Son of Ontario Hydro starting to make good: a response

Tom Adams, Letter to the Editor, Toronto Star

July 19, 2006

Re: "Son of Ontario Hydro starting to make good," July 19, 2006

To support his argument that Ontario Power Generation (OPG) has turned around its history of bad behaviour, Ian Urquhart claims that OPG’s credit rating has been upgraded and it has completed the refurbishment of Pickering 1 within $100 million of budget. The first claim sounds important but is really empty praise and the second claim is wrong.

As Standard & Poor’s explained in their most recent credit assessment of OPG, its debt was upgraded because that the Liberal government now funds OPG directly with taxpayer-back borrowing.

Urquhart’s recounting of Pickering nuclear history is faithful to the Energy Minister’s spin but not the facts. In March 2004, a Liberal-appointed committee chaired by former federal Minister John Manley and including OPG’s chairman Jake Epp recommended completing the Pickering 1 refurbishment. The final cost of the Pickering 1 refurbishment was $195 million above that first Liberal promise. It is also noteworthy that the project was completed five years and five months late relative to the original schedule.

Tom Adams, Executive Director, Energy Probe

Son of Ontario Hydro starting to make good

by Ian Urquhart, Toronto Star, July 19, 2006

Ontario Power Generation (OPG) is everybody’s favourite whipping boy. The government-owned successor to Ontario Hydro and producer of three-quarters of the province’s electricity, OPG has been called everything from "Ontario’s Enron" to a "monumental mess."

In late 2003, the incoming Liberal government fired the three most senior executives at OPG on the heels of a report that the retrofit of a single reactor at the Pickering nuclear plant had come in $900 million over budget and three years behind schedule.

There were whispers at the time of the "B word" – bankruptcy – and internal morale plummeted. Suggestions of a possible turnaround at OPG were dismissed.

Wrote Terence Corcoran in the National Post: "Vladimir Putin may have less trouble turning around the Russian economy."

Well, turn around OPG has. Last year, its profit rose to $366 million from $42 million the year before.

Its credit rating has been upgraded. It has brought in the retrofit of a second Pickering reactor on schedule and within $100 million of budget. It has launched major initiatives to build a natural gas generating plant on Toronto’s waterfront, to expand the output from Niagara Falls with a new tunnel, and to redevelop the hydroelectric stations on the Mattagami River.

And in the annual report last month from the Canadian Nuclear Safety Commission, OPG got high marks for safety in the operation of its reactors – higher than its private sector competitor, Bruce Power.

Says Energy Minister Dwight Duncan: "One of the untold stories of the last two years is the remarkable comeback of OPG."

Duncan takes part of the credit for the turnaround, through the appointment of a new board after the Liberals took power.

"One of the things I did when I appointed that board is to bring in a lot of people … who have a lot of experience in nuclear."

Credit is also due to: Jake Epp, the Mulroney-era politician whom the Liberals appointed as chair of the board; James Hankinson, the blunt-talking businessman who was named OPG’s chief executive officer last year; and Richard Dicerni, the veteran civil servant who served as acting CEO during a difficult transition period.

Last month, the government rewarded OPG by calling on it to pursue approval from the nuclear safety commission for a new nuclear reactor facility.

"I am directing OPG … to begin a federal approvals process for new nuclear units at an existing site," wrote Duncan to Hankinson. It is unlikely that letter would have been written two years ago.

"Overall I see the government’s announcement as it pertains to OPG as a vote of confidence in our ability to operate our facilities efficiently and responsibly," says Hankinson.

Duncan cautions that the decision on who should operate a new nuclear facility has not yet been made by the government and that the responsibility could still be given to Bruce Power or some other private-sector operator.

"We (the government) are not there yet," says Duncan.

"We will, over the course of the next weeks and months, be having those kinds of discussions."

Says Duncan Hawthorne, CEO of Bruce Power: "If the premier really wants to isolate the ratepayer from the risk, then the private sector might be the way to do it."

But the fact is that the longer that OPG carries the ball on a new nuclear facility, the more difficult it will be to make a hand-off to another player.

In a panel discussion earlier this year, Ken Pereira, executive vice-president of operations for the nuclear safety commission, threw cold water on the idea of transferring responsibility for a new facility midway through the approvals process.

"I would expect that Canadians who are engaged in that process would like to feel that the applicant is one who has a vested interest in constructing and operating the facility and is committed to it," said Pereira. "So, if at the front end they see that there’s only an entity there that is used to kick-start the process, how are they going to regard that in terms of commitment to that facility, that site, for the long term? … Because we’re talking about significant projects here, not operations that run for one or two years."

Translation: If OPG starts the process, it may have to finish it.

And that’s a prospect that is no longer unthinkable at Queen’s Park.

This entry was posted in Reforming Ontario's Electrical Generation Sector. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s