Steve Erwin
National Post
March 22, 2004

Toronto: A potential nuclear surge in Ontario’s electricity market is attracting interest from companies that deal in the controversial power source – as long as regulatory policies are clear and consistent.

Their interest was heightened by a report last week from a panel led by former deputy prime minister John Manley recommending that Ontario look to nuclear power to cope with a power shortage that looms as early as 2007.

"We see quite a role for Cameco there," said Jerry Grandey, president and CEO of Saskatoon-based uranium miner Cameco Corp., which already owns almost one-third of the province’s Bruce Power nuclear complex on the shore of Lake Huron.

The Manley report recommends the province consider private-sector involvement in financing new nuclear power stations through joint ventures, partnerships and long-term leases.

At the same time, Manley urged the government to end years of political interference at Ontario Power Generation, the former Ontario Hydro utility that generates more than 70 per cent of Ontario’s electricity, much of that from nuclear stations.

Years of costly mismanagement have ravaged OPG’s finances. Government estimates suggest it could cost $40 billion to fix OPG and revamp the province’s electricity sector.

Grandey suggested groups of corporations will build next-generation nuclear plants.

"In the future it will be that – it will be people who are the designers and constructors of these plants and ultimately the users – who will form consortiums and proceed with the construction."

Environmental groups insist nuclear power is too expensive, with or without private-sector financing. Add in volatile electricity prices that have angered voters and skewed policies, and there’s no shortage of political heat being generated.

"The danger here is that the public sector gets the risk and the private sector gets a risk-free return or substantially risk-reduced return," said Tom Adams, executive director of industry watchdog Energy Probe.

While some public-private partnerships in the electricity sector have worked, "my concern is that there’s a very substantial danger, based on the track record, that the public will get hosed," Adams said.

Companies will wait until the province lays out its policies before they put their money on the table, said Genevieve Lavallee, a utility analyst at Dominion Bond Rating Service.

Issues include whether the government will go ahead with the revamp of Unit 1 at the Pickering A nuclear station, and then proceed with fixing Units 2 and 3. Lavallee doubts any company will be interested in getting involved in Pickering, and suggests OPG should continue to manage that project.

Before they invest elsewhere, companies will want to be sure that Ontario’s coal plants will close in 2007, as the Liberal government has promised. If they don’t, fewer new generating stations will be needed.

"Establish the right conditions and they will come," Lavallee said. "That’s basically what it comes down to."

"If you want private-sector involvement, give them the tools, give them the rates of return required for them to invest and I’m sure you’ll have lots of people ready to invest."

Grandey says the industry needs political consistency.

"You can’t have a major capital investment move forward with regulatory unpredictability," he said. "Because it takes you years to make the decision and license and then build, you want to make sure that a change of government isn’t going to derail your project."

Other Canadian energy players, including Calgary-based TransCanada Corp., agree that consistent policies are needed before corporations can commit themselves to investing in the power grid.

"We believe that Ontario will benefit from a power market that offers stability for those investing in that market," said Hejdi Feick, a spokeswoman for TransCanada, which has been an "active participant" in the Ontario power market for over 10 years, including a stake in Bruce.

Tim Richter, a spokesman for Calgary-based TransAlta, one of Canada’s biggest private power producers, said the company is taking a wait-and-see approach.

"Ontario is not going to be able to build this much power . . . without the private sector," he said.

"They need it, we build it, and we’re keeping a close eye on things."