Across-the-border grid supplies power to US, profit to Ontario Hydro
The high tension power lines between the United States and Ontario are singing. For many US utilities the song is a welcome one. It means electricity is flowing from Ontario Hydro to these powershort US generating companies.
For example, when General Public Utilities lost its Three Mile Island nuclear power plant, it turned to provincially owned Ontario Hydro for help. In an ironic turn, the Canadian utility sold GPU electricity it had made by burning coal mined in Pennsylvania.
The export of electricity, as this story illustrates, has become an important business for Hydro, as it is known. Currently, about 11 percent, or 10.7 million megawatt hours of Hydro's electric capacity is exported. However, the utility, the largest in Canada and the second largest in North America, has both the capacity and the desire to sell more.
Hydro currently has one of the largest reserves of power in the world: some 46 percent of its current operating needs. It keeps 25 percent in reserve for itself in case of emergencies and sells 21 percent to the US on the basis that it can be interrupted. Normally, the Michigan Power Pool buys two- thirds of the electricity and the New York State Power Authority buys the rest.
Milan Nastich, president of Hydro, notes that the revenue from exports, which came to $155 million in 1979, helps pay for imported coal used to meet Ontario's own power needs, contributes to the Canadian balance of payments, and moderates power rates in Ontario. The utility estimates that its customers are paying 7 percent lower rates because of its export profits.
For the US utilities, the cost of the Ontario power is cheaper than running oil-fired power plants or building new coal-fired plants.
One impediment to selling even more electricity (Hydro has government permission to sell up to 15 billion killowatt hours annually) is a shortage of power lines connecting the US and Ontario. Hydro has received approval to build a new connection at Niagara Falls, but this line will carry only 500 megawatts of noninterruptible power. Any additional electricity exports will strain the lines between upstate New York and New York City.
The utility is also waiting for approval to lay an underwater cable to Pennsylvania to carry another 1,000 megawatts, destined for GPU. However, Mr. Nastich notes, "Serious transmission limitations would still exist in most Northeastern states."
One of the reasons that Hydro has so much power to sell is that demand for electricity has grown more slowly than it estimated when it started building up its power base in 1973. At that time, the utility figured its load would grow 7 percent annually. Now it has reduced its growth estimate to 3.4 percent annually.
The reduced consumption came in large part because of conservation by Canadians. William G. Morison, director of design and development, recalls how the utility advertised for customers to cut down on their Christmas lights as a conservation measure. Much to Hydro's surprise, its customers did and the utility saw its peak load period switch from December to February.
Hydro also has surplus power to sell because its nuclear power plants are so reliable. Currently, some 35 percent of its power comes from nuclear plants.
Its "Candu" reactors, points out Mr. Morison, in a comparison with 100 nuclear units around the world came out with the highest performance rating. Indeed, seven of the top eight reactors were Hydro Candu reactors.
A major advantage of the reactors, aside from their dependability, is that they use natural uranium mined in the province. US-built reactors use uranium that has been "enriched" by an expensive process to include a higher proportion of the fissionable isotope.
According to Mr. Morison, Hydro has signed contracts with Westinghouse and General Electric for uranium supplies that will keep the reactors supplied with fuel for the next 30 years. The contracts have also kept the uranium price down , giving Ontarians a measure of inflation-proofing.
Because of the success of its nuclear plants, Hydro tried to sell its technology abroad. However, the company has lost over $100 million on a contract to build a plant in Argentina because of design problems and Argentina's 100 percent inflation rate. And, Mr. Morison notes that reactor sales to Soviet bloc countries have been slow. So far, the utility has only sold four plants.
Hydro is likely to stick with its nuclear plants to generate power. Not only are the plants cleaner, but they are cheaper. In a comparison with its most efficient coal-fired plant, the company found it saved $125 million by using nuclear energy. This cost differential is expected to double in favor of nuclear over the next 10 years and then double again in the next decade.