Energy Probe

Valerie Lawton
The Toronto Star
August 14, 1997

It’s Ontario Hydro’s darkest hour, but plenty of businesses in the province see new opportunity.

“It augurs really very well for the private sector, people like ourselves,’` James Temerty of Toronto-based Northland Power Inc. said yesterday.

“The folks at Northland are feeling pretty good,” said Temerty, chief executive of the province’s largest independent power producer.

Temerty thinks Hydro’s plans to shut down several problem-plagued nuclear reactors means he’ll be able to sell more power to the crown utility.

And – maybe – Northland will finally be able to add to its customer list. Temerty and others hope Hydro’s woes will zap the Ontario government into moving a lot faster on opening up power-industry competition.

“The pressure is on the government, that’s the good news,” said Norman Rubin of Energy Probe.

Yesterday Ontario Hydro announced it was shutting down seven of its 20 reactors for repairs. “It’s not a good investment,” Rubin said. “I’d rather have Bre-X stock.”

The shutdown and overhaul could cost between $5 billion and $8 billion over five years. Hydro is considering writing off $2 billion in assets this year.

The head of the Independent Power Producer’s Society of Ontario also thinks Hydro’s troubles mean his members are a step closer to being able to sell power to big industry and municipalities.

“The alleged surplus that Ontario Hydro said it had in the past is gone,” said Jake Brooks. “So there’s no plausible reason to prevent alternative suppliers from entering the market.”

His group’s members include large Ontario companies that now generate their own power and would like to sell their surplus.

Advocates such as Brooks argue competition would mean lower power rates for industry and, ultimately, for individual consumers in the province. Others, however, believe large power customers would be able to strike deals at the expense of small users.

The Ontario government is on record as supporting the concept of competition. But Queen’s Park still hasn’t said how that might work.

The province is ultimately responsible for Hydro’s huge debt load, which won’t be getting any smaller during the overhaul. Hydro bonds are guaranteed by the government.

Two major bond raters confirmed their ratings for the province and Ontario Hydro yesterday, but pointed to challenges ahead.

“The effect of these additional costs on Ontario Hydro is to reduce its ability to lower its debt load significantly by the year 2000, as previously planned,” said the Dominion Bond Rating Service.

“And (it) reduces its ability to deal with the future challenge of potential competition due to deregulation.”

New York-based Standard &d Poor’s said the province could accommodate the financial impact of the restructuring but it “has the potential to push back the over-all improvement in the province’s credit profile, notwithstanding the province’s continuing progress with its own deficit.”

Hydro’s nuclear, hydro and fossil-fuel plants generate more than 90 per cent of the average daily electricity supply for Ontario. Independent producers make up the rest.

Competition advocates say the government’s first step should be to give control of Hydro’s transmission system – the network that carries electricity – to an independent body.

Hydro rivals would then be able to send their power to customers.

Top officials at Ontario Hydro have voiced strong public support for competition.

Chairman William Farlinger said the utility would have to meet the rates of would-be competitors.

“At the moment, we are constrained by regulations as to what we charge industrial customers,” Farlinger told a packed news conference at Hydro’s downtown headquarters yesterday.

“With a free and open market, we could have different rates for customers.”

In the meantime, Hydro has promised to continue a freeze on rates, despite the huge costs.

But big companies, such as Falconbridge Ltd., that buy surplus Ontario Hydro power at lower rates, may not have as much of it to choose from after the reactors shut down.

That could mean higher prices, said Lauri Gregg, energy and technical services manager at the mining company.

John Fox, executive vice-president and managing director of Ontario Hydro Generation, said the question of when competition happens is up to the province.

“We are operating with the expectation that Hydro has the obligation to continue to ensure reliable power.”

The utility plans to rely more heavily on its own fossil-fuel power to make up for the shortfall. Hydro will have to consider other options if it eventually decides not to bring its Pickering nuclear plant back up.

“We’d have to look at where additional generation could come from, either from purchasing out-of-province, or developing additional resources within the province, either by Ontario Hydro or by the private sector.”

Hydro said its ability to export power will be reduced. By how much is still unclear, but Fox said the corporation will be talking to its U.S. customers.

Over at Northland Power, Temerty is thinking about projects scrapped and gutted a few years ago, when Hydro told him it didn’t need the extra power.

“We’re just dusting off those old papers and taking a look at them,” said Temerty, whose company has three power plants in Northern Ontario.

“There may be an opportunity to go at some point in the future, and the near future, and say, `Hey look, this made sense for you four or five years ago; it perhaps makes sense again, in light of the changed circumstances.’ ”

“I think the day of building these huge giga-projects is well past.”

AEP Resources Inc., an Ohio-based utility that wants to become a power provider to Canada’s biggest industries, also believes competition is a step closer in Ontario.

“It would appear the situation here in Ontario that’s just emerged in the last few days does mean that generically there will be more opportunities down the road, probably a little bit sooner than anyone had guessed,” said Thomas Drolet, managing director for AEP’s newly opened Toronto office.

“That isn’t clear yet, because we’re not sure of the surplus or deficit power situation” at Hydro.

Brian McAndrew
The Toronto Star
August 16, 1997

Over the years, troubles were short-circuiting the utility’s nuclear stations. Now, the fuse has blown and critics are asking, `where was the watchdog ?’

ONTARIO HYDRO HAS stuck its finger in an electric socket and given itself a shock. Amazingly, the biggest producer of electricity in North America was surprised by the jolt.

An eight-month internal investigation to find out what’s been going on inside Ontario Hydro’s troubled nuclear sector spelled out the shocking story – its nuclear plants have been horribly mismanaged.

The report paints a picture of an aging, rundown system held together with band-aid patches.

It portrays those running it as mistake-prone buffoons whose only interest has been to make sure the transmission lines are filled with electric current rather than safeguarding the public from the inherently hazardous operation of nuclear reactors.

An eight-member American group of nuclear industry experts recruited to conduct the investigation into Ontario Hydro Nuclear issued the Report To Management this week to the crown corporation’s board of directors.

The Hydro hierachy – indeed, the entire nuclear industry in Canada – was stunned by the findings despite years of persistent warnings from government regulators and environmental groups.

The slim report, which described the privileged members of the nuclear sector as a “cult,” cost Hydro president Allan Kupcis his job.

Kupcis – who actually initiated the investigation – resigned after the 64-page report landed in the board room Monday.

Hydro executives and directors had never looked too closely at those running the nuclear “cult,” the prima donna specialists responsible for producing 60 per cent of Ontario’s electricity.

They were knocked cold by the report even though the nuclear division had come up with an $8 billion contingency plan.

Seven of the utility’s 20 nuclear reactors will be shut down at the Pickering and Bruce plants over the next few years – for “upgrading,” but possibly forever – while generation at one oil-fuelled and two coal-powered plants will be boosted to take up the slack.

How could Ontario Hydro get itself in such a mess?

“This came as a very big surprise to them because Hydro is such a huge organization and they chose for a long time not to probe the nuclear `cult,’ ” says Norm Rubin, director of nuclear research at Energy Probe, a watch dog group.

“They (the nuclear industry) have been so busy being cheerleaders to the government and the Canadian public that they became cheerleaders among themselves,” Rubin adds.

Still, Ontario Hydro is one of the most carefully watched outfits in the country.

Nuclear energy production is one of the most highly regulated industries in Canada.

It is subject to licensing and daily on-site examination by the Atomic Energy Control Board, the independent federal government regulator that has the authority to turn the lights out on any nuclear reactor operation gone bad.

But the board has never gone that far.

