Parker Gallant: Ontario Power Generation: then and now

(March 12, 2014) Ontario Power Generation (OPG) on March 7, 2014, released its results for the year ended December 31, 2013, which claims they eked out an after tax profit of $135 million on gross revenue of $4.9 billion.

Back in 2002, OPG only managed an after-tax profit of $47 million on gross revenue of $5.7 billion, although they had undergone restructuring which included selling off Bruce Nuclear the prior year. Despite the sale of Bruce Power, in the prior year, for 2002 OPG managed to generate and sell 125.3 terawatts (TWh) of electricity at an average price of 4.3 cents per kilowatt (kWh). Ernie Eves, then premier, had frozen rates to ratepayers at that same price. Now fast forward to 2013 and you find that OPG generated 80.3 TWh; a drop of 45 TWh or 36% from 2002 (enough to have powered all 4.6 million residences in Ontario). In 2002 there were no “smart meters” or thoughts of a “smart grid” or of the thousands of wind turbines or those acres and acres of solar panels that were to follow.

The power produced in Ontario in 2013 by OPG generated revenue for them of 5.7 cents per kWh; a 1.4 cent per kWh increase or 33 %  since 2002. In the interim years, however, ratepayers in the province have seen their average rates rise from 4.3 cents per kWh to an average of 9 cents per kWh for a jump of 4.7 cents or 109 %. There are many reasons for that increase of 10% per annum since 2002 and we have been told by our current Energy Minister, Bob Chiarelli, we will see another 33% increase over the next three years.

While the Auditor General in her annual report (released December 10, 2013) had some scathing things to say about the hierarchy at OPG the fact is they have been instrumental in keeping electricity rates down. OPG have done this despite the treatment received from the present Liberal government.

To cite some examples of that treatment it is worth noting that OPG are the first point of call by the Independent Electricity System Operator (IESO) when faced with surplus baseload as page 9 of OPG’s MDA notes:

Baseload supply surplus to Ontario demand continued to increase in 2013 as a result of lower primary demand combined with increased baseload generation, mainly from Bruce A Units 1 and 2 and new wind and solar capacity.” and goes on to say: As dispatching hydroelectric units down to reduce production is the first measure the IESO uses to reduce SBG, OPG’s hydroelectric generation was significantly affected by SBG management in 2013, reducing generation by approximately 1.7 TWh.”

It is obvious wind and solar generation is displacing clean, and cheaper, energy that could have been produced by hydroelectric power. That infers that wind and solar generation is NOT displacing “dirty” fossil fuels as advertised! We are slated to add another 6,100 megawatts of wind and solar over the next several years that will only serve to exacerbate the surplus baseload problem meaning further dispatching of OPG’s hydroelectric capacity.

On the subject of hydro power it is also worth noting that the province has more than tripled the “water rental” charge from 2002 when OPG produced 34.3 TWh of hydro power and paid a “water rental” of $116 million. In 2013 they produced 30.6 TWh of hydro electricity and were levied a “water rental” charge of $350 million.

Since 2002 OPG were directed by the Minister of Energy to proceed with the Niagara tunnel (Big Becky) which will add marginal new power at a high cost and where capital spending was $1.5 billion.  They were also directed to proceed with the Mattagami project at a cost of $2.6 billion, which will add expensive run-of river hydro during the spring freshet when power demand is low. Additionally, OPG has been directed to convert the Atikokan and Thunder Bay coal generation plants to biomass and both are expected to produce marginal electricity at an inflated cost. The former will cost $170 million and produce at 12% of its capacity while the latter’s conversion costs are presently unknown but will house nominal inventory that will result in it running only occasionally.

The result of the foregoing does not excuse the findings of the Auditor General but do point out the damage that has been done to this publically owned institution that delivers relatively cheap power but has been used as a political football by successive Liberal energy ministers.

The time has come to kill the Green Energy and Green Economy Act and send the Liberals down the Mattagami or Niagara rivers before they further damage OPG!

Parker Gallant is a retired bank executive and a former director of Energy Probe Research Foundation. As with all independent bloggers on this site, Parker’s views do not necessarily reflect those of Energy Probe.

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This entry was posted in Electricity, Nuclear Power, Power Generation in Ontario, Reforming Ontario's Electrical Generation Sector, Renewables and tagged , , , , , , . Bookmark the permalink.

One Response to Parker Gallant: Ontario Power Generation: then and now

  1. Cold Air says:

    Reblogged this on Colder Air and commented:
    Kill the GEA and sent the OLP up the Lower Mattagami!
    A new Parker Gallant post also contains:
    -OPG spills water to curtail hydro … always as much as Niagara tunnel was expected to add to production;
    -resource fees have tripled for OPG. The OLP must think OPG is a mining company.

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