During the 2003 Ontario election campaign, Liberal leader Dalton McGuinty made 231 election promises. A year and a half into his mandate, the shattered remains of these commitments litter the provincial legislature like confetti. From his long-abandoned pledge not to increase taxes or run deficits, to his futile attempt to curb ballooning waiting lists for health care, McGuinty has become known as premier Pinocchio, a politician completely incapable of keeping his word.

But he hasn't broken all his promises - yet. Among the pledges McGuinty is trying to keep is an ill-advised, environmental vote-getter: a plan to shut down the province's coal-fired hydro generating plants by 2007, replacing them with "cleaner" energy sources. Ill-advised, because coal plants currently provide 25% of Ontario's power needs, and do so inexpensively, at a rate estimated by the province's own power marketer at 3.38 cents per kilowatt hour. That compares favorably to the cost of other energy sources, such as natural gas (7.64 cents), oil (8 cents) and water power (7.67 cents).

Despite a looming $6 billion provincial deficit, the government seems determined to press ahead with this costly promise. This week, Energy Minister Dwight Duncan unveiled the first stage of the plan: a series of four projects, including a new cogeneration project, two new natural gas-fired generating plants and a "demand response" project involving Loblaw Companies Limited ("Loblaw").

While the government deserves a bouquet for involving the private sector, it merits a brickbat for the way it has structured these deals. According to Minister Duncan, private power producers will assume the cost of building the three new hydro plants. The electricity produced will be sold to consumers subject to a "price floor." The price floor represents the amount of revenue needed for the producers to recoup their fixed capital and financing costs. When market prices fall below the floor, the producers will receive a subsidy from electricity consumers to make up the difference. In other words, the producers can't lose money, but consumers will not benefit should prices fall, because any savings will be offset by subsidies tacked on to their hydro bills.

With regard to the "demand response" project, it is nothing but corporate welfare disguised as conservation. By increasing the energy efficiency of equipment at its Ontario operations, Loblaw will use 10 megawatts less of electricity per year, thus "freeing up" this power to be purchased by other consumers. Considering that the province needs to replace 2500 megawatts of lost coal capacity, this is an irrelevant savings. But that hasn't prevented the government from throwing taxpayer money at this project. Taxpayers will effectively be fattening Loblaw's bottom line by paying it to cut its hydro consumption.

Worse yet, hydro customers remain completely in the dark about the final price tag for the government's plan. The Minister has refused to provide any cost estimates, saying only that they are dependent on "outstanding contracts issues" and will be available "very soon." If the government knows the price, and isn't revealing it, that is unacceptable. And if the government doesn't know the price, how can it commit to these contracts How can it say that they are really in the best interest of taxpayers and hydro consumers And why didn't the government pursue other less costly alternatives, such as cleaner coal-burning plants instead of natural gas

In the end, taxpayers are left powerless in the face of Dalton McGuinty's bad hydro deals. Ironically for premier Pinocchio, closing coal-burning plants is one promise which taxpayers would be better off to see broken.