“The threat of being shut down is usually enough to convince a nuclear operation to take some action,” says control board spokesperson Bob Potvin.

“We have inspectors on site and there is good communication with plant operators so action is taken before it gets to the point where a plant would be told to shut down.”

Ontario Hydro has always brushed aside – like flies around a bull’s head – the criticisms from small anti-nuclear watchdogs such as Energy Probe and Durham Nuclear Awareness.

While most of the responsibility for the failures of its nuclear operation sits with Ontario Hydro itself, the energy control board compounds the problem by primarily looking out for the well-being of the industry, Rubin says.

“They are not working on behalf of the public,” Rubin says of the board.

The board, he adds, is incapable of ensuring that Ontario Hydro runs its nuclear division properly because it works as an oversight agency that allows nuclear plants to operate at minimal safety levels in order to retain their licences.

“The board sees its role as conducting audits and responsibility for safety is left up to the licensee.”

It was the control board that alerted Ontario Hydro to the seriousness of the problems within the nuclear division, Potvin responds.

“For the past several years, we have raised a number of yellow flags (at Pickering). We have made them make several changes and significant improvements,” Potvin goes on.

Pickering didn’t move fast enough on its improvements and the board “tightened the leash” by renewing its operating licence in June for just nine months rather than the standard two years, he says.

The response of managers at Pickering to the board’s concerns was too sluggish. And pressure to get problems fixed wasn’t coming from the utility’s downtown headquarters – a monolithic building across from Queen’s Park with mirror-coated windows that could symbolize the difficulty the public has getting an inside look at how the utility is run.

The latest review of Pickering published in June reveals how the control board was attempting to fix problems at the plant and trying to alert senior management to the ongoing deterioration in the operation.

According to the report on Pickering:

“In 1996, as in 1995, the number of times Ontario Hydro failed to comply with conditions of the stations’ operating licences and the Atomic Energy Control Regulations was unsatisfactory.”

“As reported in 1994 and 1995, Ontario Hydro needs to improve on the contamination control aspects of its radiation protection program.”

“Ontario Hydro needs to pay more attention to nuclear safety, supervision and managements issues.”

“Ontario Hydro needs to devote more attention to resolving issues related to inadequate human performance.”

“In 1996, we noted some improvements but progress is slow and much remains to be done.”

Says Potvin: “They were making progress but not quickly enough. The plans looked good but the proof is in the pudding, not in the recipe.”

Pickering has a history plagued by operating glitches that should have alerted Ontario Hydro management to the persistent problems there. But if it did notice, it didn’t take much action.

The Bruce plant, on the shore of Lake Huron, has also had a troubled history. One of its reactors was shut down because of a heavy water leak just last month. One other aging unit was closed last year because it needed costly repairs, and there are doubts it will ever be restarted.

Now, the nuclear system is doomed, according to Dave Martin, research director of Durham Nuclear Awareness.

“This is a permanent shutdown,” Martin says of the Pickering and Bruce reactors, “and the beginning of the end of nuclear energy in Canada.”

A list of 10 major problems at Pickering compiled by Martin includes:

A ruptured pressure tube caused a loss of coolant in August, 1983, that shut a part of the plant and led to the $1 billion retubing of the Pickering `A’ facility that originally cost $716 million to build.

An operating error in November, 1988, damaged 36 radioactive fuel bundles, an accident Ontario Hydro did not think could happen and forced it to revise operating procedures.

A broken pipe spilled 185 tonnes of heavy water triggering a core cooling system for the first time in any Candu reactor to prevent a meltdown.

All eight reactors were shut down in April, 1996, to repair a backup valve on the core cooling system.

The internal Hydro report focuses on the management failings of the Pickering and Bruce plants.

It points out how small emergencies are resolved by “jumpers” – temporary repairs – that are never completed with fully-acceptable maintenance.

It slams management of the plants for being willing to cut corners but showing a reluctance to “make waves” by pointing out more serious problems.

“You don’t get promoted by pointing out problems,” Rubin observes, adding many of the management deficiencies at the nuclear plants are common to any other industry.

The trouble is there is little room for error at a nuclear plant. Since people are incapable of working to perfection, the nuclear system will never be a totally safe operation, Rubin says.

“They are in an industry where a 99 per cent success rate is a failing grade,” he says.

Rubin and other environmentalists have been touting that line for years and hope someone in authority will finally pay attention.

Rubin is a Boston native and graduate of the prestigious Massachusetts Institute of Technology, with an arts and science degree in English literature, music and physics.

Rubin joined the then four-year-old Energy Probe in 1978. He testified at public hearings into the safety of Ontario nuclear power plants called in the wake of the Three Mile Island nuclear disaster in 1979 and revelations that Ontario ‘s nuclear plants had their own problems.

The 1980 MacDonald Report – written by a commission headed by former CCF/NDP leader Donald C. MacDonald – made some insightful recommendations about nuclear safety that went ignored by the industry but “gave us something to roll up and use as a club,” he says.

Either indifference or fear on the part of the provincial government allowed the Ontario Hydro giant to get itself into such disastrous shape.

Even this week, Premier Mike Harris and Environment and Energy Minister Norm Sterling paid lip service without fully entering the fray.

“It’s a people problem,” said Sterling, shrugging off the $8 billion upgrading and energy replacement costs the utility envisages to resolve its problems on top of its $33 billion debt.

“The government needs to be making major surgery (on Hydro) but the government is in hiding,” Rubin says.

Now it could be time for the Progressive Conservative government to take a look at the way Ontario Hydro is run and to determine whether it should continue its pursuit of producing nuclear power.

The Legislature resumes Monday – and it’s expected the opposition Liberals and New Democrats will quickly raise the nuclear plant problems as an issue.

A white paper on the over-all operation of Ontario Hydro is expected to be presented to the government within a few weeks.

After nearly 20 years of chronicling every mismanaged move made by Ontario Hydro, Rubin feels guilty about finding some pleasure in being able to say: “I told you so.”

“I’m a human being and it always feels good to be right,” he says.

But it’s an unsatisfying feeling, he adds – a feeling an anti-tobacco advocate could experience “when he discovers someone else has developed lung cancer.”

John Heinzl
The Globe and Mail
August 18, 1997

Turmoil at Ontario Hydro could be the best thing that happened to the province’s independent power producers, who are poised to boost output in the wake of the utility’s decision to shut seven nuclear plants.

"We have a feeling . . . that the door may be opening to allow higher power sales," said Jim Liddell, vice-president with Potter Station Power Co. Inc. in Timmins, Ont. "We have the potential to double our output."

Potter Station, which operates a gas-fired generation plant in Northern Ontario, is one of about 40 independent power producers across the province. With debt-bloated Ontario Hydro planning to mothball seven of 19 nuclear reactors, private producers could soon be pumping out a lot more juice.

How much more will depend on Ontario Hydro’s power needs and on what steps the government takes to open up the industry to competition.

Independent plants produce between 6 and 9 per cent of electricity used in Ontario, generating about $500-million in annual revenue. They include small operators such as Potter Station, with revenue of about $20-million, and bigger players such as Northland Power Inc. of Toronto, which produces more than $100-million of power from three plants in Northern Ontario.

James Temerty, Northland’s chief executive officer, said Ontario Hydro appears eager to increase the amount of power it buys from the private sector. He said the utility contacted his company last week to ask whether additional capacity was available at its plants. "They’ll be talking to people like us all over the province," Mr. Temerty said. "We’re very bullish."

