OPG’s on a roll and Ontario’s ratepayers and taxpayers are paying the price
OPG released their 2020 Annual Report about a week ago and despite profits increasing, during the pandemic, by $235 million (up 20.9%) from $1,126 million in 2019 to $1,361 million, the media didn’t seem to notice. Gross revenue, net of fuel costs, increased $1,118 million over 2019. Based on total generation of 82.1 TWh, (up 5.5% over 2019) the cost to produce a MWh (net of fuel costs) jumped from $68.70 in 2019 to $78.72/MWh in 2020 for a 15.5% increase!
The increased gross revenue came from, nuclear, up $700 million, gas and other generation up $300 million and higher hydro costs of $40 million. The latter doesn’t include 4.3 TWh* of spilled hydro costing ratepayers about $220 million in 2020 nor does it include the “fuel costs” of water which were $347 million up slightly from 2019 despite a small drop (2 gigawatt hours [GWh]) of actual generation.
The increased revenue from nuclear and hydro came as a result of the OEB finally blessing rate increase applications submitted by OPG. In the case of the nuclear rates the OEB took an inordinate amount of time to approve rate increases, so much of this jump was associated with some catching up by OPG as well as a slight increase (3 GWh) in actual generation. The jump in gas costs is due to the acquisition by OPG of the “portfolio of combined-cycle natural gas-fired plants in Ontario from TC Energy Corporation (TC Energy) for approximately $2.8 billion, inclusive of customary closing adjustments. The portfolio included the Napanee GS, the Halton Hills GS, and the remaining 50 percent interest in the Portlands Energy Centre.” As a result of the acquisition, OPG’s gas generation operations in 2020 represented 26.8% (2.6 TWh) of all grid connected gas generated (9.7 TWh) whereas in 2019 the 0.6 TWh they generated was only 6.3% of grid connected gas generation. The acquisition didn’t close until the end of April 2020 so we should expect OPG will have an even larger percentage of gas generation in 2021.
It is worth noting OPG’s total generation of 82.1 TWh added to Bruce Nuclear’s generation of 44 TWh provided 95.4% of all grid connected Ontario demand in 2020. If one includes the 4.3 TWh of spilled hydro OPG was paid for and the 1 GWh of steamed off nuclear at Bruce the combination of the two could have provided 98.7% of Ontario’s grid demand. The grid shortfall of 1.7 TWh could have been easily provided by OPG’s hydro units. Without the costs of over $2 billion dollars for the 13 TWh generated by grid connected wind, solar and bio-mass generation, ratepayers and taxpayers would have been much better off. Additionally as Scott Luft recently noted that surplus generation only served to reduce emissions for our neighbours in US states such as Michigan, Ohio, Indiana, etc.
Another point worth expounding on is, in addition to the water “fuel costs” of $347 million paid to the provincial government OPG is required to pay them what is referenced as PILT (payment in lieu of taxes). The PILT jumped up 103.9% from 2019 when they were $190 million to $387 million in 2020. So, the province received $734 million in 2020 from us ratepayers which should help to pay a good chunk of the estimated cost of $6.5 billion of the “Ontario Electricity Rebate” that now appears on our monthly hydro bills and is allocated to taxpayers.
While previous Ontario governments have made the electricity ministry as complex as possible the current Ford led government has gone on to exacerbate its complexity rather than trying to undo the mess! It’s time they actually studied the sector and generate changes to simplify it and reduce the burden on ratepayers and taxpayers but perhaps that is too much to hope for!
*The 4.3 TWh of spilled hydro was equivalent to what almost 480,000 average households (over 10% of all Ontario households) consume annually.