Execs fired as reactor refit costs soar

Lee Greenberg
CanWest News Service, with files from news services
December 5, 2003

Toronto: Rebuilding four ageing reactors at the Pickering nuclear generating station will cost as much as $3-billion more than originally expected and take five years longer than planned, a report released yesterday states.

“This is an affront to the people of Ontario,” said Dwight Duncan, the provincial energy minister. “It’s a horrible mess.”

He accepted the resignations of three top executives from Ontario Power Generation (OPG), the public utility responsible for the Pickering A restart. The men will collect about $3-million in severance payouts, sources said.

The delays at Pickering left Ontario starved for electricity when consumption peaked, and exacerbated a week-long shortage after the big blackout in August.

Mr. Duncan said it was too early to speculate on the future of nuclear power in Ontario, which supplies about 35% to 40% of the province’s electricity, but industry observers said there is no point in trying to bring the Pickering reactor back on-line.

“The answer now is to terminate the project,” said Tom Adams, executive director of Energy Probe. “We need power plants that work and that cost a reasonable amount of money.”

Without Pickering A’s 2,060 megawatts of power, or about 7% of Ontario’s total capacity, the province has been importing electricity from Quebec and the United States at market rates that have exceeded its own generating costs by 500 times in hours of peak demand.

Premier Dalton McGuinty was quick to blame the previous Conservative government for the cost overruns.

“Not only were the Tories fiscally irresponsible and managerially incompetent, but they failed to exercise their responsibilities,” Mr. McGuinty said yesterday in Charlottetown, where he is meeting with other premiers. “They were negligent when it came to overseeing, on behalf of the people of Ontario, the affairs that were taking place at OPG.”

Mr. McGuinty conceded that purging the top OPG executives will cost millions.

“I don’t think there’s any doubts that there are some people in there with very expensive packages, but the fact of the matter is many have not been doing their job properly. The people of Ontario are paying the price and we’re going to have to move on this.”

The report, authored by former federal energy minister Jake Epp, highlights an “alarming” litany of mismanagement and waste at Pickering.

Mr. Epp blames OPG’s management and board, as well as the company’s sole shareholder – the Ontario government – for failing to take control of the project while costs spiralled.

“There are people in management who accepted sliding deadlines” and other unacceptable excuses, he said. “It is that type of culture, which does not take responsibility and is not accountable, which I believe needs to be changed.”

OPG chairman Bill Farlinger, a key advisor to former premier Mike Harris, and two other long-time Tories – chief executive Ron Osborne and chief operating officer Graham Brown – resigned from the multi-billion-dollar utility yesterday morning.

Mr. Duncan indicated he would have more to say on the Pickering A restart next week. Work on three of the four generators continues at a cost of $25-million a month.

In 1997, four units at Pickering A were taken off-line for safety reasons. Work to get them running again began in 1999.

The Pickering A restart project was originally approved by Ontario Hydro’s board in August, 1999. The estimated cost to refurbish one of the 30-year-old unit’s reactors, Unit 4, was $457-million.

That reactor came back into service on Sept. 23, 2003, more than two years behind schedule and, at $1.25-billion, nearly triple the cost estimates.

Since that time, cost estimates on the project were changed 11 times and completion dates changed 13 times.

Mr. Epp, who served as Conservative MP for the Manitoba riding of Provencher from 1972 to 1993, said bad decisions were endemic to the project.

“What we have concluded was that this project began under a set of flawed assumptions that underestimated the size and complexity of the project from the outset,” Mr. Epp said. “There were people then in charge who believed the restarts would be relatively simple . . . [that] this was a ‘low-hanging fruit.'”

Management deemed it unnecessary to prepare a report on the work and costs involved in refurbishing the nuclear reactor, as is common industry practice.

That lack of structure led to confusion among contractors, who were forced to prioritize projects without any knowledge of overall goals. The result was a “fundamentally flawed” project, the report says.

For example, final engineering packages for Unit 4 – precise instruction booklets given to mechanics and technicians who performed the job – were delivered over 24 months later than originally scheduled.

The construction workforce began to mobilize 18 months before their final work instructions were completed.

“There were often not enough tasks to keep workers fully occupied, and some work had to be redone based on subsequently completed engineering,” the report states. “Of the 43,000 tasks generated for Unit 4, 15,000 were eventually cancelled during replanning.”

A short-sighted decision to keep nuclear fuel in the reactors forced workers to wear cumbersome radiation protection suits, which slowed them considerably.

Workers were operating at about 20% efficiency, Mr. Epp said.

“Even such fundamental things as access to the plant, badges, clearances, authority to enter what area – that’s pretty straightforward stuff. And we found examples of where people stood in line for up to three hours to get into the plant. Then by the time they were suited, by the time they went into an area that was quite congested . . . somebody else from another company was already in the area. So the whole sequencing is put in jeopardy.”

NDP member Marilyn Churley called for a criminal investigation into the project to find out if “something’s gone very, very wrong here,” she said. “I don’t want these three stooges walking away with their big, fat bonuses and leaving a mess for the taxpayers to clean up.

“I want to find out what happened to those billions of dollars and I want to be darn sure that there was no misappropriation of funds.”

Former Tory energy minister John Baird, who commissioned the report, said his government should have kept a closer eye on the project.

“I think the whole issue of oversight could have been stronger, should have been stronger. And I accept that.”

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