Northland Power, the largest Ontario-based independent, supplies about 250 megawatts into Ontario Hydro’s power grid — enough electricity to run a city of 250,000 residents. It would love to supply more, Mr. Temerty said, but for years Ontario Hydro has prevented it and other private outfits from doing so.

Independent producers are required to sell their electricity exclusively to the provincial utility under restrictive contracts that were negotiated several years ago. That arrangement has served to protect Ontario Hydro’s monopoly while putting a lid on growth of private electricity producers.

"What excess power we have, we just have to sit on it . . . even though in some cases there could be a neighbouring industry facility [or municipality] that could use the power," Mr. Temerty said. "It’s been frustrating."

Ontario Hydro plans to replace much of the power from reactors being closed at the Bruce and Pickering nuclear facilities with electricity generated from three fossil fuel plants — Nanticoke, Lambton and Lennox. The utility said it will also consider importing power from outside the province and buying more electricity from independent producers in Ontario.

"If you look over the next two years, we’ll be offering to purchase from the independents whatever power they have available," said Pat McNeil, a vice-president with the utility. But he said it will only purchase the additional power at a price that is "good for us."

What really has the independents salivating, however, is the prospect of deregulation, which would allow them to sell their power to whomever they please. "I think there’s a big opportunity for us," said Barry Chuddy, director of independent power project development at TransAlta Energy Corp. of Calgary, which operates three generating stations in Ontario. If deregulation happens, and most observers say it is only a matter of time, TransAlta would consider building additional plants in Ontario, he said.

The province is in the final stages of preparing a white paper on opening up the electricity market. Norman Rubin, director of nuclear research at Energy Probe, an Ontario Hydro watchdog, said the solution is to remove the shackles on independent producers and allow them to compete, just as retailers and other businesses do.

And, as a first step, he called on Ontario Hydro to drop lawsuits that have prevented municipalities from using alternate sources of power. Ontario Hydro should "get out of the way . . . the answer is to get rid of it," he said.

Jake Brooks, executive director of the Independent Power Producers Society of Ontario, said Alberta and, to a lesser extent, British Columbia and Quebec have already taken steps to open up their power markets. It’s time Ontario did the same, he said. "It’s about the most regressive access policy in the world. Ontario Hydro’s policy is ‘just say no to competition,’ " he said.

"Ontario Hydro has to just stop obstructing independent power."

Charles Enman
The Ottawa Citizen
August 18, 1997

Ontario Hydro is not in its death throes, but it faces a difficult future and will be far smaller in five years than it is today, according to an expert on nuclear energy.

"Ontario Hydro cannot and probably should not exist in its present form," says Norman Rubin, director of nuclear-power research at Energy Probe in Toronto. "It is a dinosaur, and the age of electricity has now entered the age of mammals."

These comments come in the wake of last week’s announcement that Ontario Hydro will close down seven of its 19 nuclear reactors — the four operating units at the Pickering A nuclear station east of Toronto and the three operating units at Bruce A on Lake Huron.

The shutdowns came after an internal report found management and training in the utility’s nuclear section inadequate. However, the basic technology of the plants was pronounced sound. Hydro president Allan Kupcis has resigned, taking responsibility for the problems detailed in the report.

Hydro says the shutdowns will allow for an intensive retraining program that will bring the utility back up to par.

As much as $8 billion will be spent on retraining, capital costs, and generating replacement power from three of the utility’s fossil fuel stations.

That will boost Ontario Hydro’s debt to $40 billion, putting an end to the facility’s debt-reduction plan. And debt reduction — which the utility had been achieving at the rate of $2 billion per year — is needed if Ontario Hydro is to compete against other suppliers when the provincial energy market is opened up as expected in the next three or four years.

But the debt-reduction plan itself has caused a controversy. Rick Jennings, of the Ontario ministry of energy and environment, says that for years Hydro has been using money earmarked for retiring nuclear reactors to pay down its debt.

He says the utility has amassed $2.6 billion over the last decade by charging customers a two-cent levy on every kilowatt of nuclear power generated. The money was supposed to cover the cost of closing down reactors at the end of their 40-year-lifespan, he says. But he says Hydro has instead used the money to "invest in the company," paying down its debt.

He said the $2.6 billion must be paid back some day, but meanwhile the utility will be forced to borrow to pay its decommissioning costs if a decision is made to close any of Hydro’s 20 reactors permanently.

Meanwhile, the utility is going to have a rough time competing with new technology, says Mr. Rubin.

"The reason Hydro can’t just spend its way out of this is because customers can generate power more cheaply than they can buy it from Hydro — and will start doing so en masse," he said.

The technology that allows this is called cogeneration and is already widely used by many industrial plants and even by some municipalities, such as Cornwall. (In Ottawa, the Ottawa Health Sciences building and Carleton University are two facilities that use cogeneration.)

Cogeneration is the process through which a facility produces electricity as a byproduct of its other activities. For example, a steel plant may use fuel to heat water to produce the steam that, in turn, heats the plant. With cogeneration, the steam is first used to drive a generator that produces electricity for in-house use. Then the residual steam enters the heating system. The plant’s electricity may come free or nearly free.

Once such practices are widespread, electricity will be cheaper, Mr. Rubin points out. And when such cheap electricity is available from many sources — as it will be once the market is opened — Ontario Hydro’s revenues will fall precipitously.

But it gets worse, Mr. Rubin says. For every dollar it earns, Ontario Hydro pays 65 cents for fixed or capital costs — most often, payments to bondholders. Even when a nuclear plant is shut down, those payments must continue.

"Ontario Hydro used to brag that it was ‘inflation proof,’ " Mr. Rubin says. "And it more or less was, when high inflation made the mortgage seem to shrink and boosted the utility’s revenues."

But today’s low inflation means that the passage of time itself will not make capital payments much less onerous.

Squeezed by high debt, imminent reductions in the price of electricity, and low inflation, Hydro Ontario faces a bleak future, says Mr. Rubin.

The nuclear stations will not be reopened and others will close, he predicts. "I would be shocked if the Darlington station gets to be 25 years old," he says. (Forty years has often been cited as the expected lifespan of the utility’s Candu reactors.)

Mr. Rubin says he doesn’t understand how Ontario Hydro can freeze power rates, as it has announced it will.

"This freeze is artificial," he says. "If they’re planning $8 billion in increased expenditure and (are) not increasing rates, this obviously means they’re not going to make the expenditures needed to maintain their infrastructure," especially the power grid and the hydroelectric generating plants.

Mr. Rubin suggests that the government sell the grid and the hydroelectric plants while they are still in good condition.

He was by no means the only observer to find cause for alarm in Ontario Hydro’s predicament.

Kent Edwards, president of the Municipal Electrical Association of Ontario, says: "We see a dismantling of Ontario Hydro over the next five years. The current environment is one of small and decentralized generation of electricity."

The higher electricity rates that might save the utility are not feasible in the current global environment, says Arthur Dickinson, executive director of the Association of Major Power Consumers in Ontario.

Electrical rates are much lower in the U.S. and in neighbouring provinces, Mr. Dickinson says. "If our already high electrical costs go up, God forbid that industries should have to move. But if they have to, they will."

Energy consultant Neil Freeman says that the utility can survive, though the future is not a rosy one. Mr Freeman, who wrote The Politics of Power, which examined the relationship between Ontario Hydro and the provincial government, says the utility has already been broken up into three functional units, so that it has a generation business, a transmission business, and a retail business.

After the provincial energy market is opened up, the transmission business could act as a common carrier for electricity producers, much as Bell Canada acts as a carrier for other telephone companies, he says.

