Association seeks approval to lease power plants.

The Northwest Energy Association (NEA), a consortium of area hydro utilities, s hoping Ontario Power Generation Corp. (OPG) will approve its proposal to lease two northwestern Ontario. Coal stations in an attempt to sell power more affordably to local markets and the United States.

"(The proposal) fits in with our overall plans for the area: the plans we have for Thunder Bay plus the building of an extensive grid," says Larry Hebert, NEA president and chief executive officer. "We see these plans as a great start to the process."

NEA consists of Thunder Bay Hydro and smaller municipal utilities in Terrace Bay, Atikokan, Fort Frances,. Sioux Lookout and Kenora. The association, which buys power through OPG's power grid, was incorporated in February 1998 in response to Bill 35, the Energy Competition Act.

Hebert, who is also the general manager of Thunder Bay Hydro, says with deregulation set to take place next spring, a leasing agreement for the two plants would benefit every member utility of NEA.

"We feel --.and we've talked to some of the employees at the plants -- that if they're run for northwestern Ontario they can be run in a more efficient manner," Hebert says. "By that I don't mean they're not efficiently run now, but they're run for the overall system in Ontario which means they're part of a 30,000-megawatt system. If we run them in northwestern Ontario, they're part of a 1,400-megawatt system. We feel we'll be able to run them in different fashion, and the employees basically share that view."

He says control over the two power plants will serve as an economic development tool for NEA; which serves about 68,000 customers in the northwest.

"We see operating these plants down the road as kind of merchant plan in the overall scheme of things. They still operate and can produce power cheaper than in the U.S., and so we could still sell their output into the U.S.

"Obviously we want to make sure our own needs are met first, and as cheap as possible. We feel that by providing cheap power to the area, and making sure we can do it in as friendly a way as possible, we will attract industry to the area because it will be an economic development tool. If we can show the rest of the world they should come and build their mines here (because) we can provide cheap power to them, then we see some real advantage to things opening up in the area."

Northwestern Ontario's demand for power is about 1,000 megawatts and the two coal stations up for grabs have the capacity to supply 500 megawatts. The two plants are valued at about $200 million each.

OPG, which controls 30,000 megawatts of Ontario's energy market through its five nuclear stations, six fossil-fuel plants and 69 hydroelectric stations, wants to sell or lease the two plants as part of a Phase 1 plan to loosen its grip on Ontario's energy market by 4,300 megawatts. Hebert says NEA has no interest in purchasing either plant.

"We feel (leasing) is our best option because we-don't have a whole lot of money in the bank," he says. "We can arrange for some financing, but We feel that down the road we may not want to own a large asset, such as a coal-fired plant. We also feel that OPG may be more interested in a lease than a sale because, as we understand it, if they lease, more of the stream of funds goes to them than goes toward the stranded debt."

The provincial government has said OPG must reduce its control on output to the point where it has only 35 per cent of the electricity market over the next decade. OPG can reduce its control by leasing plants, selling them, or swapping output with out-of-province companies.

Hebert says employees at the Atikokan Generating Station have expressed an interest in possibly leasing or sharing the facility once it is purchased from OPG.

Officials with OPG's Atikokan generating station are reportedly interested in having a 51 per cent ownership, he adds.

"I think (officials with the Atikokan generating stations) would like to see the ownership or control stay in northwestern Ontario," Hebert says.

Details surrounding leasing terms and potential revenue have not yet been finalized, but Hebert says OPG was to send a bid package to NEA in mid-May. The association submitted a letter of intent earlier in the month.

Staff levels, he says, will not be affected if the leasing agreement goes through.

If the proposal is approved, NEA would lease the two stations prior to the opening of the electricity market next spring.

"We haven't had any sense from the correspondence back and forth as to how long (the process) would take," Hebert says. "OPG wants to get on with this as quickly as possible, so I think, given that they're aiming towards a May 2002 opening of the market, they'll want it done before then. That's the only guideline I know of s far, but I'm sure there will be more distinct guidelines once we get that (bid) package."