One of Hydro One Inc.'s key transmission projects --
giving Ontario reliable access to cheap U.S. power --
is in trouble, and observers say it may never be built
now that the government has repealed key elements of
its restructured electricity market.
The Ontario-owned transmitter has asked the National
Energy Board to halt its environmental assessment on
the Lake Erie transmission link initiative, a joint
venture announced with much fanfare last year. Hydro
One and TransEnergie, a unit of Hydro-Québec, were set
to build an underwater cable (capable of transporting
up to 975 megawatts, or enough power for a city of close
to a million people) that would connect the province
with the U.S. mid-Atlantic, home to the world's largest
deregulated electricity market and an abundant source
of cheap hydro.
"We didn't get any agreements negotiated to get the
project to proceed at this time, so we are not proceeding,"
Terry Young, a Hydro One spokesman, said yesterday.
But industry analysts say Ontario's move this week
to repeal elements of its restructured electricity market
mark an end to Lake Erie.
"The project is dead," said Tom Adams, executive director
of Energy Probe, an industry watchdog. "In a rational
world, the project would be tested on its merits. But
in the irrational world of Ontario, the project doesn't
stand a chance. And that means another expected means
of keeping the lights on in the long term has been lost."
Construction on the Lake Erie line was scheduled to
start in 2003 and be completed by mid-2004. The project
was to be financed by selling parts of the transmission
line to merchants who believed they could make a profit
by buying cheap power in the United States and selling
at a higher cost in Ontario's deregulated power sector.
According to a Hydro One prospectus filed earlier this
year, the transmitter said the project "will provide
better access to out-of-province power suppliers and
an incentive for further generation development in Ontario,
which we believe will lead to a more competitive market
Another Hydro One watcher, who did not want to be identified,
said merchant lines are of interest to energy merchants
if the line connects two markets that are open to price
"There might be some generators who would want to build
in Ontario in order to export power through the line
into the higher-priced United States markets," the source
"But I would say it's a very risky business proposition
to build the Lake Erie intertie under the present circumstances
of uncertainty of the marketplace in Ontario. It's kind
The insider added that a widespread cash crunch at
most U.S. power companies, as a result from the fallout
of Enron, has also hurt Hydro One's efforts to get the
Another key Hydro One intertie project that's been
hit by delays is the 1,250 MW line that will link Ontario
and Quebec. The company has said the Ontario-Quebec
line would reduce energy prices, as well as enhance
reliability and availability of supply.
The Ontario-Quebec intertie is waiting for regulatory
approval. Construction was supposed to have been under
way by now, for completion in 2004. If Hydro One can't
recover the cost of building the line in its rates,
the project will not proceed, industry sources say.