Similarly, the retail company could act as an energy broker, selling electricity from a range of companies

.

The generation company, which would hold the utility’s various generation stations, would be responsible for sorting out its own problems, Mr. Freeman says. It would be much smaller than the aggregate of current Ontario Hydro stations.

In all likelihood, the generation company would be responsible for many stranded debt charges — money owed for infrastructure on which debt is still owed but which produces no revenue (for example, a closed nuclear plant).

Most of those stranded debt charges would have to be paid either by the government or by electricity consumers, Mr. Freeman says. If consumers wind up paying, they would all pay a small charge for debt retirement, no matter what electricity provider they had chosen. Unfair though it may seem, this arrangement is in wide use in many U.S. states. If only Ontario Hydro customers paid the surcharge, the utility’s effective rate would be nudged out of contention in the market.

In some ways, Mr. Freeman hopes that Ontario Hydro remains relatively intact. If many stations are sold, they are apt to be bought by huge American utilities, who can bid the price up far beyond what Canadian operators might pay.

Mark Winfield, policy director for the Canadian Institute for Environmental Law and Policy, says that expenses imposed by tougher environmental regulations will add to Ontario Hydro’s difficulties.

Under the provincial environment ministry’s Countdown Acid Rain program, sulphur dioxide and nitrogen oxide emission caps will be cut in half.

Oddly, new suppliers of electricity will not be subject to these caps, which are specifically directed at Ontario Hydro. (However, Mr. Winfield expects that the government would move quickly to eliminate this inequity.)

Michael Cassidy, until six months ago a member of Ontario Hydro’s board of directors, believes that the resignation of Mr. Kupcis, though well intended, may aggravate the problems facing the utility.

"In the last six years, the shakeups among senior management have been substantial," Mr. Cassidy says. "With Mr. Kupcis’ departure and another round of management changes likely — well, I’m not sure how well the utility can handle all that."

Mr. Cassidy says the utility’s future is "unpredictable." But he cautioned that it is early to count Ontario Hydro out.

"Don’t write the obituary yet. Hydro isn’t just going to roll over and play dead. But it may not succeed in effecting a cure, either."

Martin Mittelstaedt
The Globe and Mail
August 18, 1997

AFTER more than nine decades of energy domination by Ontario Hydro, the province is facing a radical overhaul of its electricity market.

Although no one can forecast the exact shape of the future power market, worth $9-billion a year, all predictions are that the monopoly system overseen by Ontario Hydro since its inception early this century is coming to an end, and something dramatically new is in the offing.

"Ontario Hydro as we once knew it is finished. I just can’t see how the province would allow them to continue on. Some kind of restructuring is absolutely unavoidable at this stage," said Tom Adams, utility analyst at Energy Probe, a Toronto environmental research organization.

With financial and nuclear woes hobbling the energy giant, a competitive market "is now inevitable," Mr. Adams predicted. "The timing and details of the market opening remain to be fought over, but there is really no serious alternative."

The province is expected to unveil a long-awaited white paper on the future of the electricity market in the next four to six weeks.

The paper will have to deal with two related issues: the timing of open competition, and the future of Ontario Hydro.

Currently, electricity prices are set by the giant utility (which is legally required to sell its power at cost to all customers). In an open market, competitive forces of supply and demand would fulfill this function.

The utility also controls the entry of new power producers into the market and oversees the hundreds of municipal-distribution utilities that sell power to most of the province’s residential customers.

The well-publicized difficulties at the Crown-owned utility have complicated the government’s task in redesigning the electricity system.

Few observers believe that Hydro, in its financially weakened position, would be able to deal with the pressures of a competitive market without a drastic overhaul.

"This has really thrown a wrench into the works," said Neil Freeman, an adjunct professor of political science at the University of Toronto and author of a recent book about the utility.

In addition, any plan to deregulate the market is running up against the approach of the next provincial election, widely expected in 1999. Opposition parties would likely try to exploit fears that major power consumers will gain in an open market at the expense of the millions of residential ratepayers.

Mr. Freeman predicted that the government will decide to allow competition but will set the date for some time in 2000, ensuring that the effects on consumers will not be felt until after the next election.

Few governments would want to face the electorate with a deregulatory plan including such political minefields as the privatization of Ontario Hydro, or taking steps to deal with debts amounting to billions of dollars on the utility’s books.

Hydro estimated in its latest annual report that these debts total $16-billion. The so-called stranded debts reflect poor investments the utility has made in its nuclear system, along with its decision to finance almost all of its growth by way of debt.

Although Ontario Hydro currently finds itself in an unwelcome spotlight, its travails with these stranded debts are common throughout the North American electric-utility business, which is facing a transition from a monopoly structure to more open markets on a continent-wide basis.

The money to cover the stranded debts would likely have to be raised through some type of surcharge on electricity bills or a tariff on the province’s transmission system, both politically contentious solutions.

Ontario Hydro’s revelations of its sloppy nuclear practices have seriously shaken its prestige, at a time when it needs to muster all its energies to deal with the the challenges of open competition.

The utility, once considered a crown jewel among Crown corporations, has been further weakened by the fact that it has few remaining allies or public defenders. "Hydro has been sort of cut adrift, and nobody has been coming to its assistance," observed Mr. Freeman.

For its part, Ontario Hydro is responding to the upheaval facing the electricity business by taking what amounts to a life-and-death gamble on its future.

Applying a ruthless type of triage on itself, it is closing more than a third of its nuclear reactors, at an estimated cost of between $5-billion and $8-billion, to concentrate its resources on saving its remaining atomic stations.

Nuclear energy is the heart of Ontario Hydro, accounting for nearly 60 per cent of its electricity production. If the plan works, Hydro will likely survive and remain as one of North America’s pre-eminent electric utilities.

But failure would probably spell the end of the 91-year-old institution in its current form.

In almost all monopoly markets opened to competition, the former monopolist has remained the major player under the new arrangements.

But Ontario Hydro’s future is open to question because it faces such daunting problems, ranging from extensive safety and pollution concerns at its troubled nuclear division to a staggering $32-billion debt load.

A provincial advisory committee headed by former federal energy minister Donald Macdonald recommended last year that Ontario Hydro’s generating assets be broken up into a series of smaller companies that would form the basis for a competitive market.

But in the United States, smaller, privately owned utilities have been merging in preparation for competition, a fact that Ontario Hydro officials have been using to urge the government to resist a utility bustup.

Particularly under former president Allan Kupcis, Hydro argued that its generating assets should be kept in one organization to permit it to continue being one of the dominant players in northeastern North America.

A single large utility would guarantee head-office functions for the organization in the province and would make it extremely difficult for foreign companies to launch a takeover for the company, given that Ontario Hydro would be one of the largest utilities in the world.

The decision to shutter the nuclear plants has completely stalled its efforts to pay down its huge debt — after the atomic problems, the other major difficulty hobbling the corporation.

Since 1992 it has managed to chop nearly $4-billion off its debt load. It had planned to eliminate another $4-billion over the next three years.

But Eleanor Clitheroe, chief financial officer, said in an interview the utility won’t be paying down any more debt in the immediate future. All available cash flow will be used to handle the additional costs incurred by the nuclear shutdowns.

"We won’t have any debt reduction now. The debt reduction that we had planned on, the cash flow that would have retired that debt, will now go into paying for the incremental expenditures around the nuclear" division.

Ontario Hydro faces extra costs of $1.6-billion for nuclear-plant maintenance, $2.5-billion for the cost of more expensive replacement fossil fuel, and $900-million in unanticipated interest costs because debt levels will not be declining, according to company estimates.

