The never-ending Thunder Bay power plant conversion

The ongoing saga of the conversion of Ontario Power Generation’s (OPG) Thunder Bay 300-MW coal plant took another twist on Budget Day, May 1, 2014, as Energy Minister Bob Chiarelli used his hammer to force a contract between the Ontario Power Authority and the OPG in respect to the allowable cost recoveries after conversion.  The Minister issued a “sole shareholder” directive to the OPG on budget day that set a limit on Annual Operating Costs, reducing them from the $40 million plus indexing (2013 dollars) he included in his earlier conversion directive of December 16, 2013.

Looking back to former Energy Minister Brad Duguid’s time in the Energy chair, he also issued a  directive to the OPA in August 2011 to convert Thunder Bay to gas, but negotiations between the OPG and the OPA failed to reach agreement, and that deal fell away by November 1, 2012.

Then on November 15, 2013 Minister Chiarelli made the initial announcement that Thunder Bay would be converted to “advanced biomass.”  That announcement was followed by the visit from Al Gore, the high priest of global warming, to heap praise on the government.  One month later, the December 16, 2013 directive was issued.  But that also didn’t lead to a contract agreement between the OPA and OPG as noted in OPG’s  press release (four months later) of April 15, 2014 disclosing: “OPG is currently seeking suppliers for the advanced biomass fuel and negotiating a power purchase agreement with the Ontario Power Authority.”

The OPG press release of April 15 was meant to add validity to the Energy Minister’s announcement on the same day which stated,  “The Thunder Bay Generating Station, Ontario’s last remaining coal-fired facility, has burned its last supply of coal” and further that “Converting the station to advanced biomass will retain 60 jobs in Thunder Bay.”   One has to assume the 60 jobs to be retained were included in the $40 million of “operating costs” per the original directive of December 16, 2013.

The May 1, 2014 directive is explicit in terms of the maximum recoverable operating costs by stating,  “Despite the December Direction, the Contract shall allow for the recovery of Annual Operating Costs which shall be deemed to be $30 million per year on average over the Contract term (for a total of $150 million) with no adjustment for inflation.”  Minister Chiarelli seemed intent on cleaning up this matter before he knew if the budget would pass, perhaps to ensure no “electricity” related matters were left blowing in the wind!

This Ministerial decision appears to be the opposite of the gas plant moves where all of Ontario’s ratepayers and taxpayers picked up the costs.  This time it will be Thunder Bay losing a $10-million annual benefit through lost jobs, and the rest of the province’s ratepayers and taxpayers benefiting from a $10-million savings on their electricity bills.   It’s not going to have quite the same effect as the cost of moving those gas plants though, unless the contract is extended for 110 years!

©Parker Gallant

May 6, 2014

The views expressed here are those of the author and do not necessarily represent Wind Concerns Ontario policy.

 

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