Ontario Power Generation has reached a settlement with ratepayer and industry groups over its proposed electricity rates for the next five years, a deal that sets the stage for rising power bills across the province.
The agreement, posted earlier this month on the Ontario Energy Board’s website, would allow the provincial Crown utility to earn significantly more for power generated by its nuclear plants between 2027 and 2031, though less than it had originally sought when it filed its application in December.
According to OPG’s estimate, the typical Ontarian’s monthly power bill, currently around $142, would rise by a total of nearly $13 over the five-year period under the settlement. OPG had initially sought a total increase of $17.
Nuclear Projects Driving Costs
The higher rates stem from a series of large capital projects underway at OPG’s nuclear facilities. The utility’s application showed that the newly refurbished Darlington nuclear station needs extensive additional maintenance in the coming years, expected to cost nearly $3-billion.
OPG is also building a small modular reactor at Darlington, expected to enter service in 2030, the first of four units with a combined estimated price tag of $20.9-billion. In late September, OPG shut down four reactors at its Pickering station for a $26.8-billion overhaul.
Payments to OPG for hydroelectric power would also increase under the settlement, though by far less than the utility had requested. At roughly $47 a megawatt hour next year, hydro power would cost less than one-quarter as much as nuclear power. OPG is also refurbishing a number of its hydro dams.
Regulatory Review Ahead
The proposed settlement still requires approval from the Ontario Energy Board, which has scheduled a meeting for Oct. 30 to hear presentations from the parties involved before issuing a written decision.
The settlement, which runs more than 300 pages, includes a measure meant to soften the impact on ratepayers next year by deferring collection of $350-million in nuclear revenue to 2028. OPG also agreed to cut its proposed nuclear revenue requirements by $1.8-billion over the period.
The parties involved proposed that the regulator accept or reject the settlement in its entirety rather than evaluate individual components separately. One matter remains unresolved: OPG’s proposal to recover $170-million from ratepayers tied to the early return to service of refurbished Darlington units, which the parties have asked to address in a separate hearing.
Wider Price Pressures
Electricity prices are rising across the continent after a long period of relative stability. A Globe and Mail analysis of provincial electricity price indexes from Statistics Canada found that Alberta has seen the steepest increase this decade, with a cumulative rise of nearly 39 per cent. New Brunswick, Nova Scotia and Newfoundland have also seen increases well above the national average of just over 20 per cent, while Ontario’s increase has been only slightly above that average.
Ontario bills reflect the cost of both generating and delivering electricity. While OPG’s nuclear and hydroelectric plants account for a significant share of generating costs, bills are also shaped by power from the Bruce nuclear station, operated by Bruce Power, and by natural gas-fired plants, which supply a large and growing share of the province’s electricity.
Negotiations over OPG’s power payments began early this summer with participation from the Association of Major Power Consumers in Ontario (AMPCO), which represents large industrial users such as 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 face greater hardship due to age, income or other factors.
AMPCO president Brad Duguid said the agreement would save his members money but cautioned that broader pressures remain. “We cannot lose sight of the bigger challenge ahead,” he said in a statement, adding that the scale of investment required to maintain and expand Ontario’s electricity infrastructure “will place enormous additional pressure on electricity bills in the years ahead.”
Tom Ladanyi, a consultant who represented Energy Probe in the negotiations, said the coming rate increases could complicate the provincial government’s push toward electrification. He noted that the government “currently subsidizes the cost of electricity by about $8-billion a year” and said it “may have to increase that subsidy to keep electricity costs from increasing faster than the cost of natural gas.”
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