If the nuclear stations scheduled for shutdown are not brought back into service later, the utility will also have to write off from its books their $3.4-billion accounting value.

Ontario Hydro has little flexibility to absorb large writeoffs because it has only $2.6-billion in retained earnings, but Ms. Clitheroe said it has received outside legal opinions indicating it can operate with a negative net worth.

Because the nuclear units are being taken out of service, Ontario will likely face a tighter power market, prone to shortages, in the years ahead, at least until new power plants can be built.

Several major U.S. utilities have also been shuttering troubled nuclear stations, eating away at the power glut that has existed throughout the 1990s in northeastern North America.

William Farlinger, Ontario Hydro’s chairman, said this week the province might have power problems if shortages occur in the regional market, where all major utilities are interconnected.

"If there is a problem throughout the northeast then we’ll have a problem, as will Michigan, New York, and everybody else," Mr. Farlinger said. "We got close to this at one stage this year, but the whole northeast was affected."

If shortages occur, it will take about two years to add new electricity capacity by building natural-gas-fired generating stations, the type viewed as the most economical alternative to nuclear plants.

Until now, Ontario Hydro had a surplus of power and used it to win hundreds of millions of dollars in U.S. export orders. But the utility will likely now become a net importer of power and lose this valuable revenue, further weakening its financial condition.

However, the fact that Ontario Hydro will not be exporting to the United States will weaken the ability of U.S. regulators to force open the provincial power market.

The U.S. Federal Energy Regulatory Commission had been trying to compel Ontario to open its power market to U.S. suppliers, in return for granting Ontario Hydro favourable access south of the border.

This means that any pressure for competition in the province will come mainly from domestic sources. These include Ontario’s municipal electric utilities that want the freedom to buy power from any producer, companies wishing to build new power stations, and large industrial users, who will likely have the most leverage to extract lower prices in an open market.

Ontario Hydro plans to offset its lost nuclear capacity by increasing output at its fossil-fuel stations, a course that will lead to dirtier air, with higher sulphur dioxide, carbon dioxide and mercury emissions in a region that already has the country’s worst air-pollution problem.

The utility is currently permitted to emit up to 215,000 tonnes a year of acid-rain-causing pollutants, but produced only 120,000 tonnes in 1996, largely because of its use of nuclear power.

John Fox, the utility’s generation chief, said it plans to keep under the acid-rain limit by using low-sulphur coal and by improving the technology used at its fossil-fuel plants.

Although there are no binding regulations on greenhouse gases, the utility has voluntarily agreed to cut these emissions to 1990 levels by the year 2000. Mr. Fox said it won’t meet this target if the nuclear units shut at its Pickering station near Toronto are not returned to service by then.

"If Pickering does not come back, I believe we’ll start to run into a carbon-dioxide issue at that point in time and we’re going to have to look at alternatives."

In any case, the reliance on coal- and oil-fired plants, with their obvious pollution problems, is viewed as a stopgap measure to ensure the province’s power supply until better options can be developed in an open market.

"As quickly as we can we’ve got to come up with something that’s just more economically and environmentally responsible," said Energy Probe’s Mr. Adams.

Tom Spears with files from Richard Brennan,The Windsor Star
The Ottawa Citizen
August 19, 1997

Reactor shutdowns make shambles of plan to pay $15B cleanup bill

Just last year, Allan Kupcis, president of Ontario Hydro, sat in an Ottawa hotel room describing how the utility would cover the $15-billion cost of retiring its nuclear stations and radioactive waste.

It would do that, he assured reporters, even though the $2 billion collected for that purpose had all been spent on other things.

Today Mr. Kupcis is gone — he resigned suddenly last week in Hydro’s nuclear fiasco -and so is his plan.

Meanwhile, an all-party legislative committee with the power to subpoena witnesses will be formed to look into the "scandalous behaviour" at Hydro that has thrown the utility into a tailspin. Ontario Energy Minister Norm Sterling said yesterday that last week’s report on Hydro by U.S. nuclear experts was so disturbing that the public must know how it fell from grace and where it is going from here.

The damning report, which cited serious mismanagement and safety concerns, was only hours old when it was announced that Mr. Kupcis had resigned and seven nuclear reactors were to be closed indefinitely.

Some of the reactors face closing 20 years ahead of schedule. But there’s not a single penny in the bank to pay for the decommissioning (cleaning up radioactivity at plant sites) or permanent disposal of highly radioactive used uranium fuel.

And that means taxpayers are on the hook for a $15-billion debt, says Hydro’s biggest critic, Norm Rubin of Energy Probe, an independent group in Toronto that has argued for years Hydro’s reactors would not last their allotted 40 years.

As Mr. Kupcis explained in last year’s interview, the plan was to set aside money earned by the nuclear stations to pay for their eventual decommissioning.

Nuclear plants were supposed to last 40 years, by Ontario Hydro’s estimates. The two stations recently picked for shutdowns (Pickering station A and Bruce station A) had started operations between the mid-1970s and early 1980s; they had, on average, half their working lives left, with plenty of earning power.

Now the earning power is gone. But the cost of cleaning up a plant that has run for 20 years is no different from the cost of cleaning up one that ran for 40 years. Each is a big pile of concrete and steel with radioactive components at the centre. "That’s a totally unfunded liability," says Mr. Rubin.

"Everyone’s talking about (Hydro’s) $32- or $33-billion debt, and nobody’s talking about this other $15 billion" in cleanup costs, he said yesterday.

"The situation has taken a dramatic turn for the urgently worse.

"The earning power of the nuclear units and their ability to set aside money for the job has just dropped by a bunch, and the cost of decommissioning and waste disposal don’t drop proportionately."

"Obviously we have to factor all that (reactor closings) in the financial plan," Hydro spokesman Terry Young said yesterday.

Last week’s announcement means that eight of Hydro’s 19 reactors will be out of action. (One reactor at Bruce A was already down.)

Hydro says the shutdowns will allow for an intensive retraining program that will bring its operations up to par.

As much as $8 billion will be spent on retraining, capital costs and generating replacement power at fossil-fuel stations.

That has nothing to do with the $15 billion it will cost, sooner or later, to retire the nuclear stations.

The $2 billion collected so far for decommissioning came from a surcharge on electrical bills in Ontario in recent years, at a rate of one-tenth of a cent for every kilowatt hour a customer uses. It’s possible that amount could be raised to cover the earlier closings of some reactors, he said.

If that doesn’t raise enough cash, the taxpayers are stuck. The Ontario government guarantees all of Hydro’s debts.

Mr. Kupcis confirmed last year that even the $2 billion collected for these costs had been spent to retire Hydro’s earlier debts — money it borrowed in large part to build nuclear stations, especially the $14-billion Darlington station.

Mr. Kupcis argued there was plenty of time to raise more money in the future by selling electricity from the nuclear plants. Those plants currently supply about two-thirds of Ontario’s electricity.

He said Hydro would sell bonds to cover future cleanup costs if it hadn’t enough cash on hand. In the meantime, the $2 billion remains on Hydro’s books as a provision for cleanup costs.

There’s no provision for the remaining $13 billion.

"They set aside money on the basis that everything was going according to plan," said Mr. Rubin.

He says Hydro should have been saving more in the early years of the reactors in case they didn’t last as long as the theory said they should.

"They’re not talking about waste. How can they slough off $13 billion?" asked Normand de la Chevrotiere, a Kitchener resident whose summer cottage is just outside the Bruce nuclear site. Mr. de la Chevrotiere is also a critic of Hydro’s finances, and has been fighting Hydro plans to expand waste storage at the Bruce.

