The 2020 1st Quarter results by OPG were reported May 12, 2020 and showed their “gross margin” (revenue less fuel expense) increased $289 million or 22.6% over the comparable 2019 Quarter. Net profit was up $96 million (+45%) to $309 million but the MSM didn’t notice as they were no doubt busy reporting on the pandemic and ignoring any other news!
Net Generation was up 1.6 TWh and 1.3 TWh of the addition came from the nuclear sector (up from 9.8 TWh to 11.1 TWh) and was the primary reason for the increased revenue. The nuclear generation also included an increase per MWh delivered; jumping from 89.70/MWh to 94.96/MWh and added $58.3 million to revenue while fuel expenses increased by only $6 million. Gross revenue from nuclear generation increased by $242 million.
Hydro generation was flat in comparison with the prior year at 8.2 TWh and a revenue gain of $11 million was due to a slight increase in an OEB approved rate application. OPG also spilled 0.7 TWh in 2020 versus 0.3 TWh in 2019 adding about $20 million to revenue. One should correctly assume the spilling of hydro in both years was caused by SBG (surplus baseload generation) as industrial wind turbines or solar panels delivered power when it wasn’t needed! In the past OPG wasn’t paid for spilling hydro but when wind and solar were found to reduce OPG’s revenue because of wind and solar’s “first to the grid” rights, OPG complained. They got the McGuinty/Wynne led OLP and the OEB to agree and since 2011 Ontario ratepayers have paid for double and often triple the cost of power. The tripling comes from gas plants whose primary purpose is to provide peaking power to back-up to wind and solar when there is no wind or sunshine. Gas plants are paid to idle and OPG is paid to spill hydro!
Now if one does the simple math to determine the cost to ratepayers for a single kWh (kilowatt hour) in the 2020 first quarter delivered by OPG simply divide the “revenue” by the TWh delivered! For the first quarter of 2019 it is $1,426 million divided by 19.1 TWh indicating an average cost of $74.66/MWh or 7.5 cents/kWh. For 2020 revenue was $1,720 million so dividing that by 20.7 TWh produces an average cost of $82.81/MWh or 8.3 cents/kWh. That implies a year over year increase of $8.15/MWh which translates to a jump of 10.9 % for each and every kilowatt hour consumed. This additional cost comes in the middle of the Covid-19 pandemic so has serious implications on affordability as many from the private sector struggle with simply trying to economically survive. If it doesn’t hit the ratepayers it will surely hit the taxpayers as the Ford government has either decreed it will be deferred or taxpayers will pick up the costs.
If it is any consolation, OPG is 100% owned by the province (we are the shareholders) so the net profit of $309 million and the $87 million in taxes (actually they are “payments in lieu of taxes) contributes $396 million to the provincial treasury. On top of that the hydro “fuel costs” used to generate the 8.2 TWh of hydro was $67 million and will allow the provincial treasury to record revenue from OPG of $463 million for just one quarter. That money comes from the pockets of the ratepayers of the province and will clearly help to supplement the “Ontario Electricity Rebate” program.
As a ratepayer/taxpayer it is both annoying and expensive to realize we pay for unreliable wind and solar generation as well as spilled hydro and those idling gas plants needed to back-up them up!
The time has come to recognize the facts and cancel wind and solar contracts or only pay them when they deliver NEEDED power. That action would help keep OPG’s rates down at the same time.