interesting things:

  • The contractor, Aecon, has contributed more than $45,000 to the Liberal Party of Ontario over the past four years and the Liberal Government has appointed the Aecon CEO to the Board of Directors of the Ontario Power Authority since its creation.
  • Over the last two years, the Atikokan coal plant has produced power at 2.6% of its capacity, which means that it has not been needed to support Ontario’s demands.
  • The conversion of the Atikokan plant to biomass (which would use wood chips as fuel) would actually reduce its ability to produce power from 175,000 to 140,000 megawatt hours.
  • As wind and solar energy plants produce electricity on an intermittent basis (i.e. when the wind blows and the sun shines), they are not sufficiently reliable to serve the needs of the pulp and paper plants in the area. This will require the construction of an east/west transmission line at a cost of $600 million to ensure reliability of energy supply to the region.
  • Considering the cost of the coal plant conversion, of the subsidies to the wind and solar plants and of the east-west transmission line, the total expenditures in this area will be close to $1 billion.

Oakville

Prior to the 2011 election, there was considerable controversy over the proposal by TransCanada Energy Corp., under contract to the Ontario Power Authority (OPA), to build a 900-megawatt natural gas-fired generating station near Oakville. The Ontario Cabinet decided, in the face of the controversy, to breach the $1.2 billion contract with TransCanada and to build the plant instead in Lennox, Ontario on land held by the government-owned Ontario Power Generation (OPG).

On September 24, 2012, Chris Bentley announced that a settlement had been reached between OPA and TransCanada over the breach of contract. The announcement focused on two payments to TransCanada – $40 million to cover sunk costs and a $210 million “turbine payment”, which was not explained.

The details that have emerged subsequently are as follows:

  • The turbine payment is an elaborate shell game. OPA has agreed to pay TransCanada $210 million for two gas turbines at the new plant. By 2017, when the new plant is completed, OPA will be sitting on a $210 million liability. When the plant starts producing electricity, TransCanada will repay the $210 million over the 20-year term of the contract, using revenues received from Ontario ratepayers. Under Ontario’s green-energy plan, even if the Lennox plant’s power is not needed, electricity ratepayers will still pay for the electricity they don’t need.
  • It is likely that the plant will not be needed. It will be located right next to an existing OPG plant that is seldom needed. When that plant does operate, it sells electricity into the export market below cost.
  • The turbine payment was far too high. If the plant had been located at Oakville, TransCanada would have been fully compensated for its costs with a payment of $113 million, $97 million less than the government has agreed to pay.
  • The gas services costs for the Lennox site, further away from the natural gas hub, may be higher than anticipated. Bruce Sharp estimates that they will be $346 million over the 20-year project term.
  • Locating the power plant farther away from the GTA will require up to $250 million in additional transmission facilities.
  • The total estimated cost of moving the project from Oakville to Lennox may thus be $733 million. This does not include other, to-be-determined costs, such as the compensation that will have to be paid to Ontario Power Generation for its land at Lennox. The figures contrast sharply with the $40 million the Ontario government has been citing.

Mississauga

The Atikokan and Oakville plants are in addition to the $190 million that the Ontario government had to pay to cancel a plant that would have been built in Mississauga. Similar to the Oakville decision, the cancellation of the Mississauga plant, made two weeks before the election, was followed by a decision to build the needed gas plant in Lambton, near Sarnia, which will add significantly to the electricity transmission costs.

In May, 1997, the MacDonald Commission issued its report recommending that the Ontario government introduce more competition into Ontario’s electricity system, including privatization of Ontario Hydro. Fifteen years later, electricity remains a publicly-owned and managed political football in Ontario.  Consumers will continue to pay dearly until this is changed.

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