He has been exchanging letters with Canada’s auditor general, Denis Desautels, arguing that Hydro should be forced to set more money aside for future cleanups.

"If they’re serious about their commitment (to future cleanup of radioactivity), show me the money," Mr. de la Chevrotiere said.

And he said Hydro is likely to have trouble selling billions of dollars worth of bonds for radioactive cleanup.

"If you’re borrowing for a business that’s going to generate revenue, that’s one thing," he said.

"When you’re borrowing to sink waste in the ground and get nothing back, I think lenders would be more reluctant to lend."

Stan Josey
The Toronto Star
August 24, 1997

`In Canada we did not have any nuclear disasters such as Three Mile Island to shake our managers and warn them to be extra-careful with things nuclear’

– Former Ontario Hydro president Allan Kupcis

Former boss blames staff ‘complacency’ for problems

The problems in Ontario Hydro’s nuclear division began when nuclear plant workers started believing they were the best in the world and became complacent, says former Hydro president Allan Kupcis.

“This situation had been building for 15 years and the only way we could get at it was to bring in outsiders to take a look at our nuclear division,” Kupcis told The Star in a frank and wide-ranging interview at his Kawartha Lakes-area cottage yesterday.

In his first public statement since he announced his resignation Aug. 12 from his $500,000-a-year job, Kupcis said there never was a question of his keeping it after outside experts found serious management “culture” problems in Hydro’s nuclear divisions.

The report by a team of American experts found the province’s nuclear plants to be safe, but operating at a “minimally acceptable level.”

Kupcis provided the first public glimpse of the “culture of complacency” that allowed nuclear division workers and managers to convince themselves they were the best in the world and therefore could do no wrong.

“Some of the problem was believing your own headlines,” he said.

“Back in the 1970s and 1980s, our CANDU system was unique in the world and Hydro was continually setting records for nuclear efficiency.

“But when people stop looking outside to see what others are doing in terms of getting better, you tend to forget that the target is raised every time someone sets a record.”

He said nuclear plant workers, basking in their success, had been “allowed to grow complacent in just normal work procedures, and management did not take these issues in hand.”

Despite the management problems in the nuclear division, Kupcis stressed there never was any danger to the safety of people working in the nuclear plants or living around them.

He said there has never been a nuclear-related death in the Ontario program.

“In Canada we did not have any nuclear disasters such as Three Mile Island to shake our managers and warn them to be extra-careful with things nuclear.”

He said a near meltdown of a reactor core at Three Mile Island in Pennsylvania in 1979 was a wake-up call for the U.S. nuclear program.

Six months ago, to identify the problems here, Kupcis called in a group of American nuclear experts led by Carl Andognini.

“Some of the people on that team have been involved in similar rescue programs for nuclear facilities in the U.S.” he said. “I am confident we can do the same thing here and return the nuclear program to its former glory.”

The team headed by Andognini, who also is head of Ontario Hydro’s nuclear division, called for the “laying up or closing” of seven nuclear reactors – four at Pickering and three at the Bruce Nuclear Station in Kincardine – and an $8 billion rescue plan for the 12 remaining operating nuclear reactors.

Kupcis said he is confident the team’s rescue program will be sufficient to return Hydro’s nuclear division to its former status.

“I had been working on this for six months with the nuclear team and I knew that one of the issues was going to be accountability in the end,” said Kupcis, 53, looking tanned and fit in a neat blue jean shirt and pants as he he relaxed at his lakefront property with close family members.

“I don’t like running away from issues but then I also knew that the issue of the culture change in the organization involved accountability among management and that is something I have to demonstrate from the front.”

CONFIDENCE LACKING

But even more important, he said, is the need to restore public confidence in nuclear energy, which has “clearly been shattered” in the past two to three years with repeated reports of nuclear leaks and spills at Pickering, tonnes of heavy-metal pollution being spilled into Lake Ontario and evidence of drug and alcohol use in sensitive nuclear areas.

“You cannot operate a nuclear power program without the support and confidence of the public,” said Kupcis.

He echoed the sentiments of nuclear watchdog groups such as Energy Probe and Durham Nuclear Awareness in wondering whether nuclear power might become too expensive compared with future alternatives.

“It could very well be that natural gas co-generation or other power sources might make it inefficient to run our full nuclear program in the future,” Kupcis said.

He said he strongly endorses opening the hydro generation field up to competition and looks forward to that happening soon.

“All this needs is a go-ahead from (provincial Environment and Energy Minister Norm) Sterling to let it happen,” Kupcis said.

Ontario Hydro’s troubles have also taken a personal toll.

“This is the first real vacation I have had in three years,” since becoming Hydro president, Kupcis said.

Relaxing with him at the cottage are his wife Baika and daughters Laura, 19, and Jennifer, 16. His brother Edgar and his family also are vacationing with him.

Kupcis said he has no job at the moment and no plans for the future.

An engineer with a Ph.D. in material science, Kupcis started working in research at Hydro 24 years ago and worked his way into the top job three years ago.

NO PLANS

He would not discuss any severance pay arrangements in the wake of his resignation, saying he had not even talked to Hydro about this.

It is believed he will receive the equivalent of the salary he would have made for the remainder of his five-year contract period, which has more than a year to run.

The seven generating units to be shut down under Hydro’s Aug. 12 rescue plan account for one-third of Hydro’s nuclear generating capacity. Kupcis said it’s possible some of these units will eventually be restarted. But first the remaining operating units at Bruce, Darlington and Pickering have to be repaired and upgraded.

“Once they are back operating at top efficiency then they can look at restarting the units that were closed.” Kupcis said.

He said it is more likely the Pickering units might be restarted than those at Bruce, because a $1 billion retubing program has been completed at Pickering, while it has not been started at the older Bruce station units.

In fact, he said, there is a tentative timetable to look at restarts of the Pickering units in 1999.

Kupcis, who appeared jovial, said his main priority over the next week is getting his daughter Laura back to Montreal for her second-year studies at Concordia University.

“Those are my plans.”

Barrie McKenna
The Globe and Mail
August 25, 1997

Deregulation is making many aging reactors suddenly unprofitable and threatening once-powerful utilities with bankruptcy.
U.S. nuclear plight may be omen for Canada

Washington –

Five of the six nuclear reactors owned or operated by the Berlin, Conn.-based power company were closed last year, at least two of them permanently. At the company’s aptly named Millstone site on the shore of Long Island Sound, for example, federal regulators ordered the shutdown of three reactors built within the last 25 years because of safety and operational concerns. The rulings have left New England’s largest power company drained of cash and scrambling to get at least part of its tattered nuclear arsenal back on line. Meanwhile, regulators, consumers and investors are fighting over who should pay the massive bill — for the temporary shutdowns, for permanently decommissioning reactors, and for the billions of dollars sunk into power plants that may no longer be economically viable in a deregulated electricity market. Last February, Northeast Utilities’ chairman and chief executive officer abruptly quit, paralleling the sudden departure this month of Ontario Hydro president Allan Kupcis.

In the U.S. industry, where monopoly utilities once papered over troubles by charging consumers more, the advent of competition has been cataclysmic. It has triggered thousands of layoffs, a wave of takeovers, executive departures, financial distress and nasty regulatory battles.

Before direct competition, which is being phased in over time in most U.S. states, utilities recovered investments over time through regulated rates. The utilities borrowed money on the understanding that this arrangement was permanent.

