OPG Windsor venture rapped

Critics say power producer should pay down debt instead

Financial Post - January 26, 2002
by Paul Vieira

Ontario Power Generation Inc.'s involvement in a proposed $450-million venture in Windsor, Ont., contravenes one of the guiding principles behind the move to open the province's $10-billion electricity market to competition, an industry watchdog says.

"The whole point of opening the market was to let taxpayers off the hook. But this deal shows we are not heading in that direction," Tom Adams, executive director of Energy Probe, an environmental think-tank, said yesterday.

Mr. Adams said government-owned OPG, the dominant power producer in the province, should refrain from investing in new projects and instead deploy its excess cash toward paying down the $21-billion of debt accumulated by the old Ontario Hydro monopoly.

Similar comments were made this week by John Mayberry, chief executive of Dofasco Inc., one of the biggest power users in Ontario.

He said in a speech to a Bay Street crowd that any money OPG has left after paying operating costs should go toward eliminating the $21-billion debt.

As part of their electricity bill, Ontario consumers pay a levy -- ranging from $150 to $350 a year, depending on the amount of power consumed -- that's earmarked toward the stranded debt.

OPG said this week it is a partner with ATCO Power Ltd., the giant Alberta utility, to build and operate a 580-megawatt plant in Windsor. A third party, Coral Energy Canada Ltd., will dictate how much electricity should be generated and sell that power to customers, mostly manufacturers and business.

An OPG spokesman has said that the venture is a good business proposition that has the potential to generate healthy cash flow -- which can be used to pay off the old Ontario Hydro debt.

Mike Kraizanc, a spokesman for Jim Wilson, the Minister of Energy, said OPG has contributed $2-billion over the past two years toward debt repayment. "That's a substantial dent," he said.

Furthermore, Mr. Kraizanc said, OPG's main contribution to the project is offering the land where the plant is going to be built.

That property is the site of a former Ontario Hydro generating plant that has links to the transmission grid. "It's not laying out a lot of cash."

He added that OPG, which consulted the government before signing on with ATCO and Coral, remains a commercial enterprise that is keen on becoming a key player in the North American power industry. "We are not out to destroy the company," the spokesman said.

OPG controls about 85% of the power generation market in Ontario and is one of the successor companies of Ontario Hydro, which was split up into five pieces in 1998.

As part of the market deregulation, OPG must reduce its control of the generating market to no more than 35% as of May 1, 2012.

As of next May 1, Ontario will open its electricity market to competition. As part of the plan, it is hoped other power producers will enter the province to generate electricity.

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