Peter Gorrie
Toronto Star
December 5, 2003

The only surprise is that people are so shocked by yesterday’s damning report on the Pickering nuclear station.

As far back as 1916, experts issued warnings about the potential for huge cost overruns and management troubles at the crown corporation that generates most of Ontario’s electricity.

Repairs to four units at Pickering will cost about $4 billion instead of the $780 million originally forecast, and the job may not be completed until 2008 – six years behind schedule, says the report, by former federal energy minister Jake Epp.

"Am I surprised? Not in the least," says Tom Adams, executive director of Toronto-based Energy Probe and a long-time critic of nuclear power. History is repeating itself, he says.

"How can you be surprised when a damning report comes out on a project that’s way over budget and behind," says Jan Carr, managing director of Barker Dunn & Rossi, electricity industry management consultants.

Why it happened, though, isn’t so clear.

For Adams, the Pickering mess is the inevitable result of problems inherent in the old Ontario Hydro-Electric Commission and its successors – Ontario Hydro and the current Ontario Power Generation (OPG).

Carr says the major problem is that OPG is simply too big and complex to manage.

But a source close to the industry says senior management must accept much of the blame. Back in the early 1990s, then-chairman Maurice Strong – in an attempt to cover the cost of a rate freeze imposed by Bob Rae’s NDP government – pensioned off most of the engineers who knew how to run the plants.

Three years ago, president Ron Osborne decided to drop Atomic Energy of Canada Ltd. – which designed the Candu reactors used in Ontario – as the main contractor on the repair project. Instead, OPG brought in U.S. consultants who didn’t understand the Candu, which is much different from the American system.

Morale at Pickering plummeted; many employees simply let the new managers self-destruct.

"They didn’t offer up any advice," the source says. "They’d answer questions, but the guys at the top didn’t know what questions to ask."

While that’s a recent issue, Adams argues there’s a long-running malaise: From the time the Hydro-Electric Commission was created in 1906, it and its successors made bad decisions and spent freely, as if they were immune from the consequences of taking unwise risks.

James Mavor, a professor of political economy at the University of Toronto, saw the danger nearly 90 years ago, Adams says.

"Nothing is more usual in public enterprises of this kind than to disregard the element of risk," Mavor wrote in one of a series of newspaper articles that condemned the creation of the hydro monopoly.

The commission’s first project – the generating station at Queenston, on the Niagara River – went three times over-budget. And the pattern was set.

Despite occasional problems matching supply with demand, Ontario has enjoyed a reliable power supply for the past century, thanks to its abundant natural resources, Adams argues.

OPG has finally come to grief because of the decision, in the 1960s, to rely heavily on nuclear generating stations, he says.

Throughout its history, Hydro spent money in an odd way.

If a lot of money had already been poured into a project, senior managers and provincial politicians wouldn’t say "no" to spending even more when, as often happened, things went awry.

"’How much we’ve spent’ was an excuse to spend more," Adams says. "It’s like driving down the highway with only the assistance of the rear-view mirror," he says. "They smash into stuff all the time. They get bailed out, the car gets fixed and they crash into something again."

This worked, albeit expensively, as long as Hydro could depend on relatively simple power sources like falling water or burning coal, he says. To keep the system reliable, it built more generating capacity than was usually required. Electricity rates were kept artificially low, and debt piled up.

Quebec, British Columbia and Manitoba have power corporations similar to Ontario’s but they get by thanks to abundant water resources, Adams says.

Once Ontario switched to Candu reactors, however, the game couldn’t continue here. Ultimately, managers couldn’t paper over problems with cash.

It hasn’t helped that some Hydro and OPG executives were appointed because of their political connections, Adams says. But in any case, "the business is too large."

"Running such a range of obsolete technologies . . . it’s impossible for managers to stay on top of it." When you have, "an unforgiving, fragile, complex system, you can’t make a go of it."

But the industry source says Candu is not at fault.

Carr, too, isn’t hard on the Candu.

It has worked well in other countries, and repairs at the Bruce station, now privately run as a single operation, have run into much less trouble, he says. "I’d stop short of saying there’s a problem with the technology."

But he says Osborne and the two other OPG executives who lost their jobs yesterday are qualified, competent men with successful track records.

But the major problem is that running the corporation, with its mix of hydro, coal- and gas-fired and nuclear stations, is simply "too big and complex to have in one heap."

OPG should be broken up, at least into two parts, he says.