Energy Probe

Bruce Livesey
Eye magazine
July 13, 2000

Will the troubled Pickering A nuclear power station be properly assessed before it fires up its reactors again next year? And is it too old and hazardous to be turned on at all?

This is what worries Lorenzo Berardinetti. The Scarborough city councillor introduced a resolution at Toronto’s city council last May calling on the federal government to set up an independent panel to conduct an inquiry into whether Ontario Power Generation Inc. (OPG) — formerly Ontario Hydro — should start up Pickering A’s four reactors sometime in 2001. The resolution was passed unanimously. "[OPG] wants a low-level assessment," says Berardinetti. "We’re saying that before we start Pickering A we must have a high-level assessment and an independent inquiry."

Two weeks ago a similar resolution was passed by Pickering’s city council. As Pickering city councillor Maurice Brenner observes, "There are a lot of unanswered questions — like why is there a higher rate of leukemia and various cancers in the Durham region than any other area of Ontario? Why is that? And you know, we don’t know."

Located just east of Toronto on Lake Ontario and opened in 1971, Pickering A is Ontario’s oldest nuclear reactor (combined with Pickering B, the entire station has a total of eight reactors). But in 1997, Ontario Hydro was forced to close down Pickering A because of a backlog of maintenance problems, a dearth of manpower and for barely meeting minimum international safety standards.

Now OPG is spending $1.2 billion to overhaul the four reactors. And all was going well until the federal nuclear regulator, the Atomic Energy Control Board (AECB), demanded an environmental assessment.

But anti-nuclear critics and the cities of Toronto and Pickering say the scope of this assessment is too narrow and the AECB is not arm’s-length enough to carry it out objectively. They even say restarting Pickering A is a bad idea, given the station’s history of safety, health and cost problems. "We’re taking the position that Pickering A should not be restarted," says Irene Kock, an activist with the anti-nuke Nuclear Awareness Project. "They haven’t got a good record on preventative maintenance."

In many respects, Pickering A symbolizes the failure of nuclear power to live up to its promise of being a cost-effective, safe and environmentally benign source of energy. As the anti-nuke group Energy Probe has long pointed out, nuclear power stations are enormously expensive to build, wear out much faster than expected and never pay back their initial investment. And, of course, they’re dangerous.

Three years ago, when Pickering A was closed down, the public utility had spent so much money on nuclear stations it had a stranded debt of $23.3 billion, a net negative value of $6 billion and Ontario’s utility rates were among the highest in Canada. Ontario Hydro once estimated it would cost $18.7 billion to phase out all of its nuclear stations.

"Nuclear plants are supposed to be cheap to operate and extremely expensive to build," says Norm Rubin, director of nuclear research at Energy Probe. "Owning a nuclear station is like owning a Ferrari that costs $100,000 but gets good mileage. The problem is, when it breaks down you keep having to pay back the loan for $100,000 and pay for taxi cabs to get you where you want. So you pay through the nose in both ways."

Pickering A has had a long history of problems. For starters, when they built the four reactors, the utility installed only one emergency fast-shutdown system instead of the two that subsequently built reactors have. In 1983, Pickering had a loss-of-coolant accident after a pressure tube ruptured, causing the entire station to be turned off and necessitating a $1 billion retubing job.

In 1988, radioactive iodine was released at Pickering after an error caused the damage of 36 fuel bundles. Four years later, the station had a heavy water leak from a heat exchanger that resulted in a release of 2,300 trillion becquerels of radioactive tritium into Lake Ontario. In 1994, Pickering had another major loss of coolant resulting in the spill of 185 tonnes of heavy water — the emergency cooling system was used for the first time to prevent a meltdown. By the time Pickering A was closed, it was operating at a bare minimum of standards.

When OPG indicated it wanted to restart Pickering A, initially it did not want to carry out an environmental assessment. Still, when the AECB persisted, the agreed-upon assessment turned out to have a limited scope and is being conducted behind closed doors.

Anti-nuclear advocates have fought against these restrictions. Moreover, they argue that the AECB has been long an apologist for nuclear power and is therefore not objective enough to conduct a proper review. "They’re too close to the operator," notes Brenner.

Not surprisingly, the AECB is refusing to hold public hearings for the environmental assessment. They gave community groups only 60 days to make written submissions, turning down requests to have this period extended. Moreover, the assessment is not looking at the possibility of a Chernobyl-like meltdown scenario, nor examining safer, cheaper alternatives to nuclear power like solar, wind or high-efficiency natural gas plants. "They are assuming the safety systems work, which is an absurd assumption because safety systems have a long history of problems," says Kock. "And there’s no discussion to alternatives or to the need of starting the plant at all."

