Setting a New Course for Electricity in Ontario Presented to the WNA Annual Symposium by Milton Caplan 2004 September 8

2 Introduction Update on the electricity situation in Ontario Address what this may mean for the potential for new nuclear.

3 Background Very volatile electricity market Environment of Change –Devolution of Ontario Hydro –Shift to market based system –Implementation of price cap –Supply shortages Election of Liberal Party Oct 2003 –Commitment to shutdown of coal units

4 The Need Ontario needs to refurbish, rebuild, replace or conserve 25,000 megawatts of generating capacity by the year 2020 to meet growing demand while replacing its polluting coal-fired generating plants. That represents 80 per cent of Ontario's current generating capacity and would require an investment of $25 to $40 billion.

5 Electricity Conservation & Supply Task Force Established in June 2003 to develop an action plan for attracting new generation, promoting conservation and enhancing the reliability of the transmission grid. Final Report Jan A Call to Action Ontario faces a looming electricity supply shortfall as coal- fired generation is taken out of service and existing nuclear plants approach the end of their planned operating lives. Early action is needed to ensure that Ontarians continue to enjoy an affordable and reliable supply of power and that electricity prices in the province remain competitive with prices in jurisdictions with which Ontario competes for investment and jobs.

6 Electricity Conservation & Supply Task Force Key Conclusions and Recommendations –Blended Price Approach –Conservation Culture –Demand Reduction to be treated as Supply –IMO should plan supply and ensure it is achieved –Provide long term certainty to investors –New Agency to take on Contracting Function –Quick Action to Implement Renewables –Gas for Peaking or Intermediate Loads –Diverse Supply Mix and Balanced Approach to Filling the Gap –OPG to be Supplier of Last Resort

7 The Commitment Government of Ontario Embraced the Task Force Report Announced a Series of Actions: 1.Commitment to Conservation 2.Restructuring of Electricity System 3.New Supply Commitments

8 Action Taken 1. Commitment to Conservation Ontario set a target of reducing Ontario's energy consumption by five per cent by The conservation plan includes: Creating an Ontario Power Authority that will include a Conservation Secretariat led by a Chief Conservation Officer Launching a public education and outreach campaign, including town hall meetings, to encourage conservation Setting aggressive targets to put smart meters into every home by Developing regulations which enables homeowners and businesses generating renewable electricity to receive credit for the excess energy they produce Allowing local distribution companies to begin investing approximately $225 million for local, community-based conservation programs Creating incentives for distribution companies to reduce expensive, wasteful "system loss".

9 Action Taken 2. Restructuring of Electricity System the Electricity Restructuring Act proposes: A new Ontario Power Authority (OPA), that would ensure an adequate, long-term supply of electricity; A new Conservation Bureau led by the province's first Chief Energy Conservation Officer; Provisions that the Ministry set targets for conservation, renewable energy, and the overall supply mix; A redefinition of the role played by the Independent Electricity Market Operator (IMO), as defined in its new name - the Independent Electricity System Operator; Incentives for more private sector investment in new generation to help meet growing demand; and Regulated prices in parts of the electricity sector that would be adjusted and approved periodically by the Ontario Energy Board to ensure price stability for consumers.

10 Action Taken 3. New Supply RFP for 300 MW of Renewables Expansion of Niagara Falls RFP for 2500 MW of Clean Energy Supply, including Demand Response and Demand Reduction Approval to Restart Pickering Unit 1

11 Will Ontario make a commitment to nuclear as a continuing part of the electricity mix?

12 Nuclear in Ontario 40% of Ontarios electricity was generated by Nuclear in units with Pickering A and Bruce A in lay up Pickering Unit 4 and Bruce Units 3&4 have been successfully restarted Most of the fleet will be reaching its end of life within the next 20 years

13 Moving Forward 1.A Clear Need for New Generation 2.Other Options must have been Explored and Exhausted There are two key criteria which must be satisfied for a positive decision on nuclear subject to resolving the issues:

14 The Issues Nuclear plant economics and competitiveness. Potential timing of implementing a new unit. Performance of Existing Fleet. OPG Experience with Pickering Restart. Timing of Implementation of OPA. Timing of the implementation of the conservation and other initiatives. Who can be the Owner of New Units. The Financial and Business Model.

15 Conclusion There is a huge demand for electricity in Ontario. The government recognizes the need and is taking urgent action. After all other options are exhausted, the gap will remain. Nuclear will continue to be an important part of the energy mix in Ontario. Ontario is likely to invest in a next generation of nuclear plant.

Thank You Milt Caplan Tel: