August 21, 2004
More than double earlier estimate
Reactors worse off than expected
Ontario Power Generation Inc. will have to spend up to $250 million, more than double earlier estimate, to install backup generators at its limping Pickering B nuclear generating station.
Inspections have also shown the station’s reactors are in worse condition than previously thought, forcing the company to do more inspections and to advance and lengthen planned shutdowns.
The news comes in OPG’s second-quarter results. They show the company lost $41 million in the three months ended June 30, compared with a profit of $8 million a year earlier. Revenue was $1.349 billion, down from $1.467 billion a year earlier.
OPG’s earnings are dampened by the fact it must rebate a portion of its revenue to customers because of its market dominance. The rebate totalled $208 million in the latest quarter, compared with $221 million a year earlier.
The rebate curbs power prices, but also cuts OPG profits that are supposed to help retire the unfunded debt of $20.2 billion left to taxpayers by the former Ontario Hydro. Far from being paid off, that debt continues to increase.
On the bright side, provincially owned OPG benefited during the latest quarter from a 27 per cent increase in output from its low-cost hydro-electric generators compared to last year. Higher output from three nuclear units that have returned to service in the past year, one operated by OPG and two by Bruce Power, also meant that OPG had less output from its high-cost fossil fuel units. Fossil fuel output was cut almost in half.
While production costs fell, the benefit was offset by higher pension costs and higher depreciation related to the planned 2007 shutdown of all OPG’s coal-fired generating stations.
The second quarter had yet more detailed news of problems at the Pickering B nuclear station, whose performance has been overshadowed in recent years by the huge cost overruns of restarting the mothballed Pickering A plant.
Last year’s blackout showed that Pickering B had inadequate backup power supply to run critical safety, communications and operating equipment.
Three months ago, OPG estimated it would have to spend $100 million to install better backup generators.
Now, the company says it will have to spend $40 to $50 million immediately to provide temporary backup “while a permanent solution is investigated.” That will take several years and cost another $100 to $200 million, for a total of up to $250 million.
OPG spokesperson John Earl said technical staff need to study the size, type and configuration of backup units.
In addition, OPG says inspections have shown that Pickering B’s fuel channels, which contain uranium bundles in the reactor core, are in worse shape than previously thought. That will trigger more inspections, lengthening planned shutdowns.
As well, maintenance work planned for 2007 to 2008 and costing $25 million to $50 million will now have to be done from this year through 2006.
That will further drag down Pickering B’s performance record. The station ran at 62.8 per cent capability in the past three months, little changed from 60.5 per cent a year earlier. It has run at 67.2 per cent over the past six months, compared with 62.2 per cent a year earlier.
(The newer Darlington nuclear station, by comparison, has run at better than 80 per cent for the same period.)
Longer shutdowns at Pickering B will put more pressure on Ontario’s over-all electricity supply. An industry task force warned in January that Ontario could have “insufficient power to meet its peak requirements” by 2006.
The news should raise some hard questions about the future of Pickering B, said Tom Adams, executive director of Energy Probe.
“The writing’s on the wall for a multibillion-dollar rehabilitation decision on Pickering B coming up forthwith,” he said.
The station reaches the end of its normal operating life by about 2009, at which point it will require a major overhaul.
The latest news raises questions about whether it’s worth continuing to spend money on the plant, especially if more unexpected problems crop up, Adams said.