Both Toronto and Pickering have demanded that an independent panel be established to do the assessment, along with public hearings. They want federal environment minister David Anderson to step in and order this.

Meanwhile, in their submissions to the AECB, Energy Probe and the Nuclear Awareness Project have criticized OPG for overlooking the age of Pickering A, ignoring the fact that radioactive toxins are emitted persistently from the plants, and that the emergency-shutdown systems are inadequate. "They haven’t incorporated the improvements in designs of nuclear reactors that have been made since the ’60s," says Rubin.

OPG spokesperson Ted Gruetzner says they have improved the shutdown systems and made other modifications to Pickering A. He says they conducted a cost-benefit analysis and found that reopening the station was the cheapest way to obtain energy at this time. Says Gruetzner, "For the type of energy needed based on current technology and costs, this was the best way to go."

Dan Westell
Financial Times
July 13, 2000

The Ontario government decision this week to lease some of its troubled nuclear electricity plants to British Energy signals a real beginning to the end of a monopoly that has shackled the province with almost C$21bn ($14.2bn) debt.

But a thick fog on the distribution side of Ontario’s C$9bn electricity market is muffling the glow produced by the progress in reducing the state’s role in generation.

The same government that is celebrating the beginning of real competition in generation has also introduced legislation to curb price increases by municipally-owned distributors. By changing the rules in mid-game, it has thrown the utilities and the investors who were to fund the industry restructuring into disarray, undermined the independent regulator and given the government’s own distributor an advantage.

Bill 100, introduced by the energy minister, Jim Wilson, dismays even those who see competition as the means to rein in the state monopolies. "Ontario is in a good position now to really embarrass itself," said Tom Adams of Energy Probe, an independent watchdog organisation that wants to introduce market forces into the system.

The province’s Conservative government began to deregulate by splitting state-owned Ontario Hydro into two arms, a transmission/distribution company, Hydro One, and a generator, Ontario Power Generation.

It also sought to make municipally owned distributors more efficient by compelling them to merge or restructure as corporations.

As part of the package, almost C$21bn of "stranded" debt was removed from the books of OPG and Hydro One, leaving them with normal levels of utility debt, rather than the unserviceable amounts inherited from Ontario Hydro.

That money, guaranteed by taxpayers, is now being collected from business and individual customers indirectly through a charge on all the companies in the business (the C$625m initial lease payment from British Energy for the Bruce nuclear plants will probably be applied to the stranded debt) and directly through a surcharge on electricity bills.

Many municipal distributors, especially those with a handful of subscribers, opted to be taken over by the government’s Hydro One. It has already bought 45, with 64,500 ratepayers, and has made offers on others.

But the cities that own the big operations, such as Toronto Hydro, opted for incorporation and took out hundreds of millions of dollars, expecting to recover the money through rate increases. Private investors began to move into the municipal sector, basing their return calculations on the rules then in place.

Even though the municipalities were operating within the law passed by the Conservatives, Mr Wilson was outraged. He talked of "value siphoned out of the local electricity system that was paid for over the years by electricity customers", who needed protection from local politicians taking "windfall profits."

In June he introduced Bill 100, entitled "An Act to Promote Efficiency in the Municipal Electricity Sector and to Protect Consumers from Unjustified Rate Increases", and directed the regulator, the Ontario Energy Board, to force municipalities to justify rate applications.

Investors are reassessing their options in the wake of the bill. A planned C$150m debt issue by Hydro Mississauga, the distributor in a booming suburb on Toronto’s western border, is on hold while the utility and its investor, a pension fund, assess the bill.

"Private buyers are going to look at this and wonder where the cash flow is going to come from," an industry insider said. The municipalities believe the minister is reacting to a crisis of his own causing. The restructuring raised costs and, they complain, distribution accounts for only 15 per cent of the costs in the system. Generation, at 70 per cent, represents a better source of cost cutting. The distributors could certainly be more efficient, Mr Adams said, but they were not facing the "financially unsustainable situation" at Ontario Hydro, which was squeezed between the need to service its huge debt and the requirement to hold down rates to prevent industry fleeing the province.

The bill does not apply to Hydro One, giving it the option to buy distributors and then seek rate increases that would be blocked if a municipality wanted the raise. Investors and the industry are lobbying the government to change the bill, which has had a first reading. The house has risen until the fall.

