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Brookfield's power supply running low Add to ...

Brookfield Power has had a dismal 2010 as near-record-low precipitation last winter and spring in Ontario and Quebec has deprived it of the water levels needed to turn its turbines.

The winter's sparse snowfall and the dry spring are posing challenges for hydroelectricity producers across Central Canada, drawing down Hydro-Québec's massive reservoirs, reducing Ontario Power Generation's generation in the eastern and northern parts of the province, and hammering production and financial results of investor-owned power companies.

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The Brookfield fund - a subsidiary of Brookfield Renewable Power Inc. - operates 18 hydro stations in Northern Ontario, with capacity of 868 megawatts, and six in Quebec totalling 289 megawatts. The two provinces represent 70 per cent of its production capacity, with the rest in British Columbia and New England.

In the second quarter, its hydroelectric production in Ontario and Quebec dropped by 40 to 50 per cent from the same period last year, not including power from assets acquired last August. As a result, profit fell to $19.2-million in the quarter from $33.5-million in the corresponding period last year, and per unit income was down to 18 cents from 62 cents.

"You had a rare combination of a very low snow pack heading into the spring and very little precipitation in April, May and June," Ben Vaughn, the parent company's chief operating officer, said in an interview Thursday.

"We depend on the spring runoff to fill the reservoirs, so there was just very little volume in the reservoirs."



Mr. Vaughn said hydrology tends to fluctuate significantly - precipitation in Central Canada was slightly above average in 2008 and 2009 - but the 2010 levels were extreme. Still, he said the company is in a strong financial position to weather the drought, and is maintaining its distributions to unit holders in anticipation of a return to more normal precipitation levels.

The dry conditions provide a warning for the Ontario government, which has ambitious plans to develop hydro facilities to power the province.

Hydroelectricity production can be highly variable over the years, while wind energy can be even more unpredictable. As it expands its reliance on those sources, the province will require expensive backups plans to provide power when the wind doesn't blow or the water doesn't flow.

The Ontario Power Authority has estimated that the province could draw as much as 3,000 megawatts of new capacity - more than is generated by Niagara Falls - from its rivers, primarily in the north.

In April, the OPA awarded 46 long-term contracts to hydro producers for 192 megawatts of power, and companies are lined up for more.

Other provinces, notably British Columbia, are also looking aggressively develop hydro potential, especially in remote areas with run-of-river technology that does not feature dams, which entail less of an environmental impact but also have no storage capacity to offset variable precipitation patterns.

Ontario's Independent Electricity System Operator (IESO) - which operates the provincial grid - calculates that water-generated power is down 20 per cent in the year to date from average levels.

Bill McKinley, a spokesman for provincially owned Ontario Power Generation, said it has been able to maintain generation levels at Niagara Falls and its Saunders facility on the St. Lawrence River. But output at its smaller plants in western and northern Ontario is down 35 per cent.

Hydro-Québec spokeswoman, Marie-Elaine Deveault said the giant utility has seen water levels at its reservoirs drop, but it has not had to cut power generation.

While hydro production is off in Ontario, summer power demand has risen to its highest levels in three years due to hot weather. That increase in demand, coupled with the drop in output from hydro facilities, has led to a sharp increase in the use of natural-gas-fired generation, which is up 30 per cent so far this year.

Indeed, the bane of hydro producers has been a boon to the natural gas industry, which has seen demand from utilities rise this summer as a result of low water levels and hot weather across eastern North America. Energy economist Peter Tertzakian, of Calgary-based ARC Financial Inc. said the higher power demand has prevented a price collapse in natural gas as the producers have brought on stream massive new supplies of shale gas despite recession-level demand.

 

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