John Spears
Toronto Star
May 18, 2002

Subsidies to big power users and zooming costs for restarting the Pickering A nuclear generator have helped to turn last year’s profit into this year’s loss at Ontario Power Generation Inc.

The giant generator, owned by the province, reported a loss of $217 million for the three months ended March 31, compared with a profit of $102 million a year earlier.

In releasing the earnings, OPG’s chief executive Ron Osborne insisted that last year’s and this year’s performances aren’t comparable because of one-time expenses and the lease of the Bruce nuclear station.

Revenue was almost the same for each quarter: $1.56 billion in the latest quarter compared with $1.54 billion a year earlier. This year’s performance, however, was weighed down by some heavy expenses. Among them:

An after-tax expense of $134 million for staff reduction.

An after-tax loss of $137 million on a program that for years has provided subsidized power rates to a number of industries using a lot of electricity. The special rates are being phased out over the next two to four years; OPG has calculated the cost and entered a one-time lump sum expense on this quarter’s earnings.

An extra $37 million on restarting the Pickering A nuclear station.

That’s only the start of the bad news on the Pickering A costs.

In 1998, the cost of getting the four reactors back in service had been pegged at $800 million.

By last year, the estimate was up to $1.5 billion. Now, OPG says the restart will cost as much as $2.16 billion. The company will spend $960 million on the first reactor, with the three others costing a total of $900 million to $1.2 billion.

"A lot of private-sector parties were not keen on going head to head against the publicly financed restart of the Pickering A power-generating station."
– Energy Probe executive director Tom Adams

OPG spokesperson John Earl said the company has not considered cancelling the restart. The company has described the much-delayed project as a source of "reliable, low-cost electricity."

Earl said part of the cost escalation stems from unforeseen factors such as the environmental assessment, which was supposed to last eight months but stretched to 20 and resulted in requirements for more costly procedures. New security procedures since Sept. 11 have also driven costs higher, he said.

Tom Adams, executive director of Energy Probe and a fierce critic of nuclear power, said in an interview the Pickering A troubles have created a double problem.

First, more than 2,000 megawatts of power that were supposed to be available to the grid have been delayed. And projections by the Independent Electricity Market Operator show that prolonged hot weather could strain the power grid’s capacity. The first reactor won’t be in service until the end of the year.

Second, continuing with the publicly financed restart despite massive cost escalation has discouraged private investors from building competing generation.

"A lot of private-sector parties were not keen on going head to head against that kind of a problem," Adams said. "Who could blame them?"

OPG also said it has deferred payment until 2004 on $200 million worth of long-term debt due this year to Ontario Electricity Financial Corp.

OPG’s report for the latest quarter for the first time excludes items relating to the Bruce nuclear station, which has been leased to a private group led by British Energy PLC. OPG bought all of Bruce Power’s output for the period, but that arrangement ended May 1 when the competitive electricity market opened.

In other news yesterday, Great Lakes Hydro Income Fund said it has completed a deal to buy four hydroelectric generating stations and related water-storage facilities from OPG for $340 million, Canadian Press reports.

The 490 megawatts produced by the facilities on the Mississagi River, east of Sault Ste. Marie, will be sold under a 20-year agreement to Brascan Power Corp., which owns 50 per cent of the fund.