But as competition grows in the electricity market, utilities with plants built in the old era are being forced to lower rates and costs to retain their market shares, which sometimes means they can no longer turn a profit or even service their debt. Such utilities are left with what’s known as "stranded costs" — massive depreciated investments in multibillion-dollar plants.

It is estimated that stranded costs now total $200-billion (U.S.) or more in the United States. Estimates vary widely because it’s unclear how soon full competition will occur, or to what extent regulators will pass on those costs to customers or rival suppliers.

Alternative suppliers — private power producers and utilities as far away as Canada — will be able to offer electricity directly to some customers as early as next January in states such as California, Massachusetts, New Hampshire, Illinois, New York and Michigan. In most cases, they will do so at prices well below existing, regulated, rates.

That will leave companies like Northeast Utilities saddled with a stable of power plants that could become the dodo birds of the electrical industry.

"The primary lesson from the United States is that customers ought to be in control — not regulators, not utilities," said Tom Adams, executive director of Toronto-based Energy Probe, an independent environmental research organization. "The people who pay the bills . . . should be guaranteed the right to shop around."

The U.S. Department of Energy estimated in a recent study that deregulation will lower prices by 6 to 13 per cent, saving consumers as much as $60-billion a year. But those savings could be reduced by the amount that consumers will have to pay to cover stranded costs.

The U.S. nuclear industry claims responsibility for just a third of the problem of stranded costs, noting that producers of hydroelectric power and fossil fuels face similar trouble of such costs, through high-priced long-term contracts to buy power.

The industry adds that its plants, particularly those built in the 1970s and early 1980s, have been victims of bad timing. Galloping inflation and a regulatory backlash after the leak of radiation at Three Mile Island in 1979 added billions to the cost of projects.

Bernard Weinstein, director of the Center for Economic and Development Research at the University of North Texas, warned in an interview that some companies could face bankruptcy if they can’t recover most of their stranded costs, resulting in "serious negative implications for system reliability."

Much of the stranded costs, Mr. Weinstein said, inevitably will be paid through a surcharge on energy bills or an "exit fee" for consumers who switch to an alternative supplier. Another mechanism of payment would be to charge suppliers of alternative power hefty additional fees to use a region’s transmission lines, but ultimately the consumer would pay the price for that too.

"The longer the day of reckoning can be put off, the better off utilities will be and the lower the stranded costs will be," Mr. Weinstein said.

At least six of the more than 100 nuclear reactors in the United States have been closed permanently since 1990. Several, like Millstone, are closed temporarily. But countless more are operating while their owners assess their continued viability in a deregulated environment.

"Utilities are looking at their portfolios and making decision about which plants can compete," said Leigh-Ann Marshall of the Washington-based Nuclear Energy Institute, a research group financed by the nuclear industry. "It’s not exclusive to nuclear."

Still, the trend away from nuclear power seems irreversible. Since the late 1970s, more than 100 planned nuclear reactor projects in the United States have been cancelled. Analysts expect output by the nuclear industry, which now supplies 20 per cent of U.S. power, to decline by a third by 2015.

The transition won’t be cheap or easy. At Millstone, where workers are busy upgrading three reactors to appease regulators, stranded costs may total more than $2-billion.

"What we need to do, and are concentrating on doing, is to get the plants back," said Northeast Utilities spokesman Rich Gallagher. "Our financial health will start to recover when that happens."

The company is also embroiled in litigation with investors and regulators over who should pay for the mess at Millstone. In New Hampshire, Northeast Utilities is suing to block a deregulation plan that, it says, would bankrupt two of its power plants. In Connecticut, it is appealing a decision by state regulators that prevents it from billing customers for shutdown expenses. Connecticut has not passed deregulation legislation that would allow the company to pass on its stranded costs to consumers.

Analysts warn that Canadians will not be immune to what is happening in New England and elsewhere in the United States where the transition to an open market is causing so much turmoil.

There is much discussion in Ontario about the problem of stranded costs in the wake of Hydro Ontario’s recent announcement. The pending closing of Ontario nuclear facilities also has redoubled calls for provincial deregulation of the electricity market.

Some of the fallout from U.S. deregulation actually will be positive for Canada’s monopoly utilities. For example, the Millstone shutdown has forced Northeast Utilities to buy additional power from other utilities, including Hydro-Québec.

Still, the quid pro quo for Canadian utilities, and indirectly for Canadian consumers, is that there must be open competition at home before U.S. regulators will allow unfettered access to the U.S. market.

So far, Alberta is the only province to have fully deregulated its wholesale electricity market. Others, such as Quebec and British Columbia, are doing so in a piecemeal way as opportunities for export sales expand. But deregulation in Ontario remains several years away and it remains to be seen whether the recent news about Ontario Hydro will change that.

Bob Hunter
eye magazine
August 28, 1997

Wouldn’t you know, I happened to be away on a canoe trip along the 60th Parallel, west of Hudson Bay, when Ontario Hydro boss Al Kupcis fell upon his sword and his retirement package, and the truth finally came out that, indeed, just as yours truly has been saying for decades, Canada’s nuke program is a crock of dangerous shit. Trust the bastards to wait until I was out of town before announcing their own doom.

They never did cooperate!

My first thought upon hearing the news about seven nukes being shut down was: I’d sure like to know what Kupcis got paid to take the blame and walk the plank. Here was a guy getting paid half a million dollars a year to run a nuclear-powered electrical utility, and he turns out to be Homer Simpson? Not likely.

Kupcis is no fool. He knew damned well what was going on down there in the shadow of the reactors where the boys were playing computer games (probably while stoned) and management was walking around with no clothes on — and no one blew the whistle!

Except people outside the industry. People not on the juicy payroll. People like Norm Rubin, Tom Adams, John Bennett, Dan McDermott, Dave Martin, Irene Kock (know as Irene Knock by her foes in the Power Workers’ Union). People who have been opposing Hydro’s mad nuclear adventurism for almost as long as the nuke cult has been running loose in Ontario.

Add to those names, by the way, practically the entire environmental movement.

How is it that these scruffy, underpaid neo-Luddites knew what was going on in the depths of the accident-prone nuclear power stations, while the $500,000-a-year execs like Kupcis sailed through life thinking everything was hunky-dory?

Hell, even I knew what a mess places like the Pickering, Bruce and Darlington generating stations were, and by the time stuff filters down to the likes of me, the heavy hitters are usually reaching for their third or fourth fall-back denial.

Kupcis knew. Everybody knew. The only reason the truth didn’t break out into the open sooner was nearly universal, systemic corruption within Hydro. From the union to all levels of management to the CEO’s office, everybody’s silence was bought.

Everybody lied. It is as simple and depressing as that. The most effective coverups are the ones where everybody gets involved and agrees to a mutual blindness. The one-eyed man is deemed mad or a traitor.

For the record, I’d like to note that the first newspaper column I wrote criticizing the vaunted CANDU nuclear reactor’s design was in 1969, in the Vancouver Sun.

If someone back then had told me Canada would still be flogging these fucked-up megamachines to Third World and Communist regimes in the late 1990s, I wouldn’t have believed it. Tells you a lot about the power of entrenched elites, even in a (quasi-) democratic society, doesn’t it?

But here’s the main question, which hasn’t been answered by the ritual resignation of Al Kupcis and the crazy talk of spending billions of dollars more to "save" the remnants of the nuclear hardware: Where was the federal "nuclear watchdog," the Atomic Energy Control Board (AECB), while the cultists were wanking wildly in Ontario’s generating stations?

