Ontario power bills likely to rise after OPG reaches settlement on rates

Ontario Power Generation has reached a settlement with ratepayer and industry groups concerning its proposed rates for the next five years, setting the stage for rising electricity bills in the province.

The agreement, published earlier this month on the Ontario Energy Board’s website, would see the province’s Crown utility earn significantly more for power generated by its nuclear plants between 2027 and 2031, although less than what OPG sought in its initial application filed in December.

The typical Ontarian’s monthly power bill, currently around $142, would increase by a total of nearly $13 during the five-year period as a result of the settlement, according to OPG’s estimate. (OPG had originally sought a total increase of $17.)

These higher rates reflect a series of large capital projects under way at OPG’s nuclear plants. Its application revealed that the newly refurbished Darlington nuclear station requires extensive additional maintenance in the next few years, expected to cost nearly $3-billion.

OPG is also building a small modular reactor at the same station that’s expected to enter service in 2030 – the first of four units with a combined price tag estimated at $20.9-billion. And in late September, OPG shut down four reactors at its Pickering station for a $26.8-billion overhaul.

Payments to OPG for power from its hydro dams would also rise under the settlement, albeit by far less than it wanted in its application. At roughly $47 a megawatt hour next year, its price would be less than one-quarter the cost of nuclear power. OPG is also refurbishing many of its hydro dams.

The proposed settlement must be approved by the Ontario Energy Board. Last week, the OEB scheduled an Oct. 30 meeting to hear presentations from the parties and said it plans to issue a written decision.

Power bills across the continent are rising rapidly after a prolonged period of relative stability. According to an analysis by The Globe and Mail of provincial electricity price indexes from Statistics Canada, so far this decade electricity costs have increased most rapidly in Alberta, where the cumulative increase has been nearly 39 per cent.

New Brunswick, Nova Scotia and Newfoundland have also experienced increases significantly above the national average, which was just over 20 per cent. Ontario’s increase during the period was only slightly above the national average.

Ontarian’s bills reflect the cost of generating and delivering the electricity they use. OPG’s nuclear and hydroelectric plants comprise a significant portion of total generating costs, but bills are also influenced by the cost of power from the Bruce nuclear station (operated by Bruce Power) and natural gas-fired plants, which generate a large and rising portion of the province’s electricity.

The negotiations concerning OPG’s power payments began early this summer. Participants included the Association of Major Power Consumers in Ontario, which represents large industrial users including auto plants and steel mills, the Building Owners and Managers Association Toronto, the Consumers Council of Canada, and the Vulnerable Energy Consumers Coalition, which represents residential customers it says “experience greater hardship” than most due to age, income or other factors.

AMPCO president Brad Duguid welcomed the agreement and said it would save his members money.

“However, we cannot lose sight of the bigger challenge ahead,” he said in a statement. “The unprecedented investments required to maintain and expand Ontario’s electricity infrastructure, while essential to ensuring a reliable supply of power, will place enormous additional pressure on electricity bills in the years ahead.”

Tom Ladanyi, a consultant who represented the non-governmental organization Energy Probe in the negotiations, said that while Ontario’s government promotes electrification, the coming rate increases will make it more difficult.

The government “currently subsidizes the cost of electricity by about $8-billion a year,” he added. “It may have to increase that subsidy to keep electricity costs from increasing faster than the cost of natural gas.”

The settlement, which runs more than 300 pages, includes a proposal to blunt impacts on ratepayers next year by deferring collection of $350-million of nuclear revenue for the utility to 2028. OPG also agreed to reduce its proposed nuclear revenue requirements by $1.8-billion over the period.

The parties adopted an all-or-nothing approach with the settlement, asking the regulator to accept or reject it outright rather than consider its many aspects individually.

One issue remained unresolved among the parties: OPG’s proposal to recover $170-million from ratepayers relating to the early return to service of refurbished units at the Darlington station. The parties requested a separate hearing to address that issue.