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#4619930 - 12/31/17 04:49 PM Ontario Power Generation... Oh my
OVERKILL Offline


Registered: 04/28/08
Posts: 36441
Loc: Ontario, Canada
So there's a bit of a situation going on with OPG at the moment with respect to their finances. OPG is a Crown Corporation, meaning that it is owned and operated by the Province of Ontario; it's public.

Most are aware of the power Gong Show going on in Ontario. Recent developments had the government reduce retail rates by 25% for election reasons, deferring 30 billion in debt, which, instead of wearing on their budget, which would show a deficit, they've slapped on the books of OPG at higher interest rates so they can claim, falsely, that they've "Balanced the books".

Now, we own three Nuclear power plants in Ontario, two of which are operated by OPG. The third, the largest in the world, is Bruce Power's Bruce Nuclear, which is actually owned by OPG, but operated with all financial liabilities by Bruce Power, a private corporation.

Bruce and Darlington are both getting refurbished, which means critical component replacement in all reactors. The cost of this is supposed to be around 12-13 billion for both plants, despite Bruce having two more reactors being done than Darlington. Pickering, the 3rd and oldest plant, will not be refurbished and is set to commence shutdown in 2024.

Both Bruce Power and OPG are paid fixed rates for each kWh generated. OPG receives, presently, around $0.07/kWh, Bruce receives $0.067/kWh.

OPG recently went to the Ontario Energy Board with a petition for a MASSIVE rate increase. They were trying to raise $16.8 BILLION dollars within a 5-year window. They were shot down. This made some headlines. Why would OPG, well aware of the Hydro crisis in Ontario, petition for a massive rate increase in light of those circumstances?

Well, when the government puts billions of dollars on your books as debt, and then you are forced to pay for a $12 billion dollar refurbishment, things start to get a bit sketchy.

OPG's plan, it would appear, was to pay off, in its entirety, the Darlington refurbishment within a 5-year window, which at first scoff, seems completely nuts. Bruce is budgeting theirs over a few decades, which will result in a final per kWh rate of $0.077 after all refurbishments are completed. They will still make money at that rate.

But OPG is in a pickle that Bruce doesn't share.

Bruce produces, roughly, 48TWh a year of power over one site. OPG produces, roughly, 45TWh a year spread over two sites. However, one of those sites is going to start shutting down in 6 years, cutting their output almost in half. If you are paying for this with your per kWh rate (which they are) then all of a sudden your revenue stream being almost halved becomes a SERIOUS issue. It seems obvious that their plan was to use the revenue from Pickering via the rate increase, to cover the cost of the Darlington refurbishment as well as the shutdown costs for Pickering, which will stop paying for itself as soon as it stops making power. It's a logical move, but not one that would be tolerated by the market in Ontario at this time.

Now, the "massive" rate increase was an effective doubling of rates, putting OPG Nuclear at roughly $0.14/kWh. This is actually cheaper than what we pay wind, gas and solar, however at 30% of our generating mix, this increase would have had an immediate impact on residential rates, wiping out the effects of the "Fair Hydro Plan" deferment scheme which I'm sure is part of the reason they pursued this in the first place.

Since the increase was denied, I'm not sure what OPG's options look like now? shrug the government has put them in a VERY bad spot here and they will be absolutely crucified by the public, who has ZERO tolerance for any rate increases at this juncture, if they continue to go after trying to cover their costs, which most are oblivious to.

I would not want to be a member of the OPG board of directors right now.... :shudder:
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#4619941 - 12/31/17 05:08 PM Re: Ontario Power Generation... Oh my [Re: OVERKILL]
car51 Offline


Registered: 03/12/15
Posts: 10256
Loc: Southwest PA
Sounds like a very well constructed mess.
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#4619949 - 12/31/17 05:16 PM Re: Ontario Power Generation... Oh my [Re: OVERKILL]
irv Offline


Registered: 10/08/06
Posts: 1059
Loc: Oshawa, Ont. Canada
It's a bloody mess, and we have McGuinty, Wynne and the rest of the Liberal incompetence to thank for all of it. mad

Sir Adam Beck, the founder of Ontario Hydro, while laying on his deathbed, stated, " I wish I could have forged a band of Iron around the Hydro to prevent its destruction by Politicians"

Currently, the Auditor General is at the Darlington GS looking into this refurb boondoggle, and not that it will be of any surprise to anyone, it won't be pretty when she is done, that is for sure!
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#4619956 - 12/31/17 05:22 PM Re: Ontario Power Generation... Oh my [Re: irv]
OVERKILL Offline


Registered: 04/28/08
Posts: 36441
Loc: Ontario, Canada
Originally Posted By: irv
It's a bloody mess, and we have McGuinty, Wynne and the rest of the Liberal incompetence to thank for all of it. mad

Sir Adam Beck, the founder of Ontario Hydro, while laying on his deathbed, stated, " I wish I could have forged a band of Iron around the Hydro to prevent its destruction by Politicians"

Currently, the Auditor General is at the Darlington GS looking into this refurb boondoggle, and not that it will be of any surprise to anyone, it won't be pretty when she is done, that is for sure!


Yes, I think the issue with the Darlington refurbishment is that since it is public, contractors are a whole lot more liberal with their pricing than were it for a private entity. Bruce has already successfully refurbished two reactors and knows exactly what that looks like cost-wise. They also stuck VERY close to budget. The fact that their price for a 6-unit refurb is the same as the 4-unit refurb for Darlington speaks volumes.

I love that OPG is publicly owned, but if that's going to result in it continually being exploited by private contractors then it's not going to stay that way frown
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#4619960 - 12/31/17 05:25 PM Re: Ontario Power Generation... Oh my [Re: OVERKILL]
Bluestream Offline


Registered: 09/13/03
Posts: 5758
Loc: Waterloo, ON
Sadly Ontario Hydro in the 60 and 70's was a world leader in power generation. We had among the cheapest power in the world, and it attracted many large industries
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#4619962 - 12/31/17 05:26 PM Re: Ontario Power Generation... Oh my [Re: OVERKILL]
wwillson Online   content

Administrator


Registered: 08/20/03
Posts: 2161
Loc: Naperville, IL
Interesting and informative, but because of the politics, we'll lock this one now.

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