Ontario Hydro couldn’t recoup $410 million in penalty fees

Mac Trueman
New Brunswick Telegraph-Journal
March 4, 2002

Ontario Hydro had to kiss $410 million goodbye, thanks to a deal like the one that Atomic Energy of Canada Ltd. is offering New Brunswick.

Ontario’s former provincial power utility couldn’t get money back from Atomic Energy’s performance guarantee for two nuclear stations at Pickering, Ont. The guarantee is similar to one that Atomic Energy is offering New Brunswick for its proposed package for refurbishing the Point Lepreau nuclear generating station.

After it was unable for nearly nine years to recover the hundreds of millions that Atomic Energy owed to it, Ontario Hydro wrote the amount off in 1993, its annual report for that year shows.

Tom Adams, executive director of the watchdog group Energy Probe, says the Ontario arrangement was “virtually identical” to one that Canada’s nuclear generator builder has offered NB Power. “Its commitment has proven to be a promise that AECL is not prepared to live up to.”

Louise Duhamel, Atomic Energy’s director of communications, has refused to respond to Mr. Adams’ contention. “Basically, these are commercial activities, and we don’t comment on that,” she said Friday. “That would be my reply to you.”

Last week, New Brunswick Natural Resources Minister Jeannot Volpé lauded the plan by which NB Power and Atomic Energy would share the risk as well as the benefits over the 25-year life of the refurbished plant. Whenever the station generates less than 80 per cent of its annual capacity, Atomic Energy pays a penalty to NB Power. When it exceeds 80 per cent, the two corporations share the extra profit, Jim Hankinson, then NB Power president, explained in an interview last year.

But Mr. Adams warns it may be difficult to collect the penalty payment. The Ontario agreement pitted the performance of the first two Candu reactors built in the early 1970s at Pickering against that of two coal-fired generating stations in Lambton, Ont., says the hydro corporation’s 1993 report.

Ontario Hydro was to make monthly payments to Atomic Energy based on how much cheaper it was to generate power at the two nuclear stations. But when Lambton performed more cheaply, Atomic Energy was to make similar payments to the hydro company. By 1983, a plague of setbacks culminated in a five-year program to replace defective pressure tubes at the heart of the Pickering stations. Over the next five years, one of the two stations or the other was shut down.

Atomic Energy and the hydro company agreed to pay off the resulting tab by using the forward payments that would eventually come, once the two stations were restored to their former performance level. But that didn’t happen. The rebuilt plants were afflicted by new problems and mishaps that cut productivity and put the Canadian Nuclear Safety Commission on edge.

“Because of the interest on the debt, the debt was growing faster than it was being paid down,” Mr. Adams said. And that is what led Ontario Hydro to throw in the towel in 1993, he said.

Dr. Allan Kupcis, who served as president and CEO of Ontario Hydro in 1993, said Friday he doesn’t remember details of the write-off. He described the issue as “interesting, because it sounds like there are some parallels in the kind of proposal going forward in New Brunswick.” The New Brunswick Public Utilities Board will conduct a hearing in May into NB Power’s application to go ahead with the project.

 

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