Greg Crone
Financial Post
February 6, 1999

Performance sliding: Production shortfall means $60M hit to bottom line Ontario Hydro appears to have moved the goal posts for its troubled nuclear division by lowering its 1998 nuclear production target.

The adjustmen allows Hydro to say that it has met and exceede its target.

Based on its original target, Hydro had a production shortfall of 3.4% or an estimated $60-million in lost production. Instead, Hydro lowered its target by about 10% and is now saying its 1998 production was ahead of target by 6.4%.

"The nuclear plants are not turning around," said Tom Adams, an analyst with public interest group Energy Probe. "In fact, they are continuing to slide."

"If the game is not going well, Hydro’s first instinct is to change the rules," said Sean Conway, Liberal energy critic. "If those targets are not met, it will have negative consequences on electricity consumers and the people who guarantee Hydro’s debt, namely the Ontario taxpayer."

Terry Young, Ontario Hydro spokesman, said the target may have been adjusted to reflect operating problems in the Bruce A plant near Kincardine, Ont., where one unit ran sporadically and another did not run at all, contrary to plan. "What we may have done was adjust the targets based on Bruce A."

The nuclear division has been under a cloud since an August 1997 report concluded it was only meeting minimum industry standards. Hydro then closed seven of 19 reactors under the so-called Nuclear Asset Optimization Plan (NAOP). Hydro also took a $6.6-billion writedown resulting in a $6.3-billion loss, the largest in Canadian corporate history. Most of the writedown was to account for future spending associated with rehabilitating the nuclear division.

In the recovery plan, Hydro said its nuclear division would generate 62 terawatt hours of electricity. (A terawatt hour is one billion kilowatt-hours.) A select committee of the Ontario legislature held hearings on the plan and reluctantly endorsed it.

In its latest nuclear report card, Hydro says its production target for 1998 was 56.3 terawatt hours. Hydro reports it actually generated 59.9 terawatt hours, calling the resul "better than target."

Mr. Adams calculates that is actually a shortfall that amounts to a $60-million hit on Hydro’s bottom line and not accounted for in the writedown.

The hit may actually be larger if the coal-fired replacement generation is factored in, as well as reduced export sales and increased import costs, said Mr. Adams.