Terence Corcoran
National Post
December 6, 2003

Canada, like most other Western nations, has found nuclear power only works when it enjoys monopoly status and generous public subsidy.

After decades of government control, marked by occasional blackouts, soaring power costs, massive mismanagement and the accumulation of tens of billions in unrepayable debt, Canada’s largest monopoly electricity system is gearing up for a new era – of more government control and greater government intervention! What a relief that must be to citizens of Ontario.

The province’s new Liberal Premier, Dalton McGuinty, skillfully manoeuvring to dodge any responsibility for what may happen in the future under more state management, said yesterday that unfortunately, whatever he does, he can’t guarantee the province’s electricity supply. A wise precaution on his part, since there is little evidence yet this new bout of state management – bigger and more intrusive than in the past – will produce any great leap forward.

This week the province’s Energy Minister, Dwight Duncan, did what all new governments do best: He fired the corporate appointees of the previous government, blamed them for cost overruns and other problems, and declared a new era. "We must rebuild," he said, "over the next 20 years, virtually our entire capacity to power Ontario."

The fired executives – the chairman, CEO and COO of Ontario Power Generation – leave the company, which controls most of the province’s power supply, without a management team. The board of directors is about to get the boot, too. New management and a new board, apparently with tighter leashes from the Cabinet, will soon be parachuted into OPG.

How many cycles of these Stalinist purges, usually in the wake of major cost blowups, does the Ontario power system have to go through? The Liberals are cleaning up the mess left behind by the Harris and Eves Tories; the Tories were cleaning up the unfinished mess left behind by Bob Rae’s New Democrats; and the NDP hired Maurice Strong to clean up the mess left behind by the Peterson Liberals.

Ah, remember the Peterson Liberals. Energy Probe‘s Tom Adams recalls that David Peterson won election in the 1980s on a platform to stop construction of the Darlington nuclear stations. At the time, the province had already spent $3.5-billion on Darlington, and both the NDP and the Liberals were using Darlington’s looming cost overruns as a weapon against the remnants of the Bill Davis Tories. Instead of killing Darlington, however, the Peterson-NDP coalition government gave it a go-ahead, thus cementing the biggest corporate financial meltdown in Canadian history. Ontario Hydro’s final Darlington bill was $14.4-billion, one of the major causes of the company’s eventual insolvency under more than $20-billion in stranded debt.

Not a cent of that debt has been repaid so far, and the total burden of stranded encumbrance is likely to climb by several billions of dollars once the ink dries on the current cost overruns.

The latest failure of state management at OPG has been pinned on the executives and board, although it is patently obvious that the problems at OPG were deeper and bigger than anything that could be overcome by a couple of top executives who were brought in to run the company in 1999. The level of dysfunction documented in a report on OPG’s biggest headache, rebuilding four units at its Pickering nuclear station, can only be described as systemic and profound. Vladimir Putin may have less trouble turning around the Russian economy. If anything, ousted CEO Ron Osborne might well deserve a medal of achievement for having made any progress turning the operation around.

The best CEO talent in the world could not hope to penetrate the deep morass of unaccountability and lack of responsibility running through the massive hierarchical structure that made up OPG management. The report describes managers who failed to own their projects, lack of follow-through on commitments, ineffective management controls, no encouragement to innovation, lack of teamwork. This isn’t a functioning corporation; it’s a collapsed civil service network.

There are few signs the new government is ready with meaningful solutions to any of this. The Minister’s first move was to take the price of electricity, fixed by the ousted Tories, and fix it again at a different price. That’s progress? Michael Trebilcock, co-author of a new study for C.D. Howe Institute this week, said nothing short of market pricing of electricity at the consumer level will keep the lights on in Ontario (www.cdhowe.org). Without market pricing, conservation won’t be effective and new supplies of electricity will not be built, at least not without fresh amounts of government debt.

The first real test of the government’s mettle will come with a decision on whether to continue with OPG’s nuclear refits at Pickering. Some believe the nuclear units should be shut down as failures. Now is the time for a clear, objective review of the business plans for nuclear power at Pickering compared with the cost of building gas turbine plants of equal capacity.

Beyond fixing the price and throwing out top executives, the Ontario government seems set to engage in a major exercise in top-down management of the entire electricity supply system. Instead of more dependence on market forces and privatization, and less of the destructive government involvement that has dogged the Ontario electricity industry for at least four decades, the McGuinty Liberals are planning to give us more government.