Why were the AECB lapdogs merrily pounding out so-called reports that assured the public time and again that everything was just fine, or, if there were problems, not to worry, it would all be taken care of by responsible officials and dedicated workers?

Why didn’t the truth come out until an American expert was brought in? Why were licences, at Pickering in particular, granted year after year despite the protestations of the environmentalists (who were right after all)?

It is not enough that one fat-cat CEO with a pension to die for has resigned. And it will not be enough if a few "misguided" managers are hung out to dry. The entire board of the AECB should be kicked out onto the street with signs saying "Incompetent Bastard" pinned to their backsides.

And what about all those spin doctors and spokespersons who have been revealed as nothing but hucksters of disinformation?

By hey, why get picky? We’ve got the godless nuke swine on the run! That’s what counts.

Bob Hunter is a co-founder of Greenpeace and ecology specialist for CITY-TV.

Tom Spears
The Ottawa Citizen
August 30, 1997

Way back in 1981, a tiny research outfit in Toronto wrote to the chairman of Ontario Hydro, warning that nuclear megaprojects would cost Ontario dearly. Energy Probe warned of cost overruns in building nuclear plants, uncertain future demand, growing debt, competition from cheaper power sources, and reactors that might not run as perfectly as the glowing forecasts claimed. It’s been proven right on all counts, bearing out two decades of warnings that nuclear stations were financial messes.

Hydro announced this month the shutdowns of eight reactors and publicly attacked its own nuclear cult.

And costs did balloon, as Energy Probe forecast. Darlington was supposed to cost $3.5 billion to build; the actual cost was $14.3 billion all of it added to Hydro’s long-term debt.

But back in 1981, Hydro chairman Hugh Macaulay was in no mood to listen. He accused Energy Probe of scare tactics, and claimed that high inflation would cover the expense of building Darlington. To put it in perspective, he wrote, someone currently earning $25,000 a year will be making nearly $100,000 a year in the year 2000 just through inflation.

Well, maybe not.

Through Ontario’s age of nuclear expansion, with 20 nuclear reactors producing two-thirds of our electricity, Energy Probe has been the only constant voice of opposition.

The organization is mainly two people (plus one part-timer and some volunteers). Norm Rubin, 52, is the one who wrote to Mr. Macaulay. He’s a transplanted Bostonian with a mixed background in physics and music from MIT. Tom Adams, 36, is the other half, a Nepean native with a BSc in agriculture and a master’s in environmental science.

That’s all there is to Energy Probe. "It’s the Norm and Tom Show," Mr. Adams says.

The two of them have ignored the easy, sky-is-falling anti-nuclear warnings and produced analyses that have accurately found nuclear weak spots time and again.

Mainly those are based on money. For instance, they dug through Hydro data as Darlington was delayed in the early 1990s, and found that the delay was costing $27 million per month in interest charges alone for each of Darlington’s four reactors.

Ontario has now seen an unlikely shift of views, with the mainstream edging towards Probe’s views as nuclear troubles keep driving the price of power up and dependability down.

"In a lot of ways we’ve always been close to heartland values," said Mr. Rubin.

The public never felt comfortable with nuclear power, he believes, but people didn’t really criticize as long as no problems were apparent at the nuclear plants.

Hydro now acknowledges it mismanaged its nuclear plants in the early 1980s, making them look artificially good. It kept them running at high power without stopping to do maintenance that the reactors needed, like a taxi driver who never changes the oil because he might miss a fare.

"They bet the farm on nuclear," Mr. Rubin says.

By the early 1990s, the nuclear stations were having a lot of down time. On average, they were lucky to run at 70 per cent of full output. And as costs rose, these were passed on to the customers. Hydro’s prices rose by 19 percentage points more than the rate of inflation in the first three years of this decade.

Hydro’s debt soared from $14 billion before building Darlington to $36 billion afterwards.

That’s when Probe started to attract unlikely fans economists and investors. One of the most visible was an influential Wall Street investment newsletter called Grant’s Interest Rate Observer. It sent a researcher to Ontario late in 1992 to review Ontario Hydro’s double-A bond rating, and interviewed Mr. Adams along the way.

"Ontario Hydro is going bankrupt," he told Grant’s. "They’re backstopped by the (electrical) monopoly, which gives them the right to screw the taxpayer." He argued that lack of accountability to shareholders and unlimited loan guarantees by the province of Ontario had made Hydro reckless with money. In an article called The Ugliest Double-A, Grant’s concluded: We are with Adams.

The newsletter warned investors not to buy Hydro bonds. What is the best thing to happen to a bondholder? As always, the payment of interest and principal. And the worst thing? Don’t ask, it said.

That publication was one of the early signs that Mr. Rubin and Mr. Adams, with a combined salary of less than $75,000, had their fingers closer to the pulse than all the people in Hydro’s headquarters.

The Grant’s piece was part of the process of making Energy Probe appear credible to a group of people who had never considered an environment group credible, says Mr. Adams.

He followed up by addressing economists at the Chateau Laurier in mid-1993, telling them Hydro had run up its debt unwisely.

If he had said that 10 years earlier, one economist told him, people would have thrown food at you.

Later that year the Canadian Journal of Business Economics published his analysis of the trouble at Hydro.

Though it’s within walking distance of Hydro’s monolithic glass tower, Energy Probe’s office is in another world.

The 1920s brick building was first a parish hall, then a church, then a temple for two successive Jewish congregations, then an art school.

Nestled on Toronto’s Brunswick Avenue, a block from the coffee houses and used clothing stores of Bloor Street West, the office is shared with the union representing Toronto’s library staff.

Shade trees are all around; even a sundial is in the shade. Conserving solar energy?

Inside, boxes of papers and shelves of files are Probe’s long-term memory. They show fascinating changes in the nuclear business.

Then there’s Hydro’s secret proposal to cause intentional power blackouts in the late 1980s, to persuade the public that Ontario needed more nuclear stations. (Probe made that proposal public, and Hydro hustled to reply that it came from an outside consultant, not Hydro staff.)

There are also forecasts by Hydro showing that show electrical demand rising by seven per cent every year. It didn t; in fact it fell slightly in the recession.

And there’s Mr. Macaulay’s 1981 letter.

"He was in a position to see and saw none of it," says Mr. Rubin.

"And ran right into the brick wall," says Mr. Adams.

There are also revised costs analyses from Hydro. Oddly, as the actual cost of providing electricity has risen, the theoretical costs in these analysis is shown to fall. That makes more nuclear stations look good on paper.

"And you ask yourself, What’s wrong with this picture?" Mr. Rubin says. Now Ontario has launched a select committee of the legislature to examine what went wrong in the nuclear stations.

"I’m nervous it will detract from the urgent task at home (by creating) more research and less action," Mr. Rubin says.

He wants to see greater competition in place of Hydro’s monopoly right to sell electricity in Ontario. That, he says, will bring smaller cogeneration plants, where steam that powers a factory also runs a turbine generator and makes electricity. One fuel does two jobs at once.

He also warns Ontario shouldn’t let Hydro spend a further $2 billion to upgrade its remaining reactors at Bruce and Pickering after its closes the first eight.

If it’s such a terrific investment, he argues, then the Hydro employees pension funds should be investing heavily in it.

Suddenly, with the shockwaves that flattened eight reactors still rumbling, everyone is calling Probe. Mr. Rubin has been in front of a lot of TV cameras, on CBC’s Cross-Country Checkup, and in newspapers from all over. And everyone’s wondering whether the latest nuclear troubles make him happy.

"Yes and no," he says. "You have to fight yourself to keep from feeling good, because it’s bad news."