TORONTO — A new gas-fired power plant may be the only way Canada's largest city can avoid blackouts while quenching its insatiable thirst for electricity, Premier Dalton McGuinty said Monday.

Toronto, which currently can't generate power of its own, needs 250 megawatts of new supply by 2008. The city currently relies on existing transmission lines, which run at full capacity during peak demand periods such as hot summer days.

"We need to build new generation inside the city of Toronto and we can't duck this,'' McGuinty said before a caucus meeting.

Blackouts or temporary voltage reductions, also known as rolling brownouts, would create economic stress and safety risks for both the city and the province, critics warn.

Energy Minister Donna Cansfield said a decision on how to attract bids for the project _ and where to put it _ is a few weeks away.

The Portlands area, east of the city's downtown core, is considered a likely site for the project, but opponents fear pollution in the area and the possibility a new power plant would impede development of the city's waterfront.

"Nobody wants new generation in their backyard, but the fact of the matter is that this is a large urban centre and we're going to have to find a way to build new generation inside the city,'' McGuinty said.

"There's just no way around it. It's either that, or talk about rolling blackouts.''

Toronto Mayor David Miller has said city council would likely only back a co-generation project that would produce both electricity as well as steam to heat homes and businesses. Miller also wants the province to spend more on conservation.

Cansfield, who agreed that any new plant should be capable of co-generation, denied there's an impasse with the city.

"We have an emerging crisis _ we don't want blackouts in the city,'' she said. "But it's not a blame thing _ it's just been neglected for a while.''

On Tuesday, Cansfield is set to launch a new advertising campaign with six of Ontario's largest electricity distribution companies, aimed at encouraging residents and businesses to reduce their power use.

"We need rigorous conservation and demand management _ they have to go hand and glove,'' she said.