New Nuclear?

October 14, 2005

Premier McGuinty chose the recent Ontario Energy Association conference to offer the government's most definitive pronouncement yet on new nuclear. While the pronouncement itself is significant, perhaps more telling is the manner in which it was conveyed. The Premier did not say the government was deciding whether to build new nuclear plants. Rather, he said: "We are prepared to go ahead with economical, safe, new nuclear if that is recommended by the [Ontario Power Authority]. We will act on the best, unvarnished advice on what we need to do to ensure Ontarians always have access to safe, clean, reliable, affordable electricity."

By purporting to put the ball in the OPA's court, Premier McGuinty highlighted the issue that continues to bedevil Ontario's fledgling electricity market -the unpredictability of government involvement.

On the surface, the government's deference to an independent agency should be cause for optimism amongst market proponents. Market proponents should be similarly heartened by comments Premier McGuinty made during the same speech wherein he vowed to "take the politics out of pricing" and allow "the OEB [to set] the price based on what electricity costs, not on what politicians think it should cost or wish it would cost." On the other hand, in the short time the Liberals have been in office Ontarians have watched the government break promises when political pressures intensified. Moreover, the prospect of new nuclear poses enormous political and economic challenges (not to mention temptations for would-be central planners). During one of the morning sessions at the OEA conference prior to Premier McGuinty's speech, one industry expert opined that the OPA will be a failure if it slips beyond its transitional mandate and becomes a dumping ground for governmental directives. The same expert cautioned - perhaps presciently - that one of the warning signs the industry needs to be watchful of is the government's use of the OPA to engage in grand new generation projects, particularly the refurbishment or construction of new nuclear facilities.

As always, predicting energy policy in Ontario is like reading tea leaves. That said, the prediction that profound changes lie ahead is probably a safe one. Dire conditions - and Ontario's electric supply profile certainly qualifies - are crucibles for transformation. Under such conditions, governments that typically shy away from dramatic changes, are forced into them, often with unexpected and irreversible consequences. Now more than ever, the Premier's comments signal the need for a cohesive industry voice.

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