Hydro pulls the plug on much-needed jobs.

Substantial economic benefits will be lost to Northern Ontario if the province allows Ontario Hydro to cancel private-generation projects, charge two northern mayors.

Hydro announced in February that it had terminated or deferred 53 private cogeneration and hydraulic generation stations because the utility's conservation efforts had reduced the demand for electricity.

Thirteen proposals, including ones for Atikokan, Blind River, Hearst, Cochrane and Iroquois Falls, were deferred. These must either be downsized or redesigned for improved efficiency before being renegotiated with Hydro.

Forty additional proposals were shelved altogether. One of these was Sunthetic's proposal to build a $700-million mixed ether and cogeneration plant in Sudbury.

"It begs the question as to how accurate is their (Hydro's) demand-supply curve," says Iroquois Falls Mayor Jim Brown. "It was a very short period of time to say, 'We need the power, and now we don't.'"

After major layoffs at its chief employer, the Abitibi-Price Inc. mill, Iroquois Falls was looking forward to Northland Power building a 350-megawatt cogeneration facility which would employ 40 people and create an estimated 40 spinoff jobs.

The power company is currently negotiating with Abitibi-Price to supply steam to the local mill after being told by Hydro that the utility would not buy power from a stand-alone plant.

"I've been sitting on the edge of my seat for sometime now," Brown declares. "In principle they (Northland Power) have received approval with regards to a downsized arrangement (reducing the megawatts), and Abitibi is interested in the steam by product."

In a bid to save $7 billion over the next decade, Hydro has more recently deferred the construction of four planned generation and transmission projects.

One of these, the $300-million Patten Post project on the Mississagi River north of Lake Huron, was supposed to generate 250 megawatts starting in 2009. Construction has been deferred for 10 years.

For Elliot Lake Mayor George Farkouh the deferral of Patten Post is a sign of history repeating itself.

The city had expanded in the late 1970s and early 1980s based on Hydro's prediction then of a strong future in the uranium market. Those projections were wrong, resulting in an over-supply of housing and the eventual cancellation of uranium contracts by Hydro.

This is why residents of Elliot Lake feel Hydro is obligated to come up with an alternative to the 1,600 jobs Patten Post may have created.

"You look at the hardship and broken hearts of the people here. That (project) would be a significant boost to Elliot Lake in construction alone," Farkouh comments.

The Patten Post project was to receive $16 million from the $250-million adjustment and diversification package for the Elliot Lake and North Shore area called for after Hydro cancelled its uranium contracts.

Farkouh suggests that the possibility of using the money promised for Patten Post for an extension of the Rio Algom uranium contract would be a welcome compromise.

Northern Development and Mines Minister Shelley Martel agrees that non-utility generation (NUG) could be a boon to the economy of Northern Ontario, but she argues that the timing is not right.

"I think what has happened is there has been a dramatic increase in need for Hydro to cutback. New NUGs coming on line would only add to excess power, and for businesses and residents that would mean significant rate increases," Martel points out.

Duncan Chisholm, a senior business co-ordinator with Hydro's non-utility generation division, says the short-term need for private generation is gone.

"We foresee this surplus going into the next decade," he adds.

John Earl, the corporate relations adviser for Hydro's northeastern region, admits that private generation projects would be a boost to the economy of Northern Ontario. However, he says that the additional excess capacity would drive up hydro rates for all Ontario customers.

"All of the NUGs coming on line are in competition with other utility (Hydro) generation sources. To encourage non-utility generation right now is not a good idea," suggests Earl.

This is dramatic change from Hydro's previous position on non-utility generation. In 1990 Hydro unveiled a 25-year strategy which identified the need for private generation stations to bring the province's supply of electricity in line with future demand.

Tom Adams, a utility analyst with Energy Probe in Toronto, questions the validity of Hydro's revised forecasts.

"We take the view that the surplus is a paper surplus. If there is one thing Hydro can't do it is forecasting," Adams claims.