As cost pressures mount, Ontario’s wholesale power prices set to soar – by Shawn McCarthy (Globe and Mail – January 31, 2013)

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OTTAWA – Electricity consumers in Ontario face the prospect of soaring prices in the coming decade, a trend that would put additional cost pressure on power-hungry industrial users.

The cost pressures are rising at the province completes the closing of its coal-fired plants while its nuclear fleet faces further retooling and renewable power takes a greater share of the load. A new forecast by London Economics International predicts Ontario’s wholesale power price will jump by 74 per cent – to $55.80 per megawatt hour between 2013 and 2022 from $32. That figure does not include higher costs to distribute the power and for conservation and other demand-side programs.

Concerns about rising electricity prices will be one of the key economic challenges facing the incoming premier Kathleen Wynne as she prepares to assume power from the outgoing Dalton McGuinty. Ms. Wynne will have to take on opposition critics who have slammed the government for its election-related cancellation of a gas-fired power plant that result in $190-million in compensation payments to the plant’s financiers.

Ontario is not alone in anticipating sharply higher power prices. Alberta will see its wholesale prices decline slightly over the next few years, but then turn, beginning to rise significantly in the latter part of the decade. Western New York State could see wholesale electricity prices double, but from a lower base than Ontario, according to A.J. Goulding, president of the Toronto-based economics firm, which has produced a series of forecasts for provinces and states.

“I think the concern is that at least over the next decade, Ontario is going to see prices higher to final consumers than neighbouring markets and that is going to have an impact on people’s industrial and commercial investment decisions,” Mr. Goulding said in an interview.

He said all jurisdictions – including Ontario – got a reprieve from higher prices because the recession drove down electricity consumption, which is only now returning to the previous peak that Ontario hit in 2006.

Critics often point to Mr. McGuinty’s Green Energy Act for being responsible for higher electricity costs. But the new forecast identified several contributing factors, including the need to refurbish Ontario aging nuclear fleet, the decision to shut down coal-fired plants due to climate change and other pollution concerns, and expected increases in natural gas prices from today’s depressed levels.

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