Here's how the 2005 press release described the capacity payment mechanism of Ontario's natural gas contracts:
The contract winners are assured that they will have sufficient ongoing revenue to meet their fixed project costs, such as capital and financing, if they operate efficiently according to the pre-agreed standards. When market revenues exceed these fixed-cost requirements, the contracts stipulate that 95 per cent of the surplus will flow back to ratepayers. The proponents that submitted proposals under this RFP each bid a "Net Revenue Requirement" (NRR), which includes all fixed project costs. The weighted average NRR that was bid by the six selected proponents is about $7,900 per megawatt-month. This is the average amount required on a per-megawatt basis to cover the monthly fixed costs of these projects.
...The actual cost of power from the five generation facilities will vary with the price of natural gas, which fluctuates from season to season and year to year. However, using historical market data from the last two years as an example, the average price of power from the five generation projects would have been less than 7.8 cents per kilowatt-hour.
This provides much of the information to needed to calculate the levelized unit energy cost (LUEC):
(capacity * capacity factor * hours * Heat Rate * Gas Cost/MMBtu) + NRR / (capacity * capacity factor * hours)Bringing the figures up-to-date, the last average NRR provided for natural gas generators was $13,187/MWmonth, but gas prices have fallen considerably: at $5/MMBtu (higher than it's been for some time now), and the 45% capacity factor noted in 2005's price release, the LUEC today would be roughly the same as the 7.8 cents/kWh projected in 2005.