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Power Paradox: Energy-Rich Northern Ontario Can't Afford Cost of Electricity

Posted on: Saturday, 7 October 2006, 15:00 CDT

By ANGELA PACIENZA

TERRACE BAY, Ont. (CP) - When crews were constructing a hydro station in this community along the Aguasabon River Gorge in the 1940s, few thought power would ever be a source of trouble for the water-rich region.

Eager to take advantage of the abundance of cheap electricity which eats up about a third of their operating budgets, paper and pulp mills popped up next to practically every waterfall.

Now, more than half a century later, those same mills are shutting down or reducing production because of soaring operating costs, leaving many to wonder what happened to all that cheap, clean energy.

Many say it's wasting away, sitting in a surplus pool that has nowhere to flow because of transmission lines that are too small. Others say the price is inflated by the demand in energy-guzzling southern Ontario.

In any event, local politicians and business leaders say the time has come for the province to either establish a regional power pricing scheme for the north, or provide unfettered access to their own electricity.

"We'd have the opportunity to salvage a great deal of the industry to prevent future closures of pulp and paper plants," said Tannis Drysdale, a town councillor from Fort Frances, Ont.

Her township is a member of the Ontario Forestry Coalition, a collective of northern communities, industry and labour leaders lobbying the provincial government for an all-inclusive rate of $45 per megawatt-hour - well below the current market-value rate, which averages about $70, but can soar to $90 during peak times.

That rate would be higher than what neighbouring Manitoba and Quebec charge industry, but would at least provide the sector with stability and stop further job losses in an already economically stagnant region, Drysdale said.

Some 25,000 direct and indirect jobs have been lost in the past year as a result of a battered forestry industry - a crippling loss for small towns, which have seen their tax base shrink and unemployed workers move away, leaving empty homes, shops and schools.

In acknowledging a weakening industry, the government has helped lower wood fibre costs by improving forest access roads and offered loans for plants that want to expand and modernize. But the coalition says mill owners have repeatedly cited electricity as the most crippling part of doing business in Ontario.

Since the deregulation of Ontario's $10-billion electricity market in 2002, prices have jumped about 60 per cent, even as the price of generating and producing energy in northern Ontario has stayed the same - roughly $40 per megawatt-hour.

"If I was the government I would be actioning this as soon as possible to mitigate any further losses, not only to northern Ontario but to the economy of Ontario itself," Drysdale said.

"I have no idea why there is a delay in this announcement, particularly knowing that every day and every week that there's a delay there's another potential job lost or mill going down in northern Ontario."

Premier Dalton McGuinty has said only that he's "seriously" considering electricity relief for northern industries.

"That's something I made a commitment to do, something that all previous governments have refused to do," McGuinty said in a recent interview, referring to a promise he made during a visit to Thunder Bay in 2005.

"We are seized with the challenges that are being faced by northerners through no making of their own."

McGuinty, however, pointed out that New Brunswick and Newfoundland have also experienced job losses, notwithstanding power costs that are relatively low.

Energy Minister Dwight Duncan blamed the delay on the fact it's a "complicated issue."

Northerners consume just 2,000 megawatts of power compared to the 25,000 swallowed up in the south, said New Democrat Leader Howard Hampton, whose Kenora-Rainy River riding depends heavily on the forest sector.

Unlike the south, where consumption and supply are the problem, the north's electricity challenge is high rates, he said. That's why a northern pricing scheme is so fundamental to the region's economic future.

"The electricity system has totally turned their world upside down," Hampton said.

"Even though they built their mills in the middle of the best wood fibre in the world and in the middle of power dams where they have a surplus . . . somebody turning on their air conditioner in Toronto will shut them down."

Despite the fact they're already quite efficient, mills routinely shut down production and lay off workers when energy prices run too high, which tends to happen on hot summer days and frigid winter nights.

Given the forest industry's dependence on power, the government needs to offer a break on energy, said Hampton, who likened the idea to the hundreds of millions in financial aid awarded to the auto sector by the province.

Waiting on the sidelines are folks like Terry Wojick, a wind power consultant from North Bay, Ont.

Wojick said he believes the north's wide geographic area could easily host enough windmills to produce 3,000 to 8,000 megawatts of eco-friendly power.

They can be up and running more quickly than nuclear power facilities, and are less than intrusive in an area that measures a massive 8,000 square kilometres, he said.

Problem is, the power would have nowhere to go until a more robust distribution network was built in the north.

"We don't have the infrastructure to get it down to where it's needed, which is the (Greater Toronto Area)," Wojick said.

Since the 1970s, there's been talk of beefing up the north's puny transmission lines. But the province seems more interested in buying power from Manitoba and Labrador, and spending billions on nuclear plants, he added.

"That ticks me off . . . We have the power right here in our own province. We're just not looking at tapping into the renewable energy up in northern Ontario."

Upgrading lines near the Parry Sound area could get 600 more megawatts flowing south at a cost of $50 to 60 million, less than the cost of a nuclear plant, he added.

Wojick pointed to a new wind farm in the townships of Prince, Dennis and Pennefather, near Sault Ste. Marie, consisting of more than 65 turbines, to illustrate the region's potential.

When completed, the Prince Wind Energy Project will have more than 120 turbines creating 189 megawatts of power for Ontario's electricity market - enough renewable electricity to power about 40,000 homes.

"If they'd given us our own power years ago we wouldn't be in this mess," said Laval Dallaire, a struggling bush worker from Longlac, Ont., another mill-dependent town in Ontario's northwest.

"They let the water flow over the dam and it's wasted."

About 55 per cent of Terrace Bay's tax base comes from the local mill. Losing the mill would mean tax increases of at least 50 per cent, said Richard Beare, clerk of the township, a community of 1,800 on the north shore of Lake Superior.

"The mill is the lifeblood of this community."

Source: Canadian Press

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