Ontario Power Generation report: good news and bad news

Ontario Power Generation (OPG) just released its annual report for the year ended December 31, 2016.

It’s a mix of good and bad news.

For example, gross revenue (net of fuel expenses) increased by $137 million and $34 million of that increase found its way to the bottom line, for a $436 million profit.

Generation from 2015 increased slightly from 78 terawatt hours (TWh) to 78.2 TWh, with nuclear generation increasing by 1.1 TWh and hydro decreasing by .9 TWh, which was further exacerbated (see next paragraph) by spillage due to surplus base-load conditions.

The bad news was that 4.7 TWh of hydro was “spilled” or wasted in 2016, up from 3.7 TWh in 2015. Those wasted 4.7 TWh of power could have supplied more than 500,000 (approximately 11% of all residential ratepayers) average Ontario homes with electricity for the full year.

The spillage by OPG didn’t affect their revenue, however, as they are paid for spillage at an average of about $44/MWh or $44 million/TWh. That means they received $207 million for wasted power and paid the Ontario Ministry of Finance the “water rental” fee for the spillage (although the latter wasn’t disclosed in the report).

Other “good/bad” news indicates OPG sold their Head Office on University Avenue in Toronto with closing scheduled for the second quarter of 2017. They expect the sale will generate an after-tax profit of $200 million.  The bad news is, OPG is obligated to turn over the profit to the Consolidated Revenue Fund. The land, building and maintenance costs fell to the ratepayers of Ontario to pay for via the electricity rates, yet the profit generated on its sale will be tossed into the bottomless pit of the Finance Ministry, instead of going towards reducing OPG’s costs of generation which could have benefited ratepayers.  That $200 million won’t even pay the interest on Ontario’s debt for a week!

SOLD! But the money won’t help you ..

The previous Energy Minister Bob Chiarelli on June 9, 2016 (four days before he was replaced by Glenn Thibeault) also issued a “declaration” to OPG instructing them: “to transfer, sell, dispose of or divest all of the Corporation’s interest in the Lakeview Site, comprised of the Municipal Park Lands and the Uplands”.  The Lakeview site is 67 acres running along the Lake Ontario shoreline and the Municipal Park Lands are the remaining 110 acres of the Lakeview Site.  Any excess revenues associated with the sale is to be transferred to the Government (Consolidated Revenue Fund), again rather than going to reduce electricity rates.

Ontario’s ratepayers absorbed the impairment costs of closing the coal plants in 2003, absorbing a “loss of $576 million as a result of the termination of cash flows from these stations after 2007.” The ratepayers of the province deserve to benefit from any recovery resulting from the write-off of the plant closings!

All this is more evidence of the “shell game” being perpetrated on Ontario ratepayers and taxpayers and the continuing legacy of the McGuinty/Wynne-led governments.

More to come …

Author: parkergallantenergyperspectivesblog

Retired international banker.

4 thoughts on “Ontario Power Generation report: good news and bad news”

  1. There’s that magic liberal math again hard at work eroding your future!!! Again…. who else could take a public company like Hydro One …. gut the assets ….. gut the cash accounts…. leave all the debt on the ratepayers backs… and list it on the stock exchange….. only the government can pull shat like that off… if you or I tried to sell a company with books like that I think we would be escorted out of the exchange office and charged with trying to defraud the public…. no … yes?????


  2. Here is one I’m trying to get my head around Parker:
    “In the fourth quarter of 2016, a comprehensive update of the estimate for OPG’s obligations for nuclear waste management and nuclear facilities decommissioning as at December 31, 2016 was finalized as part of the required process to update the reference plan under the Ontario Nuclear Funds Agreement. As at December 31, 2016, the update resulted in a decrease of approximately $1.6 billion in OPG’s obligation, with a corresponding decrease to the asset retirement costs capitalized as part of the carrying value of the nuclear generating stations to which the liabilities relate.”

    When these funds exceed the deemed liabilities, or meet other conditions of a Nuclear Funds agreement with the province, the excess is deemed to be due to the Province of Ontario.

    The “Nuclear Segregated Funds” figures displayed on page 39 indicate “Due to Province” rose to $3.415 billion in 2016, from $2.988 billion in 2015; I suspect this $427 million will be added to the $200 million from the sale of the Toronto Headquarters – and soon thereafter $350+ million for the Lakeview property.

    I suspect the “Due to Province” will be reduced by funding the subsidization or regulated rates – allowing that expense to avoid detection until after the next election, while selling off chunks of OPG will show in balancing the books prior to that election.

    Liked by 1 person

    1. While I agree with you that the province may require OPG to borrow funds to support the subsidization of the electricity bills (as long as the funds are in surplus) they (the province) will still be on the hook for any future shortfall on the nuclear decommissioning and spent fuel funds. OPG is obligated to set aside a set amount each year and what has happened is the funds investments in equity have performed well. I don’t believe the province can take those surplus funds until the final costs of decommissioning is known or the disposal of the spent fuels is known. In some earlier reports OPG noted monies were actually due from the province. You never know though with this government they might give it a try.


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