(December 20, 2011) The 3rd quarter results for Hydro One and OPG have both been released and the news isn’t good.
Combined revenues were up marginally by $ 8 million for the comparable 2010 quarter and net income plummeted from $551 million to $71 million. The biggest reason for the drop had nothing to do with the generation, transmission or distribution business it was the stock market which turned OPG’s profit of a year ago into a loss of $96 million. The other reasons were more complex.
OPG took a battering this quarter as a result of the nuclear decommissiong fund dropping due to the fall in global stock markets and because their unregulated hydro and thermal generated less revenue. OPG received 3.7 cents per kWh or 18% less for unregulated hydro then the comparable 2010 quarter and for thermal production they received 3.9 cents per kWh or 28% less then last year. With Ontario currently sitting on excess generation capacity as demand falls and wind and solar ramp up OPG has trouble selling unregulated power. OPG doesn’t really compete with anyone for this unregulated power as it is treated as “peaking capacity”. As a result hydro power was spilled and thermal capacity sat almost idle so kWh generated by these two sources was down 36% compared to the 2010 quarter. Even at the lower prices it cost OPG approximately $80 million this quarter in forgone revenue (for the 9 months the revenue loss was closer to $250 million). During the quarter the Independent Electricity System Operator was obliged to accept expensive wind and solar generated power at 4 to 20 times the cost as they are granted “first to the grid” rights.
In Hydro One’s case sightly higher revenues of $14 million were offset by operations, management & administration (OMA ) costs; up $34 million (13.5%). Their management, discussion and analysis (MDA) note increased costs went to pay for the connection of small renewable projects and further stated expenditures to sustain their existing transmission system were lower than last year. Hooking up wind and solar for the FIT & MicroFIT programs increased OMA expenditures and not to improve old infrastructure! The MDA also noted monies continue to be spent on the smart meter/smart grid initiatives, which will continue to impact ratepayers. Another factor playing on Hydro One’s results was a directive of April 19, 2011 from the Energy Minister, Brad Duguid which told Hydro One they could not recover any costs associated with hooking up any MicorFIT contracted power. Hydro One has estimated the costs related to this directive are $25 million in their MDA (management discussion and analysis).
The GEA (Green Energy Act) has eviscerated OPG’s ability to provide us with cheap reliable power, causing them to lose revenue and devalue their worth to shareholders; the Ontario taxpayers and thereby extend repayment of the “stranded debt”. In the case of Hydro One they have been ordered to spend billions on transmission lines, transformers, etc to hook up wind and solar at a cost to be borne by ratepayers or to absorbed through downsizing or reduced profits.
Devaluing our public electricity companies in order to transfer ratepayer and taxpayer funds to foreign wind and solar developers/manufacturers is nothing more then a stealth wealth transfer. It is time for real competition-let’s make wind and solar generators compete with the unregulated generation from OPG, pay Hydro One to hook up to the grid and bring back shareholder values for these two publicy owned institutions!