Lepreau refurbishment review falls short

Tom Adams
New Brunswick Telegraph Journal
April 23, 2004

Refurbishing NB Power’s troubled Point Lepreau nuclear power station will cost New Brunswickers $3,373 per household if the assurances issued last week by the former chairman of the now bankrupt nuclear company British Energy hold true. If Ontario’s recent nuclear refurbishment experience is repeated, the cost could exceed $9,000 per household.

The “Point Lepreau Refurbishment Review” authored by Dr. Robin Jeffrey, contains serious information gaps and analytical errors.

The review ignores the high costs NB Power carries to maintain back-up capacity for Point Lepreau when it is running in order to comply with North America’s power reliability rules. No other utility on the North American grid is as reliant on a single station as is New Brunswick, an overall system design flaw making back-up expensive. Replacement generating capacity for Point Lepreau, fueled by gas or waste fuels, could be built in small increments at many sites around the province, including industrial facilities that can use the waste heat generated. Diversifying the sources of supply would dramatically cut back-up costs.

Bruce Power, an Ontario Candu operating company established under Dr. Jeffrey’s leadership, has also struggled with refurbishment overruns. Applying the type of project management proposed for Point Lepreau, Bruce Power initiated a limited refurbishment of two old reactors in 2002. That project was completed earlier this year, six months behind schedule and over twice the original budget.

The review ignores the history of Point Lepreau’s ballooning refurbishment estimates. Originally estimated at $500 million, the estimate climbed to $745 million in 2001, $845 million in 2002 when the project was reviewed by the Public Utilities Board, and $910 million in 2003 before arriving at the new estimate of $1.075 billion, excluding the cost of replacement power during the refurbishment. Since the review fails to address the reasons for this cost explosion, the public should be leery of its conclusion that the current estimate is “realistic”.

As revealed by the Saint John Telegraph Journal article “N.B.’s electricity rates must go up,” by Tom Adams, published on March 6, 2002, NB Power has been under-reporting the decommissioning costs for Point Lepreau since 1999. The shortfall is currently $85 million. Instead of treating this liability as it should – a sunk cost to be recovered from consumers and/or taxpayers come what may – the review perversely treats this $85 million as a penalty against any replacement for Point Lepreau. NB Power’s nuclear decommissioning shortfall is not a cost of building alternative generation but yet another example of its management’s irresponsibility.

The review concludes that AECL is the right contractor for the refurbishment job, in part because of AECL’s “project management expertise.” The review ignores AECL’s project management track record from its most recent major reactor project in Canada, the construction of two isotope production reactors at Chalk River in Ontario. That project is several years behind schedule. AECL’s partner on the project, MDS Nordion, has seen its projected costs more than double from $140 million to $304 million. AECL won’t disclose its share of the cost overrun. The reactors have been beset by two major safety problem, raising serious concerns from the federal nuclear safety regulator.

The review supports AECL solely on the basis of the recently completed Candu construction project in China, far beyond the oversight of Canada’s tough safety regulations.

In guessing at the future production of the refurbished reactor, again the review omits almost all of the relevant Canadian experience. Taken as a group, Candu reactors in Canada have declined in performance with age. Rather than looking to the Canadian nuclear performance trend, the report relies on the U.S. nuclear production trend without noting that U.S. reactors use different designs.

Candus that have undergone the same retubing refurbishment planned for Point Lepreau are particularly poor producers. The four retubed reactors – Pickering A – performed so badly after being retubed in the late 1980s that they were shut down in 1997, less than 10 years into expected lives of 25 years.

The review’s worst shortcoming is its recommended strategy of inviting competing bids for electricity to replace Point Lepreau’s output and then using that information to negotiate better terms with AECL. Credible suppliers won’t bring in the best bids without assurances that they have a fair chance of winning the business, the playing field is level, and their bid will not be used simply as a negotiating ploy.

In 2002, the Public Utilities Board considered refurbishing of the troubled Point Lepreau nuclear station. The Board’s process allowed independent evidence to be presented and permitted all interested parties to cross-examine witnesses presenting evidence under oath. The Public Utilities Board rejected the refurbishment proposal as too risky.

Now, less than two years later, the estimated refurbishment cost has ballooned by another 27%. Hindsight has proven the Board’s wisdom.

Every household in New Brunswick has at least 3,372 reasons to thank the Public Utilities Board and to stick with its verdict.

Tom Adams is the Executive Director of Energy Probe a national consumer and environmental watchdog and the only expert witness to testify before the Public Utilities Board in 2002 against NB Power’s application to refurbish Point Lepreau.


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