November 16, 2004
Toronto: Ontario Power Generation’s habitual cost overruns on nuclear power plant refurbishment projects are continuing under the Liberals, OPG confirmed yesterday in third-quarter financial results that show efforts to upgrade a second unit at the Pickering A station are as much as $100-million over budget.
Energy Minister Dwight Duncan allowed that he is “concerned” by the projected overrun, which will see the price tag for retrofitting Pickering A’s Unit 1 reactor increase by between $75-million and $100-million.
Mr. Duncan, however, rejected suggestions the Liberals are headed down the same road as their Conservative predecessors, who were unwilling or unable to halt a 400% cost overrun on OPG’s refurbishment of Pickering A’s Unit 4 reactor.
“This is high-risk,” he acknowledged. “[But] we have the best management team available on it. We’ve outside auditors watching it. We’ve appointed new board members including board members that have nuclear experience.
“I believe that we’re managing the situation as best we can. I remind you that we did not put the province in the position of having to rely on nuclear power and generators that were 30-some years old when we came to office.”
He refused to speculate on whether there would be even further cost overruns on the 500-megawatt reactor that he says Ontario needs to avoid electricity shortages in the near term.
“I won’t say anything definitely one way or the other,” said the minister, who back in June boasted that “rigorous public scrutiny will ensure that the project stays on track and on budget.”
OPG’s quarterly report, however, warned that futher cost overruns are not inconceivable.
“Performance over the next three months in terms of schedule adherence and productivity of the major contractors and OPG resources will have a significant impact on the estimated cost and schedule to complete the project,” the company said in its report.
“Estimated costs could also be impacted by any additional repairs or refurbishment work related to the material condition of the station that may be identified during the course of the construction and commissioning phases of the project.”
In a conference call with reporters, OPG’s acting president, Richard Dicerni, blamed the cost overrun on “overly aggressive” assumptions about the company’s ability to recruit the skilled labour required for the project during the summer months, when the construction industry was booming.
“The cost increase flows from the fact that we incurred some slippage in terms of construction progress during the summer that we need to make up,” he said, noting that the project schedule has been extended and overtime bills are higher.
The reactor, now 56% complete, according to company data, was originally scheduled to go into full service in September, 2005, but that has now been delayed until later in the fall.
“The only person in Ontario that could possibly be surprised by these results is Dwight Duncan,” said Tom Adams, executive director of the energy watchdog group Energy Probe. “Everybody was expecting this.
“I’ve been arguing from the beginning that OPG should not be allowed to spend another dollar on new capital expenditures,” said Mr. Adams, who questioned how long the government-owned utility would be able to continue borrowing to finance the project without a major cash injection from the government.
NDP leader Howard Hampton noted that the cost of refurbishing the Unit 1 reactor was actually $825-million when former deputy prime minister John Manley delivered a full review of the Pickering upgrade project earlier this year.
“They should stop throwing money down a hole,” said Mr. Hampton, who insisted the resources could be better used to promote energy efficiency and conservation.