TORONTO - Ontario Power Generation Inc. has confirmed that the anticipated cost of its massive Niagara tunnel project has ballooned to $1.6 billion from $985 million.

The provincial Crown utility also has pushed back the expected completion date to December 2013, from the original target of June 2010.

The disclosure came Friday as OPG reported it browned out to a loss of $9 million in the first quarter, down from year-earlier net income of $162 million.

It cited "a reduction in electricity generation, higher fuel prices, and an increase in expenses related to planned maintenance outages at our nuclear generating stations."

OPG's generation in the January-March period was down 13 per cent at 25.6 terawatt-hours (trillion watt-hours).

Nuclear production faded by one TWh to 12.3 TWh, "primarily as a result of planned maintenance outages," OPG stated.

Hydroelectric production was flat at 9.0 TWh.

Output from fossil-fuel stations sagged to 4.3 TWh, compared with 7.0 TWh a year ago, "primarily due to lower electricity demand as a result of Ontario's contracting economy, an increase in electricity production from other Ontario generators, and a significant reduction in natural gas prices compared to the cost of coal, which resulted in a displacement of coal-fired production."

The unfavourable impact of lower fossil and nuclear generation and higher fuel costs was partly offset by higher electricity rates.

At the Niagara hydroelectric expansion project, the boring machine had advanced 3,794 metres at March 31 -- 37 per cent of the tunnel length. As a result of the geological complexities of the area, the machine "is now operating on a revised alignment that will minimize remaining excavation in the Queenston shale formation," OPG stated.

The utility and the contractor are renegotiating the contract to confirm the revised target cost and schedule.

Along with the quarterly results, OPG said it expects a preferred vendor will be chosen late this spring for a new two-unit nuclear plant at the Darlington site, 70 kilometres east of Toronto, already home to a four-unit Candu complex. OPG has started work on an environmental assessment and licensing.

The utility said Darlington operated at 99.9 per cent of capacity in the first quarter, but the Pickering A plant was at 42.4 per cent, "primarily due to planned outage maintenance work."

Pickering B worked at 84.9 per cent of capacity, down "marginally" from the first quarter of 2008.