There is hope, said David McFadden, chairman of the Stakeholder Alliance, which represents most parties in the system. "The rules have not been changed. There’s a proposal to change them."

Janet McFarland
Globe & Mail
July 13, 2000

God knows there’s no defending Ontario Hydro’s safety record managing its nuclear facilities. But British Energy’s track record isn’t spotless either, and Canadians need to carefully monitor the province’s first effort at hiring a private company to manage a nuclear plant.

The British are way ahead of Canada in the privatization game. British Energy, now a publicly traded company, runs eight nuclear sites in Britain and has signed deals with an American partner to buy five nuclear plants in the United States.

On Tuesday, it announced its first Canadian contract, an 18-year lease to operate the Bruce nuclear plant in Ontario. British Energy owns 95 per cent of the new company established to run the plant, while two unions that represent nuclear power workers own the rest.

The British experiment at nuclear power privatization has been rocky. The biggest black eye for British Energy, which was established in 1996, was the leak last August of a confidential report by Britain’s Nuclear Installations Inspectorate (NII) — the government nuclear regulator — that said BE’s relentless quest to cut costs and boost profits had led it to severely cut staff levels in its nuclear plants.

Since 1996, BE has cut 1,500 jobs or 20 per cent of the work force, including many operating positions in the plants. Some have been replaced by outside contractors.

The NII said this was a threat to safety at the nuclear plants. The inspection report said the staff cuts were done on the assumption that there would be less safety work required in a privatized company, but instead the experience has shown no reduction in workload.

In a number of key safety areas, such as fire protection, BE now has just one specialist for eight different nuclear sites, the report says. It said there is no longer anyone working in the area of severe accident analysis.

The report cites a "widespread attitude" that the top priority was on electrical output and that it was acceptable to delay less immediate safety work. It faults management for not fully appreciating the difference between nuclear and conventional utility management.

Since last August, BE has indicated it still plans more layoffs. However, it has been prohibited by the NII from making further major cuts in key staff areas. Meanwhile, the NII says many if not most employees at the plants are working substantial overtime, and said the actual levels of overtime have been underreported by BE.

In Canada, BE has offered jobs to all 3,500 people working at the Bruce plant. The union partnership at Bruce has already ensured that BE has the unions on side, which could indicate we will not have the same cuts here — at least in the short term.

In the United States, there has been strong opposition by environmental groups to the AmerGen Energy Co. partnership (half owned by British Energy and half by Peco Energy Co.) that owns or is buying five nuclear facilities. Four environmental and anti-nuclear groups, for example, have conducted a campaign to prevent AmerGen from buying the Vermont Yankee nuclear station, citing concerns that safety will be compromised by private ownership. They have extensively quoted the NII report to support their safety criticisms about British Energy.

Nuclear watchdog Energy Probe in Toronto says it does not oppose private management by British Energy. Indeed, nuclear research director Norman Rubin says Ontario Hydro did too poor a job to advocate keeping it in charge.

All faith was swept away in 1997 with the release of a damning report commissioned by the hydro utility, which called the nuclear operation a rogue division that shrugged off serious safety problems. In the report’s wake, Ontario Hydro shut down seven of its 19 reactors, while chief executive officer Allan Kupcis resigned after accepting responsibility for the fiasco.

There’s no evidence to suggest British Energy will do a worse safety job than Ontario Hydro. But there must surely be some time spent acknowledging the British problems.

Ontario residents have been shaken by the Walkerton E. coli crisis and the message it sent about poor monitoring of privatized water testing. This is not the best time to sell the safety merits of privatized nuclear plants. The only way for the Ontario government and the federal nuclear regulator to reassure the public is to openly acknowledge the risks and to learn from the safety concerns in other jurisdictions. British Energy has to earn our trust.

Deirdre McMurdy
Maclean’s
July 31, 2000

Ron 0sborne has one of the most unusual challenges of any chief executive in Canada: his primary job is to create competition for the company he runs.

Osborne, 54, is president and CEO of Ontario Power Generation Inc., the venture that now holds the electricity- generating assets owned by Ontario Hydro before ir was bro- ken up in 1999. Osborne had joined Hydro in 1998, two years after the provincial government announced that it would dismantle the largest power utility in Canada and in- troduce open competition into a monopoly market. Since taking the helm at Hydro, he has been racing to overhaul the utility’s bloated bureaucracy. Within a decade, he must re- duce Ontario Power Generation’s share of the province’s elec- tricity generating market to 35 per cent from its present 90 per cent, to comply with the Tories’ Energy Competition Act.

