OPA differs with AG’s costing of Oakville power plant cancellation

Sticks with $310M, citing different assumptions and rates used for future costs, savings.

TORONTO: The Ontario Power Authority differs with Ontario’s Auditor General’s estimated $675 million to $810 million costs associated with the cancellation of the Oakville natural gas power plant and its relocation to Napanee.

The OPA said in a statement that in April it estimated the cost at $310 million based on what it describes as different assumptions and rates used to calculate future costs and savings. Auditor General (Bonnie Lysyk’s) approach lowers the savings associated with having the Napanee plant up and running later than when the Oakville plant would have been in service.

A short window to renegotiate a deal with TransCanada Energy complicated the process. OPA and Infrastructure Ontario had 12 days, versus the 12 to 18 months it usually takes to develop estimates.

“Nevertheless, when the relocation deal was announced, the Memorandum of Understanding (MOU) with TCE was clear that there would be costs in addition to the $40 million in sunk costs incurred in Oakville plant,” said the OPA.

It noted the $170 million in potential benefits to TCE as well as $162 million in savings noted by the Auditor General’s report related to starting contract payments later, which means TCE must wait longer to start receiving a return on its investment.

As for additional ratepayer costs for the Napanee plant resulting from its location being farther way from the gas storage hub near Sarnia, the OPA notes the Minister of Energy at the time (Brad Duguid) said the plant would not be relocated in the GTA.

The OPA, responding to Lysyk’s assertion that it did not take municipal opposition to the plant into account during the procurement process, said it didn’t want to affect the “integrity of the procurement process” by attempts to stop the plant midway through “a well-defined and public process,” believing that locating the power plant in the southwest GTA good for the system and ratepayers.

“Ultimately, it was the responsibility of the successful bidder to obtain all necessary permits and local approvals. As the Auditor General’s report states, the OPA provided the provincial government with ‘off ramps’ during the procurement and contracting process.

Auditor General Special Report – Oakville Power Plant Cancellation Costs

Estimated Oakville GS Relocation Costs ‐ 29 April 2013