[cdn-nucl-l] Variable power rate deters investors

["Jerry Cuttler" <jerrycuttler@rogers.com>]

FYI
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Variable power rate deters investors, Bruce CEO says; Generators want 'price
certainty' Ontario needs huge investment
The Toronto Star, Tue 02 Mar 2004
Byline: John Spears

Illustration: DICK LOEK/TORONTO STAR Dave Barrie, senior vice-president of
Hydro One Inc., and Duncan Hawthorne, CEO of Bruce Power, discuss Ontario's
electricity market yesterday at a meeting of the Electricity Distributors
Association in Toronto. "We cannot make any capital investment without price
certainty," Hawthorne said.

Ontario needs new electricity generating plants, but won't get them unless
potential investors are assured they have long-term buyers for their output
at fair prices, says one of the province's biggest private generators.

Duncan Hawthorne, chief executive of Bruce Power, told an industry meeting
the spot market, with its highly variable prices, won't entice investors to
spend the billions of dollars Ontario needs.

The province needs a jolt of investment quickly, he said, because the
provincial government has promised to shut down all coal-burning generating
plants in the province by 2007.

Those plants make up close to 25 per cent of the province's generating
capacity. "I don't believe there's a chance in hell of conservation filling
that gap," Hawthorne said.

In addition, the province's nuclear plants are aging and need to be
overhauled over the next decade.

"You need $20 billion over the next 10 years," Hawthorne told the annual
meeting of the Electricity Distributors Association.
That's a huge investment that would take decades to recoup, he said. And
backers want to know how their money will be recovered over the long term.
"We cannot make any capital investment without price certainty," he said.
"There must be some contractual framework that can be made to work so we can
raise that money." That means long-term contracts to buy considerable
amounts of power at stable prices, he said, and a spot market doesn't
deliver that.

Hawthorne's company is conducting a feasibility study on restarting two
mothballed nuclear reactors at the site it leases from Ontario Power
Generation Inc. near Kincardine.

The cost is likely to be in the area of $2 billion, he said.

If the project goes ahead, to raise that kind of money he'll need to assure
investors that he has buyers who are willing to pay upward of 5.5 cents per
kilowatt hour for years to come, he said. For generators to agree to those
sales, buyers must be seen to be creditworthy, Hawthorne said.

Large clusters of local utilities serving a million or more customers would
likely be able to buy enough power, but could still need financial backing
from the province or a larger power authority to be considered creditworthy,
he said.

Hawthorne also said the province should provide investors with a long-term
power plan that maps out roughly how much power should be generated by
water, nuclear, gas or renewable energy sources.

Dave Barrie, senior vice-president of Hydro One Inc., told the meeting there
could also be substantial costs involved in building new transmission wires,
depending where new generators are built.

He noted, for example, that a proposal has been floated to build new nuclear
generators at the Bruce Power site. If all the existing reactors are
restarted, costly new wires would have to be installed to carry the power to
market, he said.

And regulatory hoops could delay those lines, he added.
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