John Spears
Toronto Star
November 18, 2004

Ontario Power Generation hasn’t been given the guidance to plan its future and lacks adequate control over its finances, chairman Jake Epp has told the Toronto Board of Trade.

In a breakfast speech yesterday, Epp also alluded to problems at the big Nanticoke coal-burning generating station, which has been out of action more than one-third of the time this year.

Epp said OPG is still waiting for the provincial government, the company’s sole shareholder, to define its likely role in the years ahead. The province had promised to do that this fall.

"You should have been able to hear from me today both a plan for 2005 and a five-year rolling plan," Epp said.

But he can’t map out a medium-term plan because the provincial government hasn’t told him what they want OPG to be. The province hasn’t decreed whether the company will continue to be the province’s dominant generator producing two-thirds of its power.

"There are a lot of issues that need to be taken care of, whether you’re talking about supply, you’re talking about the market, whether you’re talking about OPG’s role, or the role of the private sector," Epp said

The uncertainty hanging over OPG is eating at morale inside the company, Epp said. He’s been visiting OPG facilities around the province, and giving employees this message:

"I cannot tell you what our collective futures are. But you’re professionals; do your jobs and we’ll get back to you when we have better information."

OPG reported a loss in its third quarter this week of $15 million on revenue of $1.41 billion, down from a profit of $34 million on the same revenue a year earlier.

Epp noted that OPG has had to refund $850 million to customers in the first nine months of 2004 ($201 million in the latest quarter). That refund, imposed on OPG when the electricity market was first set up because of the company’s market dominance, is a huge drag on profit, he said:

"This company, on the first day of its fiscal year, cannot be successful."

This year’s profits are lower than last year’s due to higher pension costs, higher depreciation and higher nuclear maintenance costs.

Epp also noted problems at an unnamed coal-burning plant, clearly the 3,920-megawatt Nanticoke station, which according to company figures has been out of service 36.5 per cent of the time this year.

That’s partly the fault of the marketplace, which can ask generators to switch on or off at five minutes notice. Coal plants don’t adapt well to the frequent stops and starts, Epp said:

"Equipment is much more likely to break down."

Tom Adams, executive director of Energy Probe, said that sounds like a credible explanation for Nanticoke’s performance.

The short-notice stops and starts make life difficult for some other types of generators as well, he said, and might mean the Ontario market system should be re-thought.

Adams said the lack of direction given so far to Epp and his board of directors is making life tough for OPG.

"I’ve got some sympathy for a guy who’s trying to steer the ship and not being told where to go," he said.