To that end, Osborne recently inked a controversial $3.1-bil- lion deal that will see British Energy PLC lease and operate the nuclear facilities at the Bruce generating plant on Lake Huron for 18 years, competing with OPG for their existing customers, as well as any new ones. In his view, the deal is a huge step in the right direction. "We’ve been mandated to help create com- petition under Bill 35 and we might as well get on with it," he notes. "It’s not much of a game plan to have the sword of Damocles of decontrol hanging over your head for 10 years."

The transaction has come under intense public scrutiny. For one thing, critics have expressed concern that after the lease expires, Ontario taxpayers will be saddled with an ob- solete facility and a big tab for decommissioning the reactors and disposing of hazardous waste. There has also been a call for assurances that the money from the lease will be directed towards the reduction of the almost $8 billion "stranded debt" left behind after Ontario Hydro’s restructuring. Still others are worried about the environmental standards that will be enforced when Bruce–which is now only partially operational–is no longer under OPG’s control.

In his rapid-fire manner, Osborne briskly ticks off his an- swers to each of those issues. Ontario is on the hook for the cost of de-commissioning and disposing of waste regardless of who operates the plant. And a big block of the lease pay- ments will be directed to those future costs. Both federal and provincial regulators will oversee the environmental stan- dards at Bruce. Furthermore, Osborne points out that British Energy will try to restart several of the Bruce nuclear units that were mothballed between 1995 and 1998. "We can’t re- store service at Pickering and Bruce simultaneously. That’s beyond any management team’s grasp," he declares.

Even Norm Rubin of Energy Probe, a vigilant watchdog on nuclear issues, sees some benefit to the British Energy deal. "There will be no more confusion surrounding this business. We all now know that we are dealing with a company that is out to win, to minimize costs and maximize returns." He adds that "any clarity is welcome."

Certainly, clarity is something that Osborne is struggling to achieve at OPG. He would support privatization of the util- ity–eventually. Although he emphasizes that the Ontario government has taken no formal steps in that direction, he also notes that the government did hire two teams of invest- ment bankers in the spring to help it review options for OPG and its assets. "lf we do a good job, the government will have several options to consider," says Osborne. "If we do a bad

job, it will have few options beyond the status quo or the breakup and sale of assets."

For Osborne, the status quo has never been a viable option. A British-born chartered accountant, he worked for several years as a partner at Clarkson Gordon, before scaling the se- nior ranks at Maclean Hunter. After losing an acrimonious battle with Rogers Communications in 1994 over control of the publishing company, now called Rogers Publishing, Os- borne resurfaced at BCE Inc. As president of the conglomer- ate, and then president and CEO of Bell Canada, he became directly involved in a painful process that taught him many of the lessons he’s now applying at OPG: the end of Ma Bell’s monopoly in Ontario, Quebec and the Northwest Territories.

Perhaps the most important lesson, says Osborne, is the huge cultural adjustment required for successful deregu- lation and competition. "In a monopoly, there’s a sense that you know what’s best and the customer has to take what he’s offered. You dictate to the customer, then all of a sudden you have to learn to listen and respond," says Osborne.

In addition to his self-confessed practice of "preaching from the Mount whenever an employee will stand still long enough," he is also tackling the cultural shift at OPG in a practical manner. "We’ve made it clear that we’ll continue to put bread on the table for our workers," he explains. "But most of the jam for that bread has to come from earnings and corporate performance." To reinforce that message, he has introduced a variety of profit-sharing plans which, he says, "have quickly gone a long way to building an interest in the financial success of OPG."

Any such success will come under some serious strain by mid-2001, when full competition is anticipated to begin in the Ontario power market. Independent power generators, local distributors, aggregators, wholesalers and British Energy will all be vying for their piece of the $9-billion-a-year provin- cial power market. By then, Osborne intends to have OPG even closer to its fighting weight–and his fighting spirit.

Norm Rubin

August 9, 2000

In the wake of the announcement that Ontario Power Generation (Ontario Hydro successor company) will lease the Bruce Nuclear Power plant to British Energy, Norm Rubin, Director of Nuclear Research for Energy Probe appeared in:

Macleans Magazine
The Toronto Star
The Globe & Mail
The National Post
EYE Magazine
CBC Radio’s National and regional news programes
CBC Radio’s Ontario Today with Dave Stephens
CBC Radio’s Here and Now with Avril benoit
CFO Radio’s Open Line in Owen Sound
CTV’s National news
Prime TV’s Prime Business with Deirdre McMurdy.

