The Ontario Power Generation (OPG) announced their financial results March 12, 2020 for the year ended December 31, 2019 and the media appears to have been so focused on Covid-19 to even notice. At first glance the $1,126 million of after-tax income reported appears to be less than 2018’s $1,195 million but the latter includes after-tax income of $205 million associated with the sale of the Lakeview Generating Station and unrelated to earnings from power generation.
Power generation was 77.8 TWh (terawatt hours) in 2019 versus 74 TWh in 2018 and gross revenue climbed by $485 million from $5,537 million to $6,022 million. Payments, in lieu of taxes, were $190 million versus $141 million in 2019. All-in, the province will be able to include $1,316 million as revenue. That, as Scott Luft points out, is a long way from covering the $5.5 billion in costs for the “Ontario Electricity Rebate”* (OER) for the upcoming March 31st year-end budget.
Noted in the financial report is the following: “The Enterprise Total Generating Cost (TGC) per megawatt hour (MWh) was $50.82 for 2019, compared to $53.24 for 2018.” While it appears the claim in this statement is the cost of generating a MWh decreased on a year over year basis, OPG do not define what is included in the “TGC” calculation. One should suspect a number of substantial costs, paid by ratepayers, are not included in the TGC!
This writer’s preference is to calculate the actual costs per MWh by simply dividing gross revenue by actual generation. If one does that calculation for 2019 for OPG; the per MWh cost is simply $6,022 million (total revenue) divided by 77.8 TWh (generation reported). Resulting from this calculation; the cost per MWh for 2019 was $77.40/MWh or 7.74 cents/kWh (kilowatt hour). Ratepayers in the province would be happy if that was the average of TOU (time-of-use) rates, but ratepayers know, other factors played a role in increasing costs. Wind and solar generation have driven prices up over the past 10 years by over 100% due to above market, contracted prices and the inability of wind and solar to generate power when it is actually needed causing us to export surplus generation for pennies on the dollar to our neighbours.
Looking back in OPG’s past is interesting. If one reviews their financial statements for 2009 (the year the GEA was passed) the same calculation as noted above indicates a per MWh cost of $60.97 (6.1 cent/kWh). That means we have seen an increase of $16.43 per MWh or 26.9% over the 10 years! Ontario’s inflation rate over those same 10 years was 17.97% so the cost of OPG’s generation over that time-frame was slightly above Ontario’s inflation rate.
While we can commend OPG for keeping their costs of generation at reasonable levels it is unclear why they suddenly went south of the border to acquire a string of hydro electric generating stations at a cost of C$1.12 billion. The acquisition of Cube Hydro (merged with Eagle Creek Renewable Energy) adds 627 MW of (mainly) hydro electric capacity but does absolutely nothing (on its surface) to benefit Ontario ratepayers. As a provincial crown corporation their focus should be to ensure the delivery of cheap reliable power to Ontario ratepayers!
We ratepayers will need to keep our eyes fixed on OPG to ensure they don’t loose sight of their mission which is noted on their website as “ Ontario Power Generation’s mission is to provide low-cost power in a safe, clean, reliable and sustainable manner for the benefit of our customers and shareholder.”
*The OER replaced the Wynne led governments “Fair Hydro Plan” subsidizing rates for residential customers.