Final Annual Report of Ontario Hydro
Total Page：16
File Type：pdf, Size：1020Kb
More than energy ONTARIO HYDRO FINAL ANNUAL REPORT JANUARY 1998 — MARCH 1999 C ORPORATE PROFILE OnOntariotario HyHydrodro cceasedeased operoperationsations on MarMarchch 331,1, 1999; itsits asassetssets and functions wwereere trtransferredansferred bbyy prprovincialovincial statutestatute toto ttwowo ccommercialommercial successorsuccessor corporations,corporations, OntarioOntario PPowerower GenGen-- ererationation Inc. and OntarioOntario HydroHydro ServicesServices CompanyCompany Inc., as wellwell as toto twotwo not-for-profitnot-for-profit agencies,agencies, the Inde-Inde- pendenpendentt ElectricitElectricityy MarkMarketet OperOperatorator and the ElectricalElectrical SafetySafety Authority.Authority. OnOntariotario HyHydro,dro, a sself-sustainingelf-sustaining ccorporationorporation without sharsharee ccapital,apital, wwasas crcreatedeated bbyy prprovincialovincial sstatutetatute and operoperatedated under the Power Corporation Act ooff OnOntario,tario, which has nonoww been sucsucceededceeded bbyy the Energy Competition Act, 1998. BBondsonds and notesnotes isissuedsued bbyy OnOntariotario HyHydrodro prior ttoo April 1, 19991999,, araree guarguaranteedanteed bbyy the ProvinceProvince ofof Ontario.Ontario. UnUntiltil the demerdemergerger ooff the ccompanyompany on April 1, 19991999,, OnOntariotario HyHydrodro sservederved 108 dirdirectect indusindustrialtrial ccustomers,ustomers, almoalmostst one million retailretail customerscustomers and 255255 municipmunicipalal utilitieutilities,s, which in tturnurn serveserve almoalmostst 3 million customers.customers. OntarioOntario PowerPower GenerGenerationation (OPG)(OPG) inheritinheriteded OnOntariotario HyHydro’sdro’s genergeneratingating porportfolio,tfolio, making it one ooff the largestlargest powerpower producersproducers in NorthNorth AmericaAmerica in termsterms ofof installedinstalled capacity.capacity. TheThe OPG systemsystem includesincludes 6969 hyhydroelectricdroelectric stations,stations, threethree nuclearnuclear sitessites and six operatingoperating fossil-fueledfossil-fueled stations.stations. TotalTotal installedinstalled systemsystem ccapacityapacity is apprapproximatelyoximately 31,00031,000 megawatts.megawatts. OntarioOntario HyHydro’sdro’s ttotalotal enerenergygy ssalesales in 19919988 wwereere almoalmostst 131399 tterawatt-hours.erawatt-hours. OnOntariotario HyHydrodro SServiceservices CCompanyompany ((OHSC),OHSC), the ootherther sucsuccessorcessor ccompany,ompany, is an enerenergy-services-basedgy-services-based trtransmissionansmission and distributiondistribution company.company. It ownsowns and maintainsmaintains 229,0009,000 kilomekilometrestres ooff trtransmissionansmission linelines,s, 114114,700,700 kilometreskilometres ofof disdistributiontribution lines,lines, 240240 kilometreskilometres ooff high-high-voltagevoltage undergroundunderground cable,cable, 256256 trans-trans- fformerormer stations,stations, 928928 distributiondistribution and regulatingregulating stationsstations and 2020 microwavemicrowave stations.stations. OHSCOHSC alsoalso reretainstains the rretailetail businebusinessss fformerlyormerly held byby OntarioOntario Hydro,Hydro, which servesserves overover 950,000950,000 customers,customers, and the trtransmissionansmission and generatinggenerating businessbusiness fforor 2233 rremoteemote ccommunitiesommunities in NorNorthernthern OnOntario.tario. LETTER T O THE MINISTER C ONTENTS ToTo the HonourHonourableable Jim WWilson,ilson, A MeMessagessage fromfrom the Chairman MinisterMinister ofof EnerEnergy,gy, SSciencecience and TTechnology:echnology: and the PresidentPresident 2 OntarioOntario HyHydro’sdro’s SSuccessorsuccessors 5 I am plepleasedased ttoo submit ttoo yyouou OnOntariotario HyHydro’sdro’s MoreMore ThanThan EnergyEnergy 6 reportreport ooff the ffinancialinancial popositionsition ooff the CCorporation,orporation, OperationsOperations RReporteport 12 as ooff MarMarchch 331,1, 19991999,, when operoperationsations ceased,ceased, in Financial SectionSection 29 accordanceaccordance with prprovincialovincial statute.statute. ThisThis 15-month15-month CorporateCorporate GovernanceGovernance PracticesPractices 69 reportreport alsoalso ccontainsontains disdiscussioncussion and analysisanalysis ofof BoardBoard ofof DirectorsDirectors 7 711 issuesissues and initiativesinitiatives fforor 1991998-998-99 and beyond.beyond. OrganizationOrganization and CorporateCorporate OfficersOfficers 72 WeWe wwantant ttoo thank yyourour sstafftaff at the MinisMinistrytry ofof EnerEnergy,gy, SSciencecience and TTechnologyechnology fforor their cooperationcooperation during this period ofof grgreateat change in Ontario’sOntario’s electricitelectricityy ssector.ector. WILLIAM A. FFARLINGERARLINGER CHAIRMAN