Mr. Rubin also spoke with:

Toronto Sun
Reuters
Financial Times of London
Owen Sound Sun-Times
Dow-Jones Energy Service
Kitchener-Waterloo Record
Bloomberg
NOW magazine.

Mr. Rubin made the following points:

– The lease will transfer some of Bruce’s financial risk from "unwilling investors" (Ontario taxpayers) to "willing investors" (British Energy shareholders) – a welcome shift.

– Unfortunately, much of the financial risk — of poor operation as well as higher-than-expected costs of cleaning up the radioactive mess — remains with Ontario taxpayers. The cleanup costs have been estimated by Hydro/OPG at $18.7 billion for all 20 reactors, approximately 40% of which relates to the Bruce reactors.

– The involvement of a shareholder-owned, profit-maximizing company in the operation of Bruce will predictably elicit better regulation (safety and environmental) from federal and provincial regulators, and demands for even stricter regulation from the public. Many people have long believed (wrongly) that Hydro’s/OPG’s public ownership and non-profit status meant that they did not "play to win" in regulatory matters. The lease arrangement will bring welcome clarity in that regard, and the clarity will help remind regulators and the public of the importance of regulation. (Indeed, the federal AECB, now renamed CNSC, has already announced that it directly links private ownership with the need for regulatory stringency: specifically, AECB/CNSC says it will ONLY demand that the present generation provide the cash to clean up the nuclear mess IF reactor ownership is transferred to a private, non-governmental party!)

– In all the above regards, an outright sale of the reactors would have been far preferable to the lease. We are disappointed with the lease arrangement, though it is better than yesterday’s status quo. It also appears (from recent reactor sales) that BE was willing to pay MORE for the 18-year lease than it would pay to buy. (Wouldn’t you??)

– All the cash BE pays for this lease MUST be directed to pay down Ontario Hydro’s "stranded" debts, and not left in the hands of OPG to play with and lose. (Minister Jim Wilson has since promised that this "MUST" will be met.)

Mohammed Adam
Ottawa Citizen
September 3, 2000

Ontario-Quebec project would cross wetlands  

Ontario’s Hydro One is teaming up with Hydro-Quebec to build two new $304-million cross-border transmission lines the companies hope will reduce electricity prices, increase reliability and provide backup in emergencies.

Pending approval of the Ontario Energy Board, construction of two 20-kilometre transmission lines from Ottawa, through some of the region’s most sensitive wetlands to Masson in Quebec, will begin this winter. The new grid will be up and running by December 2002. It will carry 1,250 megawatts of electricity — enough for a city of half a million people for about 40 years.

The project will cost Hydro One, one of the successor companies of the former Ontario Hydro, $96.5 million. Hydro-Quebec will pay the balance of $208 million.

David Curtis, Hydro One’s transmission manager, says the main reason for the collaboration with Hydro-Quebec is to provide Ontario residents with another source of power to foster competition, particularly because one company, Ontario Power Generation, enjoys a monopoly. The hope is that another source of electricity will lead to cheaper prices.

For Quebec, however, the main consideration is the desire for a new source of power that will ensure "security of supply" in the event of an emergency such as the 1998 ice storm.

"This project will serve us well because it gives the people of Ontario access to a new source of electricity that will provide competition and lead to lower prices," said Mr. Curtis.

"And it will also serve Quebec well by improving the reliability of its electricity supply."

Mr. Curtis said political considerations played no part in the decision. "From our company’s perspective, the reasons were purely economic. Political considerations were never an issue."

The Hydro-Quebec project is the second cross-border collaboration by Hydro One. A similar project with Michigan is almost done, Mr. Curtis said.

Hydro-Quebec spokesman Eric Moisan said the company’s interest in the project is driven by lessons learned in the ice storm.

During the storm, transmission lines from James Bay froze and broke. Mr. Moisan said the problem was exacerbated in the Outaouais because Hydro-Quebec has only one line to West Quebec and this broke down near Mirabel.

"The main reason we are doing this is to secure our line so if in future we lose one line, we can use the other," said Mr. Moisan. "This will be used to secure the Quebec grid."

Tom Adams, executive director of Toronto-based Energy Probe, an environmental watchdog, says the lines are expensive but necessary.

"It’s an expensive form of insurance against higher prices, but in the absence of real competition in the generation of power in Ontario, we needed more capacity in transmission.

"This is what you get when you don’t do things right. I am a reluctant supporter."

