- Ontario Power earnings melt down

The Aug. 14 blackout, lower electricity prices and poor performance by the Pickering B nuclear station have combined to wallop profits for Ontario Power Generation Inc. for the three months ended Sept. 30.

The company says net profit plunged to $37 million for the quarter, down from $215 million a year earlier. The Ontario government is the sole shareholder.

The blackout alone accounted for $40 million to $50 million of the $178 million plunge in profits, OPG said in a release recently.

The blackout and subsequent power emergency drastically reduced output for eight days, and saddled OPG with higher costs as it struggled to bring its generators back to service. Its nuclear generators were a special problem, as seven of its eight operating reactors had to be shut down, then slowly restarted one by one.

But OPG faced other challenges in the period.

The generally cool weather over the summer reduced power consumption during the non-blackout period, compared with the searing heat of the summer before. The lower demand meant OPG and other generators got lower prices.

The company said the average price it received for spot-market sales in the latest quarter was 4.1 cents, compared with 5.2 cents a year earlier. The price takes into account the rebate OPG must pay to customers to offset its market power.

OPG said it also had trouble with its Pickering B nuclear station, which had lower output due to both planned maintenance outages and forced outages caused by unexpected operating problems. The company gave no details.

When nuclear production slumped, the company had to fill the gap by cranking up its oil, coal and gas-fired generating plants, all of which faced higher fuel prices this year.

Hydro generating stations couldn't pick up the slack because of low water levels resulting from a modest spring run-off.

Revenue for the quarter dropped to $1.224 billion from $1.612 billion a year earlier.

The poor third quarter dims what had been an improved year for OPG. For the first nine months of its financial year, the company's profits rose to $125 million, compared with $61 million a year earlier. Normally the summer season would help, not hinder, earnings.

The poor profits at OPG are bad news for the provincial government, which relies in part on dividends from OPG to pay down the unfunded, or stranded, debt left by the old Ontario Hydro.

That debt stood at $19.1 billion in 1999, but has risen steadily and stood at $20.1 billion in March, 2002.

Financial statements revealing the size of the debt for the latest year, which ended March 31, 2003, have not yet been published.