November 15, 2004
Toronto: The perils of Pickering returned to haunt the Ontario government Monday as Ontario Power Generation warned that its efforts to restore another of the problem-prone nuclear plant’s reactors could end up costing $1 billion.
When it was announced in July, the project to restart the mothballed Unit 1 reactor was supposed to cost $900 million, a budget that included a $65-million contingency fund that officials now say is already down to $20 million.
The cost of the restart now has the “potential” to climb by between $75 million to $100 million, and may not happen until next October, a month behind schedule, OPG chairman Jake Epp warned in a conference call Monday.
Difficulties getting the right tradespeople on the job site during the busy summer construction season helped delay the project and fueled increases in certain costs, such as overtime, Epp said.
As of the end of September, the provincially-owned power generator – already stung by the delays and massive cost overruns that plagued the botched refit of Unit 4 – had spent $526 million on the mothballed Unit 1.
Energy Minister Dwight Duncan – who pledged in July that Unit 1 would not repeat mistakes made on Unit 4 – said the latest problems are no reason to pull the plug on a complex project that’s more than half done.
“I continue to be concerned about it,” Duncan acknowledged in a news conference Monday.
“We’ll continue to report milestones, both in terms of the timelines and in terms of the costs and continue to keep on top of it as best we can.”
Duncan later told the legislature that the Unit 1 refit was a “high-risk” project that was necessary to ensure the stability of the province’s electricity supply.
In July, when the province gave OPG the go-ahead, Duncan promised to be “vigilant” and to ensure “rigorous public scrutiny” would ensure the project stayed on schedule and on budget.
On Monday, however, Duncan would not provide any assurance that costs wouldn’t continue to increase.
The Ontario government is “throwing money down a hole,” said New Democrat Leader Howard Hampton, who cited studies that show refits often only squeeze an extra 10 to 12 years out of an aging reactor.
“When you look at it from that perspective, these are incredibly costly refurbishments,” Hampton said. “This is just pouring more good money after bad.”
Duncan said he wasn’t about to walk away from the money the province has invested so far to say nothing of the additional 500 megawatts of electricity Unit 1 will eventually be called upon to generate.
Late last year, the province fired OPG’s top three executives for botching the restoration of Unit 4, which in the end cost $1.25 billion to fix, almost three times the original $457-million projection.
Acting chief executive Richard Dicerni emphasized that the project is being managed well and watched closely – two things that were absent in the case of Unit 4.
“We know where the project is at, we know what caused the slippage in terms of schedule, we know where we have to make up the progress,” Dicerni said.
“There is fairly tight control over project management, and we believe that we have a good understanding as to where the overall schedule for completion of the project is.”
Tom Adams, executive director of Energy Probe, an Ontario power watchdog, called Monday’s warning “deja vu all over again” and urged the government to phase out Ontario’s chronically troubled reactors.
“We should have pulled the plug on this a long time ago,” Adams said. “The sooner we pull the plug, the more of a headache we’re going to avoid.”
Ontario’s Candu reactors are old, complex, difficult to fix and prone to new and unforeseen problems that lead to soaring refurbishment costs.
Progress over the next three months will “have a significant impact” on the project’s overall costs and schedule, the company said – a statement Adams seized upon as a sign that costs are likely to continue to climb.
Dicerni said there are 1,600 workers on the site now, compared with 1,000 a few months ago.
Word of the project’s financial woes emerged as Ontario Power Generation reported a loss of $15 million, or six cents a share, for the quarter ended Sept. 30, compared with a year-earlier profit of $34 million, or 13 cents a share.