The Ontario Energy Board (OEB) has published its decision on Ontario Power Generation's (OPG's) application regarding payments for regulated nuclear and hydropower output in 2017-2021. While approving budgets for the refurbishment and extended operation of reactors, the regulator called for OPG to cut costs.
Six of government-owned OPG's hydropower plants and three nuclear power plants - Pickering A and B, plus Darlington - are regulated.
OPG filed its application with the provincial energy regulator on 27 May 2016. It sought approval of CAD16.8 billion (USD13.4 billion) of revenue requirement over the period 2017 to 2021 for these nuclear facilities, and of an inflation and productivity based formula for the determination of payment amounts for the hydropower facilities over the same period. The utility calculated that the typical residential customer's bill would increase by CAD0.65 per month in each year in that period.
The OEB, which published its decision regarding OPG's application on 28 December, approved OPG's application relating to the refurbishment of the Darlington nuclear power plant. This includes the addition of CAD4.8 billion to the rate base in 2020 when the first of the four Candu units to be refurbished is expected to come back online. It also approved OPG's approval to spend CAD292 million in 2017-2021 to pursue technical assessments related to extending operation of the Pickering plant beyond 2020.
However, the OEB called for OPG to reduce its proposed operations, maintenance and administration budget for the nuclear business by CAD100 million per year. The regulator said this was mainly due to "the results of poor OPG performance against its comparators, and excessive compensation when compared to its benchmarked comparators and its own performance, and other excessive costs". The OEB said it found "OPG's overall pension and benefits costs are clearly excessive ... there is voluminous evidence demonstrating that the costs of these programmes are well above market".
It also called for a reduction of an estimated CAD33 million "relating to the rate base additions of two nuclear operations capital projects based on an analysis of forecast and actual costs. In addition, the OEB made "a requirement for higher productivity expectation underpinning the setting of nuclear payment amounts".
OPG estimates its reactors will generate a total of 188.3 TWh of electricity over the 2017-2021 period. The OEB approved this proposed production forecast.
The OEB approved the hydroelectric payment amount setting formula, with one exception on the calculation of the inflation factor.
While OPG had requested an effective date of 1 January for the new rates, the OEB approved an effective date of 1 June.
The OEB said the impact of its decision will not be immediately seen on customer bills due to OPG rate smoothing and the government's Fair Hydro Plan.
OPG said it is reviewing the decision in detail, and as directed by the OEB, OPG will develop a draft rate order to implement the decision by 17 January for public review and OEB approval. A final OEB decision on rates is expected early this year.
The Ontario Energy Board is an "independent regulatory body that makes decisions and provides advice to the provincial government in order to contribute to a sustainable, reliable energy sector and to help consumers get value from their natural gas and electricity services".
Researched and writtenby World Nuclear News