The Ottawa section of the line will run along an existing hydro corridor from Hawthorne Road in Ottawa, cross Green Creek and then run along the edges of the Mer Bleue bog, to Cumberland and across the river.

Mr. Curtis says because the new line is on an existing corridor owned by Hydro One, no discernible environmental damage will occur. He said Hydro One completed an environmental assessment that has been approved by Ontario’s Environmental Assessment Board.

"Most of the potential environmental effects associated with this project are minor and short-term in nature," the environmental reports says.

A public hearing could be held by the Ontario Energy Board on the project. Those who wish to intervene have 14 days to notify the board of their intentions. An ad in Friday’s Citizen sets out a detailed process and addresses of the agencies.

Lily Nguyen
Globe & Mail
September 15, 2000

Plans to spend $400-million on country’s largest co-generation facility.

TransAlta Corp. said yesterday that it plans to spend $400-million on a Sarnia, Ont., power project that could produce enough electricity to light up a city of 500,000.

Observers said the Calgary-based company’s plans to build, own and operate what will be Canada’s largest co-generation plant is a sign that Ontario’s emerging open market for electricity is catching fire.

"It’s really one of the first projects to go forward under the new open Ontario market," said Steve Snyder, TransAlta’s chief executive officer.

Tom Adams, the executive director of Energy Probe, a Toronto- based environmental think tank, hailed the news as a sign that Ontario’s competitive power market is finally becoming a reality.

"It’s a good sign. It’s a really good sign," Mr. Adams said.

The plant, which was originally scheduled for early 2001, is now set for October of 2002.

The natural-gas-fired project, which will produce 650 megawatts of electricity per hour, enough to meet 2.5 per cent of the province’s demand, has been in the works for more than two years. In June, 1998, TransAlta announced it was selected for the power project being proposed by major industrial consumers such as Bayer Inc., Dow Chemical Canada Inc., Imperial Oil Resources Ltd., Nova Chemicals (Canada) Ltd. and Shell Canada Ltd. But as deregulation of the power industry in Ontario stalled, so too did the power project. It’s only now that the company has been able to move ahead, Mr. Snyder said.

"We had to know the rules by which we could sell the power," he said. "We had to wait for Ontario."

Sam Kanes, an analyst with Scotia Capital Inc. in Toronto, said "I think the Ontario government’s happy to see any development, given this delay to open up market and some confusion still over the rules."

Mr. Adams of Energy Probe said that if "there had been a stronger, more stable institutional environment, they could have come to this conclusion earlier."

Deregulation was supposed to happen this November, he said. Instead, the province has shuffled it off to some indeterminate date in the future – although he added he was hopeful it would happen by the middle of next year.

Mr. Snyder said that although the timing of Ontario’s open market is a concern, it’s not enough of one to stall the project any longer.

"We’re patient," he said. "Any market we’ve been in, be it Australia, New Zealand, Mexico ro the U.S., it does take time to go from an unregulated market to a regulated market." He added that the regulatory regime is "getting clearer," and TransAlta has plans to do another project of similar size in Ontario.

But in the intervening time from the initial announcement of the project, many of the original players in the project dropped out leaving only Bayer, Dow Chemical and Nova as acting participants.

In the deal, TransAlta will take over those companies’ existing facilities generating 210 megawatts, build a new plant supplying 440 megawatts, and provide Bayer, Dow and Nova with roughly 175 megawatts.

"They’ve outsourced their electricity and their steam," Mr. Snyder said, adding that the three remaining large customers are enough to make the project viable. That leaves 475 megawatts that can be sold into the market to provide consumers’ needs.

Mr. Adams noted that the project is good for the environment, since natural-gas-fired plants spew less pollution into the air than coal-burning plants. That’s even after environmental initiatives such as one announced by Ontario Power Generation yesterday to spend $250-million over three years to clean up its generators.

Mr. Adams dismissed it as a "Band-Aid solution."

James Mccarten
Hamilton Spectator
September 15, 2000

May prolong coal-fired plants

Environmentalists greeted a $250 million emissions-reduction plan by Ontario’s largest power producer yesterday with scorn and suspicion.

Ontario Power Generation plans to reduce nitrogen oxide emissions at its coal-fired Nanticoke, Lambton and Lakeview stations by 13,000 tonnes a year, president and chief executive Ron Osborne announced yesterday.

New technology to cut emissions at the plants will be among OPG’s largest capital projects, said Osborne, second only to the restart of the Pickering A nuclear plant, shut down amid safety concerns in 1997.

