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Coal plants closing may cost $1 billion

Electricity consumers will have to foot the bill for them to be replaced, a study warns
London Free Press, October 27, 2003

TORONTO -- Ontario electricity consumers will have to pay between $900 million and $1.2 billion more a year if the province's coal-fired electricity plants are closed down and replaced by new natural gas-powered plants, says a study by Dominion Bond Rating Service. Ontario's Liberal government, which was sworn into office last week, has promised to shut down Ontario's five coal-burning power plants by 2007 and replace them with cleaner sources of energy such as natural gas, hydro, wind and landfill methane.

The report suggests the plan will be expensive. Operating and maintenance costs for coal generation are about three cents per kilowatt hour. For new natural gas power plants those costs are about five to six cents per kilowatt hour.

Shortly after being sworn in last week, Ontario's new energy minister gave little indication about the first steps he'll take.

"It's too early to speculate on policies at this point," Dwight Duncan said after being asked about the plans to shut the coal plants, which produce about 25 per cent of the province's electricity.

"We have a plan to bring back hope to undo the mess that the Tories have set up, particularly in the energy sector and I look forward to that challenge." The Liberals have also promised to cap residential electricity prices at 4.3 cents per kilowatt hour until 2006.

As Canada's coal-fired electricity plants age, they are expected to be replaced by natural gas generation because of the signing of the Kyoto Climate Control, a global agreement to reduce greenhouse gases, says the study on Canada's electricity industry released last week.

Closing Ontario's coal-fired power plants by 2007 "can be done but at what cost?" said Genevieve Lavallee, a vice-president at the bond rating service, an agency that rates companies' debt.

As a relatively cheap alternative, coal-fired power is likely to be replaced by natural gas power generation, Lavallee said.