Revenue from the sale of power produced at the Conestogo Dam is projected to average $250,000 per year over the life of a new 20-year contract signed with the Ontario Power Authority (OPA).
The new contract provides an initial purchase price .0714 cents per kilowatt hour, states a report prepared by GRCA director of engineering Dwight Boyd, and received as information at the authority’s annual general meeting held on Feb. 28. The price is indexed annually based on the Consumer Price Index (CPI).
In his report, Boyd notes the Ontario Power Authority’s (OPA) Hydroelectric Contract Initiative (HCI) price of .0714 cents is more than three times the 2012 average spot market price of .0228 cents per kilowatt hour.
A similar contract is in place for sale of hydro electricity from the Shand Dam generating station.
Staff were authorized, through board resolution, to pursue power purchase agreements for Shand and Conestogo Dam generating stations. The new purchase contract is effective Jan. 1.
In December 2009 the OPA released details of the HCI program. The initiative allows existing hydro producers and suppliers to enter into 20-year agreements with OPA for the sale of electricity. The contract price is established at a rate of 6.9 cents per kilowatt-hour in the base year of 2009. Each year, this price is adjusted by the value of the CPI.
A 20-year HCI contract was executed for Shand Dam in September of 2010.
GRCA has been producing hydro power at Conestogo Dam since 1991. This hydro plant failed in the summer of 2004, and a new refurbished plant was brought back into production in September of 2006. Power from this site was sold to Ontario Electric Finance Corporation, (OEFC) under a 20-year contract that expired on Sept. 25, 2011. Since the expiry of the OEFC contract, power produced at Conestogo Dam has been sold on the spot market at the spot market price.
To qualify to enter into a new contract with OPA for sale of hydro from Conestogo Dam, hydro metering upgrades were required. The upgrades were required to bring the metering at Conestogo Dam up to current standards and satisfy obligations from the original 20-year contract with OEFC.
“By establishing a firm price for hydro produced over the next 20 years, the HCI contract provides for a stable and predictable revenue source, and removes the uncertainty related to selling hydro at spot market prices,” the report states.
While revenue is expected to average $250,000 per year, the report notes, actual revenue varies from year to year based on discharge from the dam. Revenue is higher in wet years and lower in dry years due to water availability.