"The solution to the smog problem needs to involve the electricity industry, other industries, the transportation sector and all consumers," Osborne told the Mississauga Board of Trade during a luncheon speech.

"We will not stop making these investments. We will continue to look for other opportunities for cost-effective emission reductions."

But the plan to install the technology — called Selective Catalytic Reduction (SCR) units — at three aging fossil-fuel plants has its critics.

Ontario Premier Mike Harris has already assured local officials that the Lakeview plant in Mississauga must be converted to natural gas before it can be sold.

"What they’ve got here is a 1985 K-Car that’s on the market, and OPG has decided to throw a lot of money at the exhaust system," said Tom Adams, of energy watchdog Energy Probe.

"You’ve got to wonder, is it good money after bad?"

But the investment makes good sense, since converting the plants to natural gas isn’t something that could happen overnight, Osborne said in an interview.

"Even if somebody told us tomorrow to convert all of these to gas as quickly as you can, we’re going to be burning coal in at least four of these units seven, eight, nine years from now," Osborne said.

"Anything beyond a couple of years means that it’s imperative that we clean up our act on this stuff, and we’re going to do that."

Jack Gibbons of the Ontario Clean Air Alliance said he believes that by investing in antiquated facilities, OPG is trying to force Harris to "allow them to extend the life of their coal-fired power plants."

Yesterday’s announcement was made while both Harris and Mississauga Mayor Hazel McCallion were in Australia, Gibbons noted.

"This investment makes no sense if you’re just about to sell on the condition that it be scrapped and converted to natural gas."

Osborne, who denied having any sinister motives in timing the announcement, said it would be unwise to rush into a gas conversion when fuel prices are so unstable.

The environmental benefits of the investment could be outweighed by its relative cost, said Adams, noting that the SCR units don’t reduce toxic metals like mercury, arsenic and lead.

"It’s not a clear win for the environment, and it’s a lot of money."

Once the plants begin producing less nitrogen oxide, they will be used to a greater extent, generating more pollutants that aren’t being adequately screened, he added.

Between nuclear and hydroelectric generation, 75 per cent of OPG’s power results in no smog-producing emissions, Osborne said.

Including its time as Ontario Hydro, the company — responsible for just 12 per cent of Ontario’s nitrogen oxide emissions — has spent more than $1 billion on fossil plant emissions over the last 15 years, he said.

"As a result, today we produce as much power from our fossil plants as we did in the early 1980’s, but with 60 per cent less acid gas emissions."

Stuart Laidlaw
Kitchener-Waterloo Record
October 7, 2000

The world of privately owned nuclear plants that Ontario is about to enter is going through a consolidation as companies build worldwide conglomerates that dwarf the province’s utility.

"There’s a lot of buying and selling going on," said Pat Kane, an analyst with Federated Investors in Pittsburgh. For the last three years or so, American state governments have been deregulating the electricity sector, leading to a wave of utilities selling nuclear reactors.

The trend has extended internationally, with Britain and Norway shifting their nuclear plants to the private sector in hopes of making them more efficient.

"The nuclear industry is really consolidating," said Tom Adams of Energy Probe, a power industry watchdog group based in Toronto.

Ontario Power Generation Inc. announced this week it’s seeking private investment for its nuclear operations. Ontario has 20 reactors, only 12 of them functioning at the moment.

Ontario Power Generation is one of five successor companies to Ontario Hydro, the Crown utility broken up under the Ontario government’s plan to open up the province’s 90-year-old electricity monopoly to competition next year.

In announcing the move to nuclear privatization, Ontario Power Generation president Ron Osborne said Ontario will likely have to look to foreign companies for investment because no Canadian companies exist that could run the plants.

This will take the province into a tumultuous industry where traditionally staid utilities suddenly find themselves selling off entire divisions, buying others and mapping out new strategies.

In the U.S., while power generation companies have been privately owned for decades, they have until recently been heavily regulated.

Now the power generation field has moved out of regulation, while prices and profits in power-line operations have remained regulated, said Kane.

As a result, utilities have had to decide whether to be unregulated power generators or regulated distributors. Once they decide which side of the company to concentrate on, they sell the other part.

"Once they sell off, they are suddenly half the size," said Kane. " They need to get some scale back," which has led to consolidation.

British Energy took its nine nuclear plants private in 1996, and has since been buying up nuclear plants abroad. It has an office in Toronto.

The British company has also set up a joint venture in the U.S. with Peco Energy called AmerGen, which is buying half-a-dozen reactors.

