Tyler Hamilton
Toronto Star
January 5, 2006
The Ontario government’s suggestion that it will consider foreign nuclear companies for the construction of new power plants is a bargaining tactic aimed at getting Ottawa to cover any financial risks of sticking with Candu technology, sources say. Government officials began hinting in the summer that choosing Candu technology from Atomic Energy of Canada Ltd., a federal Crown corporation, is not a certainty and that reactor designs from countries such as France and the United States will also be explored.
"The feds will have to take some of the financial risk," one unnamed government official told the Toronto Star. "This minister (of energy) is not rubber-stamping anything."
The Ontario Power Authority recommended in a report last month to the provincial Ministry of Energy that nuclear power remain 50 per cent of the province’s energy mix over 20 years, requiring an estimated $40 billion be spent to refurbish aging plants and build new ones as coal generators are shut.
But critics said that figure could end up much higher if history repeats itself. For example, the province expected to pay about $4 billion for the Darlington nuclear station but the price tag surpassed $14 billion by the time it was completed in the early 1990s. The former Ontario Hydro assumed all the risk.
Ontarians have no intention of carrying such a burden again, observers say. Getting the federal government to offer upfront subsidies or indirectly guarantee a fixed rate from AECL could be a way for the Ontario government to make new nuclear plants more palatable for taxpayers, they say.
Tom Adams, executive director of think-tank Energy Probe, said the situation is not unlike New Brunswick’s request earlier this year for federal subsidies for its nuclear refurbishment plans. He said that province threatened to negotiate with Ontario’s Bruce Power and the Indian government’s nuclear agency to put pressure on the federal government.
When those subsidies were refused, Premier Bernard Lord blasted the federal government for abandoning New Brunswick.
"The federal government is willing to invest in nuclear development in China, assist Ontario with decommissioning of coal in Ontario, but they are not willing to invest in the nuclear industry in New Brunswick," Lord said in a July speech that characterized Ottawa’s decision as a "betrayal."
‘If the Candu history is any guide, those guarantees . . . could be worth billions.’
Tom Adams of Energy Probe
New Brunswick eventually signed with AECL, but it didn’t walk away empty handed. Its contract with AECL stipulates that 90 per cent of the cost of the refurbishment be fixed so that Ottawa indirectly covers any unexpected cost overruns.
"AECL has actually absorbed more of the risk than the original project," said a spokesperson from New Brunswick’s energy department.
Adams said such a contract structure is potentially more valuable than upfront subsidies, because it creates more certainty and lowers the financial risk for any province that has been hit financially in the past.
"What Lord obtained was a guarantee from AECL on construction time, construction cost, and also the post construction performance of the reactors," he said.
"If the Candu history (in Ontario) is any guide, those guarantees are worth more than a few hundred million dollars. They could be worth billions."
AECL spokesperson Dale Coffin said it’s now standard practice to offer fixed-price contracts.
"Whenever we are bidding on new projects, such as the last two in China, that’s already the model we promote in our business case," said Coffin. "As the technology has evolved, so too has the business model to become more robust and to carry risk-sharing."
Rivals to AECL and its Candu technology include U.S.-based General Electric Co. and Westinghouse Electric Company LLC, and France’s Areva SA. There are about 30,000 nuclear industry jobs in Ontario. As well, the hiring of a foreign company would likely lead to significant job losses at AECL, which employs about 4,000.
While taking the unpatriotic route of choosing a foreign technology would likely come with its own set of uncertainties and risks, one provincial official said AECL’s next-generation Candu technology has its own question marks and risks, making it impossible to accurately predict costs.
"They admitted two years ago it was nearly designed and it’s still not designed," the official said.
Energy Probe 