Ontario could have saved $513-million if cancelled gas plants stayed in GTA: auditor

Ontario could have saved more than half a billion dollars on the cancellation of a gas-fired power plant in Oakville if it had built a replacement facility in the Toronto area, Auditor-General Bonnie Lysyk has told a legislative committee.

Instead, the government of former premier Dalton McGuinty put the alternative plant in Napanee, 250 kilometres away – over the objections of the Ontario Power Authority – which more than doubled the cost of pulling the plug in Oakville.

Earlier this week, Ms. Lysyk estimated the cost of killing the Oakville plant at $675-million to $815-million. Added to the previously revealed total to cancel a similar plant in Mississauga, Mr. McGuinty's Liberals will ultimately spend up to $1.09-billion.

In follow-up testimony at the legislature's Justice committee on Thursday, Ms. Lysyk said cancellation costs were much higher than they needed to be.

When the government dropped the Oakville plan, the government promised to compensate TransCanada Corp., the company slated to build it. The OPA wanted to do this by giving TransCanada a contract for a smaller plant near Waterloo, Ont., an area that needed electricity. TransCanada rejected the offer because it was not as lucrative as the Oakville contract would have been.

The government then told the OPA to give TransCanada a contract for a larger plant in Napanee, one that would pay the company more than it would have received had Oakville not been cancelled, Ms. Lysyk said. The OPA did not think Napanee was the best location for the plant, because the electricity it will produce must be shipped back to the Toronto area, where it is needed.

Under questioning from Progressive Conservative MPP Vic Fedeli, Ms. Lysyk added up the additional costs of putting the plant in Napanee, including getting gas there and sending electricity back. The total came to $513-million.

"The majority of the difference in the cost between the Oakville plant and the Napanee plant relates to the fact that there's distance from the southwest [Greater Toronto Area]," she said.

The plant cancellations were widely seen as a move to save Liberal seats ahead of the 2011 provincial election.