Peco, meanwhile, plans to merge with Unicom Corp. to form the largest utility in the United States, with 14 nuclear reactors and sales of $12.4 billion US.

Another company, Entergy Corp., operates six reactors and has been looking to buy more.

The moves have resulted in a web of companies controlling more than 30 reactors, and Kane expects much more consolidation as companies continue to look for ways to cut costs and boost profits.

Kane said consolidation makes sense since companies can no longer count on state regulators to guarantee a return on investment.

"Nobody seems to want to take on nuclear, except for Peco and Entergy," he said.

They have been acquiring atomic plants at a fraction of the cost it took to build them.

Creating a network of nuclear plants allows a company to cut staff to improve profits. For instance, a company with 10 nuclear plants could operate safely with five fire protection engineers — one for every two plants, Kane said. "But if you only have one plant, you still need one engineer. You can’t have half."

Joanne Paulson
Saskatoon Star Phoenix
October 13, 2000

Uranium supplier invests $100 million in Ontario plants

Cameco Corp. plans to take its first plunge into nuclear power generation with a $100-million investment in the Bruce nuclear plants of Ontario.

Cameco announced Thursday it has signed a memorandum of understanding with British Energy PLC to take a 15 per cent interest in a new company, Bruce Power Partnership. The partnership was established to lease and operate the reactors.

British Energy will own 80 per cent of Bruce Power, and the remaining five per cent has been offered to the unions representing approximately 3,200 workers at the nuclear plants.

Earlier this year, British Energy struck a tentative deal running at least through 2018 to lease and operate the Bruce plants from Ontario Power Generation Inc. (OPG), formerly Ontario Hydro. The British company is expected to take over in mid-2001.

Cameco will also have an exclusive contract to supply all of the uranium, uranium conversion services and fuel fabrication services to the plants.

Cameco CEO and chair Bernard Michel said the deal is "like entering a new world" for his company.

"We have so far been a provider of fuel and fuel conversion, and now we become a 15 per cent producer of electricity from this very large nuclear plant," Michel said Thursday.

Cameco’s financial results will likely show little change until its investment is paid out over two years. However, Michel expects the partnership to be profitable. How profitable depends on long-term electrical and uranium prices.

"This should impact our earnings, after the two first years, increasing in the future by somewhere in the 20 to 25 per cent (range) every year … and cash flow should be about the same."

Michel said he is confident this forecast is based on a conservative assessment of future electrical prices in Ontario.

Bruce Power is in a transition phase, working to satisfy regulatory requirements and gain its operating licence from the Nuclear Safety Commission.

The Bruce project is divided into two parts called A and B, each with four Candu reactors. The four Bruce B plants are operating, although the Bruce A plants have been closed- one because of a technical problem, and the other three for business reasons.

Michel expressed confidence in the Candu technology, citing expert assessments that Candus are reliable, long-term nuclear reactors.

"They were operating with record capacity factors a few years ago, and they continue to do that for instance in Argentina, for instance in Korea, (and) they achieved excellent results in Romania," he said.

"It just needs to be operated well."

Elaine Kergoat, Cameco’s manager of public relations, said British Energy is assessing the possibility of bringing two of the four non-operational plants on stream.

If that occurs, Cameco will supply 1.5 million pounds of uranium and 600 tonnes of uranium dioxide conversion services annually. Otherwise, Cameco will provide one million pounds of uranium and 400 tonnes of uranium dioxide to the four plants.

OPG uses several uranium suppliers, including Cameco, although Cameco already provides all of the uranium dioxide conversion services for the Bruce reactors.

Cameco has always said it was looking for opportunities to expand in the industry without straying from its core business of mining and conversion, said Kergoat.

"This is a perfect fit for Cameco, given what it has been saying over the last several years."

Tom Adams, executive director of Energy Probe in Toronto, said having many partners with different specialties makes commercial logic in the operation of power plants. Energy Probe is a national consumer and environmental watchdog organization.

Adams said the long-term future of the nuclear industry is in doubt, considering declining prices for uranium and little construction of reactors around the world.

But he said plants such as these are still capable of creating substantial cash flow.

The Bruce site has recently been "very controversial" from an environmental point of view, Adams added. Of greatest concern is contaminated water leaking off-site, and it is uncertain where the water is coming from, he said.

News of the deal produced a lukewarm response from investors. Cameco shares rose 50 cents in Thursday trading on the Toronto Stock Exchange, closing at $21.75.