Electricity bills in Canada need to be increased to help attract private-sector investment in new power plants and "assist in averting a full-blown power crisis in the longer run," according to a bank study released Monday.

While higher energy prices would be quite costly, TD Bank says the emergence of an energy crisis "would almost certainly entail a much more painful price adjustment and more significant adverse economic impacts."

TD pointed to a Canadian Electricity Association estimate that it will cost $150 billion over the next 20 years to ensure a reliable electricity system in Canada.

With governments already squeezed for cash, businesses and consumers should pay more in the short term to make investing in new power plants more enticing to energy companies, the bank said.

Governments could partner with the private sector to design, build, operate and/or finance projects.

"With governments already facing rising health care costs and high debt burdens, moves by governments to throw the door open more widely to private-sector involvement could assist greatly in covering these huge investment requirements," TD senior economist Derek Burleton said.

TD said current electricity supplies across the country are sufficient to meet demand, but there are warning signs ahead.

In Ontario, for example, the government has said it will shut down its coal-fired generation units by 2007, which account for about a quarter of the province's supply.

The Ontario government is also putting more emphasis on cleaner sources of energy. On Monday, it approved 18 new sites for water power development and will accept wind power proposals starting in April.

Other regions, including Quebec and British Columbia, have experienced weakened supply-demand positions in recent years evidenced by declining exports, rising imports and lower electricity reserve margins, the bank said.

TD noted that many governments have subsidized the prices electricity users pay over the years to attract more industry investment _ making it more affordable for energy-intensive manufacturers to keep their power bills modest so they can expand or solidify operations. But the gaps between the cost and price of electricity "remain significant" in many parts of the country, TD said.

"Case in point in Quebec, where it has been estimated that if domestic consumers had paid the export rate in 2003, their bills would have been $8 billion higher," Burleton said.

TD said a more deregulated, market-based system that uses less subsidies and that better reflects the demand-supply equation would be painful for consumers and businesses in the short term.

Burleton noted that Alberta's move to deregulation in the late 1990s created some short-term pain as prices rose by about 60 per cent.

"Since then, there has been a wave of new private-sector investment and a sharp pullback in prices," he said.

Raising power bills is politically tricky. The former Conservative government in Ontario moved to deregulate its electricity system but stepped back amid consumer outrage two years ago ahead of a provincial election they ultimately lost.

Burleton said there are other steps that can be taken to keep prices low even under deregulated systems, including shifting power use by some industrial users to off-peak periods.

Provinces could also better co-operate and share resources to locate and construct new "clean" power supplies. Ontario, for example, is exploring the idea of working with Manitoba and Newfoundland to develop hydroelectric projects in their regions.