FINANCIAL SUMMARY Ending on a High Note DESPITE THE MANY OPERATIONAL AND RESTRUCTURING CHALLENGES OF 1998 AND THE FIRST QUARTER OF 1999, ONTARIO HYDRO’S FINANCIAL HISTORY CONCLUDES ON A HIGH NOTE. REVENUES AND NET INCOME WERE STRONG AND SIX YEARS OF STABLE RATES HAVE SIGNIFICANTLY REDUCED ELECTRICITY COSTS AS A PROPORTION OF PROVINCIAL ECONOMIC ACTIVITY, BOOSTING ONTARIO’S ENERGY PRODUCTIVITY AND, AS A RESULT, ITS INDUSTRIAL COMPETITIVENESS. INCOME BEFORE CORPORATE TOTAL REVENUES WRITE-OFFS & DEFERRED DEBT OUTSTANDING PENSION ADJUSTMENT ($ millions) ($ millions) ($ millions) CUMULATIVE REDUCTION WEIGHTED AVERAGE INTEREST RATE IN REAL RATES SINCE 1993 ON LONG-TERM DEBT (per cent) (per cent) 1 FINAL ANNUAL REPORT A MESSAGE FROM THE CHAIRMAN AND THE PRESIDENT Reliability and Commitment During Challenges and Change WILLIAM FARLINGER RONALD OSBORNE Chairman President & CEO FROM WINTER ICE STORM TO SUMMER HEAT WAVE, FROM THE NEED TO RELIABLY MEET ONTARIO’S ELECTRICITY DEMAND TODAY TO THE MANDATE TO LOOK BEYOND ONTARIO TOMORROW, ONTARIO HYDRO’S FINAL 15 MONTHS AS AN OPERATING ENTITY WERE FILLED WITH GREAT CHALLENGES AND GREAT CHANGE. THROUGHOUT IT ALL, OUR EMPLOYEES DIS- PLAYED EQUAL MEASURES OF COOPERATION AND COMPETITIVENESS. THEY ARE ONTARIO HYDRO’S MOST VALUABLE LEGACY TO THE FUTURE. 2 ONTARIO HYDRO We are preparing for competition; our aim is to make our commercial successor companies successful in the new energy services marketplace. This is the Final Annual Report of Ontario The other is supply reliability, and here too Hydro, which ceased operations on March 31, Ontario Hydro’s generation staff, at our 1999; its assets and functions have been trans- nuclear, hydroelectric and fossil-fueled stations, ferred to successor companies and agencies. proved their resourcefulness and commitment For this reason, the 1998 Annual Report was to customers. delayed to include a report on the company’s To replace the output of reactors laid up final quarter. under the Nuclear Asset Optimization Program The 15 months since our last Annual (NAOP), the Fossil business boosted its produc- Report was a historic period for Ontario Hydro tion to its highest level in more than a decade, and the province’s electricity industry. It began and did so without exceeding provincial air with the most devastating ice storm on record emissions regulations. In Hydroelectric, pro- and the largest emergency power restoration duction was constrained by low water levels, effort ever undertaken by Ontario Hydro and but staff nonetheless extracted every possible its municipal utility allies in Eastern Ontario. kilowatt out of their facilities. Both businesses, Record summertime peak demand briefly along with Central Market Operations, helped approached the limits of our current in-service ensure that Ontario suffered no supply interrup- generating capacity. By the end of 1998, a new tions during the record spikes in summer peak provincial statute, the Energy Competition Act, demand that threatened shortages in other areas 1998, had rewritten the fundamental rules under of North America. which our industry has operated throughout The Nuclear business made substantial most of this century. And these are only the progress towards its multi-year goal of moving major highlights of the period. performance back to the top quartile of world Despite unprecedented demands on On- nuclear industry standards. When Ontario tario Hydro’s people, everything that happened Hydro’s generating portfolio was assumed by during this period strengthened our conviction Ontario Power Generation Inc. (OPG) on April that we will be prepared for competition and 1, 1999, nuclear production and capability fac- that both commercial successor companies will tors were up; forced outages were down; most be successful in the emerging North American performance targets were exceeded; and new energy services marketplace. agreements with our unions gave us more Our response to the ice storm showed how operational flexibility to speed the recovery to deep the reservoir of our organizational and excellence and help position the company to technical skills really is and how committed seize more quickly the growing opportunities our people are to the safety and well-being of in the U.S. power marketplace. our customers, regardless of the conditions that All of the above was accomplished, more- must be braved or workloads endured. They over, during the restructuring of the corporation proved once again that reliability begins with in line with the passage of the Energy Competi- people and that only people can sustain it. tion Act, 1998. This legislation marks Ontario But the wires networks are only one side – as the first jurisdiction in North America to plan the delivery side – of the reliability equation. to introduce electricity