By Sue Thomas

TORONTO (Reuters) - Ontario will decide within two months on the future of its key nuclear plant, the province's Energy Minister said on Thursday, after a damning report in December revealed mismanagement and massive cost overruns.

"In terms of making a decision to proceed with the refurbishment, we're talking within the next couple of months," Ontario Energy Minister Dwight Duncan said in an interview.

"The costs of not making a decision are significant. It's costing C$20 million a month just to keep the thing prepped for the decision."

An independent report in December detailed mismanagement and soaring costs to refurbish Pickering A nuclear plant, one of the world's largest nuclear facilities. The refurbishment was launched under Ontario's previous Conservative government, which lost to the Liberals in October.

Pickering A's four nuclear units were closed in December 1997. In 1999, the board of Ontario Power Generation, the provincially owned power producer, decided to revamp and restart all four units at a cost of C$1.1 billion ($808 million) by December 2002.

But by the end of September 2002, only one unit had returned to service, at a cost of C$1.25 billion -- triple the original estimate for one unit -- and two years behind schedule. The remaining units are still not back in service.

Duncan said on Thursday the total cost of refurbishing the facility "could exceed C$1 billion."

"There's no lack of advice on this. We're just sorting through the analyses and will take recommendations later this month."

The advice includes a report on future Ontario power needs that was commissioned by the provincial government and headed by John Manley, Canada's former deputy prime minister.

The March report warned that Ontario could face a severe power shortage by 2007 adding that the province needs a strong dose of nuclear power.

It recommends that debt-ridden Ontario Power Generation should be broken up into a nuclear arm and another that handles electricity from hydro and fossil-fuel sources.

Duncan is adamant that Ontario will shut down all its coal-fired power plants, which produce about a quarter of the province's electricity, by 2007 and dismisses criticism that the move will overburden the power system.

Ontario already imports power during peak summer and winter months, and analysts say losing coal plants would create a supply crunch.

Duncan says that is not likely to happen.

A recent request for proposal (RFP) for 300 megawatts (MW) of new, renewable electricity capacity had been oversubscribed, he said, and another request for 2,500 MW will be issued within a week.

"We are moving prudently forward with our coal goal. We have to make sure we have a replacement supply, but we are quite confident we will achieve that," he said.

"I don't agree with the criticism. We believe we are taking a logical first step in moving from 17th century technology to 21st century technology."

He said plans are on track to introduce sweeping reforms in power legislation within the next two weeks, which could be passed into law by the autumn. It includes increasing supply and conservation, and stabilizing prices.

($1=C$1.36)