Richard Mackie and Martin Mittelstaedt/Tom Adams
Globe and Mail
October 30, 2001
The Ontario government has given British Energy PLC the ability to make exorbitant profits from the Bruce nuclear power station without taking on any risks, New Democratic Party Leader Howard Hampton charged in the legislature yesterday.
"For a $7.7-billion asset, British Energy is only going to pay rental fees of $16-million a year. What a giveaway," Mr. Hampton said, citing a report yesterday in the Globe and Mail based on documents obtained using the province’s freedom-of-information law.
"When it’s over, the people of Ontario will have to pick up the costs of decommissioning the nuclear facility and the people of Ontario will have to pick up the costs of storing the nuclear waste," Mr. Hampton complained.
He told Finance Minister Jim Flaherty, "You’re giving away the profits to your corporate friends for virtually nothing and you’re loading the people of Ontario with all of the debt down the road."
Mr. Flaherty defended the deal, saying it had been approved by both government officials and by an outside investment firm. "We had Salomon Smith Barney provide a fairness opinion which was related to the agreement, and the government’s own financial advisers reviewed this transaction as well."
But Mr. Hampton questioned the impartiality of the investment firm because it helped arrange the transaction.
"You cite Salomon Smith Barney. This is the company that you hired to put the deal together. They get $7-million for putting the deal together, and of course after they receive the $7-million they are going to tell you it’s a good deal. They make $7-million on the transaction. What do you expect?"
Outside the legislature, Mr. Flaherty complained that Mr. Hampton was misinterpreting the agreement under which Ontario Power Generation leased the Bruce nuclear plant, the world’s largest nuclear complex, to a firm set up by British Energy.
Four of the plant’s eight reactors are currently idle, and British Energy wants to restart two of them. The lease has provisions allowing it to run until 2043.
Mr. Flaherty said any investment to restart the reactors benefits taxpayers.
"Should we be taking public money and using it for that or should we be using it for other priorities like health care?"
But Mr. Hampton warned that the Bruce nuclear deal may set the stage for the government and OPG to divest other power plants at far below the cost to build them.
Some independent energy analysts were also critical of the deal.
"There is no question that Bruce Power has a sweetheart deal," said Dave Martin, a nuclear power consultant for the Sierra Club of Canada, referring to the British Energy affiliate that signed the lease.
And if electricity rates go up under the competitive market that the Tories plan to allow next year, British Energy could earn large profits.
"If the plant does famously well and has a long and productive lifetime with minor costs and good revenue, the upside potential for the public purse is limited and Bruce Power captures a big windfall," said Tom Adams, executive director of Energy Probe, an environmental policy think tank.
Under the lease, Ontario Power has a revenue-sharing agreement with British Energy that is linked to the output of the Bruce facility. Terms of this arrangement have never been publicly disclosed.
Critics contend that the revenue sharing may undermine the government’s stated policy of creating a competitive electricity market because both Ontario Power and British Energy have incentives to co-operate, rather than be true competitors.
Tom Adams’ letter to the editor in response to this article
October 31, 2001
Letters Editor, Globe and Mail,
Re "Bruce deal ‘a give away,’ NDP says" (October 30, 2001)
Your article inaccurately recorded my concerns with the Bruce power lease. I did not tell your reporter, Martin Mittelstaedt, that the deal was unfair, as your reporter implies, quite the contrary. I told him that the auction process appeared fair, that no unsuccessful bidders have identified deficiencies in the outcome, and share price movements of the successful bidder has not reflected anticipated windfalls. I only regretted that the lease limits competition compared to an outright sale since OPG retains a financial interest in Bruce Power’s profits.
Tom Adams, Executive Director, Energy Probe
cc: Dr. Robin Jeffrey, Bruce Power
Mr. Floyd Laughren, Ontario Energy Board
The Globe and Mail did not print this correction.