Lots more. A record, in fact.
Ontario Power Generation (OPG) released its 3rd Quarter report in mid-November, and it was impressive!
Revenue was up $156 million to $1,373 million (+12.8%) and after-tax income was 113% higher, increasing from $131 million to $279 million. For the first nine months of 2018, OPG reports RoE (return on equity) of 10.8% and will easily generate record after-tax profits for the full year of well over $1 billion. Nine-month profits sit at $948 million, up 84% or $433 million—that’s a record.
Revenue is also poised to crack the $5 billion-dollar level (nine-month revenue is $4,062 million) as it has many times in the past; however, after-tax profits have never been this high since the creation of OPG in 1999 when Ontario Hydro was broken up into several different entities.
What’s interesting about those record profits? OPG is record profits despite a substantial decline in generation.
Look at year-end December 31 2000: OPG generated and sold (into the grid) 139.8 TWh (terawatt hours) and earned revenue of $5,978 million for an after-tax profit of $605 million. What that means is, back in 2000, OPG’s approximate cost to generate 1 TWh was $42.7 million (4.3 cents/kWh). In 2018 (so far) the cost has jumped to $74.8 million (7.5 cents/kWh) for the 54.3 TWh delivered in the first 9 months.
The 54.3 TWh delivered so far in 2018 is down from the comparable 2017 period by 1.7 TWh or 3% and from 2000 (9 months) by 49.4 TWh* or 46%! Comparing the first nine months of 2018 to 2000, net income is up $405 million or 74.6%
With such significant drops in generation one would expect net income to drop so what happened?
Some five years ago (December 4, 2013) an article I wrote for Energy Probe was headed up: “OPG-whipping boy for the Ministry of Energy” and it outlined how the GEA (Green Energy Act) had a detrimental effect on OPG’s electricity generation and its revenue, which resulted in declining profits.
I noted how their many “unregulated hydro” assets received only the HOEP (hourly Ontario energy prices) which produced revenue of just over 2 cents/kWh, and how they had been instructed to build “Big Becky” (cost of $1.5 billion) and the Mattagami run-of-river project (cost of $2.6 billion). Falling out of the GEA also was the rise in prices caused by wind and solar generation with first-to-the-grid rights and had resulted in declines in consumption. That meant much of OPG’s power generation was called on less and less.
OPG were also instructed by the Liberal Minister of Energy to convert power plants such as Atikokan and Thunder Bay from coal to biomass and to close the remaining coal-fired plants, one of which required a multi-million dollar write-down for prior expenditures on “scrubbers” to eliminate emissions.
As all this was happening, over the subsequent years, OPG applied for rate increases such as being paid “regulated prices” for all of their hydro assets and for revenue when they were forced to spill hydro. Those were eventually approved along with other increases to cover pension contribution shortfalls, increases in operational management and administrative costs (OMA), and for refurbishment of some nuclear plants.
OPG’s capacity has fallen from 25,800 MW in 2000** to 16,218 MW today, yet in 2000 they generated electricity at a capacity level of almost 62%. So far in 2018, they are operating at a capacity level of just under 51%.
OPG power could have eliminated excessive costs for wind and solar
If OPG were granted the rights to operate at the 62% level of capacity as they did in 2000, they could have generated 65.8 TWh easily, replacing all the generation produced by industrial wind turbines and solar panels. That generation would have resulted in a cost of electricity of less than 7.5 cents/kWh and eliminated the excessive costs for wind and solar under those 20-year contracts!
Today, OPG seems to no longer look like the “whipping boy” but still produces power at prices well below the costs of contracted generation under the GEA and should earn over $1 billion for 2018!
*Enough to power all of Ontario’s 4.9 million households for a full year with over 5 TWh left over. **Staffing levels have dropped from 12,250 (including 650 under contract) in 2000 to 7,700 in 2018 meaning the ratio of employees to capacity has remained static at 2.1 employees per MW.