Energy Probe

Richard Brennan/Queen’s Park Bureau
Toronto Star
May 22, 2002

Premier Ernie Eves says the golden parachutes provided for senior officials at publicly owned Hydro One are "inappropriate."

Eves faced criticism in the Legislature again yesterday for allowing the government-appointed Hydro One board to hand out such deals to five executive members, totalling about $13 million.

"I regard those amounts as being inappropriate," the Premier said in the Legislature, adding he has already asked Energy Minister Chris Stockwell to look into it.

Hydro One president and chief executive officer Eleanor Clitheroe stands to get more than $6 million in pay plus about $1 million in annual indexed pension payments if she is fired or quits after a change in ownership.

New Democratic Party Leader Howard Hampton described the compensation packages as disgusting and outrageous.

"I think virtually everyone in the province is outraged to learn that the people you have in charge at Hydro One since 1998 (have) awarded themselves what amounts to $13-million pay packages," Hampton said. "This is greed."

Hydro One, which runs the electricity grid, has said the compensation for its senior executives is "competitive with other comparable companies across Canada."

Clitheroe, 47, a former banker and deputy minister, earned pay, bonuses and benefits totalling $2,182,180 last year. Included in that was a vehicle allowance of $174,644 and $172,484 in vacation pay.

The Conservative government is considering a number of options for Hydro One, including selling it off to investors. Details on the compensation packages were included in a company prospectus.

John Spears and Richard Brennan
Toronto Star
July 3, 2002

Ontario could be flirting with power shortages if electricity consumers don’t move quickly to conserve, Energy Minister Chris Stockwell says.

Recent scorching temperatures pushed Ontario to hit near-peak demand yesterday, forcing the province to scramble to buy power from other jurisdictions, including the United States where much of the electricity is produced by highly polluting coal-fired plants.

Temperatures in Ontario yesterday climbed to 35C, the hottest weather Ontarians have experienced this year. Today’s temperature in Toronto is to hit 34C.

The demand also pushed prices into new territory – jumping to 47 cents a kilowatt hour by 5 p.m. yesterday. That’s more than 10 times the regulated price of 4.3 cents a kilowatt hour prior to May 1. By 6 p.m., however, the price had subsided to 8.7 cents a kilowatt hour.

"Demand is high. It has never been this high frankly in the province of Ontario’s history," Stockwell told reporters, adding that it means more pollution and higher energy prices for consumers.

In fact, figures released by the Independent Electricity Market Operator (IMO), which oversees the conduct of electricity producers under the deregulated market, showed demand peaked at 25,075 megawatts – just shy of the 25,269 megawatts set last Aug. 9. But IMO officials said comparisons are difficult because this year’s figures are compiled differently than last year’s.

Stockwell, who is also environment minister, urged people to set their air conditioners at no lower than 26C and avoid using major appliances such as dishwashers, washing machines and dryers until after 8 p.m.

Stockwell was sounding far less confident than a few weeks ago when he said unequivocally there would be no brownouts as he defended opening the electricity market to competition on May 1.

Asked about possible brownouts, Stockwell said the province is expected to have adequate supply, but "you never say never."

"We are experiencing record demands for energy and it’s important that people understand that conservation is the best advice I can give them as minister of the environment and, of course, minister of energy," he told reporters.

"We will work towards having no brownouts and no blackouts," Stockwell said. But "I can’t give you an absolute guaranteed undertaking that something won’t happen."

John Earl, a spokesperson for Ontario Power Generation, which runs the generating plants, said that over the years it has not been unusual for appeals to be made to consumers to conserve electricity during very hot weather.

"I would say it is certainly not a new thing," Earl said.

Yesterday, Stockwell stressed that the pressure on the system has nothing to do with the new deregulated electricity market. But critics jumped all over the government saying the very fears of possible brownouts and insufficient supply are coming true, just as they did in California last year.

"The Tories’ botch-up on electricity is becoming a reality," said Liberal MPP Michael Bryant (St. Paul’s). "They were crowing about what a great job they did with the electricity competition market when, in fact, they failed to get enough back-up power on line to avoid high peak demands such as we are going through right now."

New Democratic Party Leader Howard Hampton said the government has been "caught in a lie" when it said Ontario did not have to worry about the kinds of serious supply problems that California and other jurisdictions experienced when electricity was deregulated.

"People are now susceptible to skyrocketing price increases and we do not have the adequacy of supply which ensures reliability and predictability, and we are at risk of brownouts," Hampton said.

Prior to the spurt at 5 p.m., the price hadn’t reacted strongly to yesterday’s high demand, hovering most of the day at about 8 cents a kilowatt hour. That was substantially below prices in neighbouring U.S. states, where afternoon prices ranged from 18 to 20 cents (U.S.) – or close to 30 cents (Cdn) – a kilowatt hour.

Supplies are tight because generators that were supposed to be adding power to the Ontario grid are not on line, said Tom Adams of Energy Probe.

The Pickering A nuclear station, which can produce 2,000 megawatts of power, was supposed to be up and running this summer, but its refurbishment is nearly a year behind schedule and hundreds of millions of dollars over budget.

New generators fuelled by natural gas and planned by a private firm in Mississauga and Brampton, which combined could produce 1,600 megawatts, are not yet under construction.

Stockwell acknowledged Ontario would have been far better off if Ontario Power Generation had been able to get Pickering A nuclear power plant on line.

When the demand is high the environment suffers because there is greater reliance on coal-fired plants, including Nanticoke, the biggest polluting power plant in Canada, Stockwell said.

"By consumption going up that increases the likelihood of bad air," he said, later telling CFRB radio station, "Obviously the less power you use the better it is for the environment."

Stockwell confirmed Ontario is importing power but refused to say from where.

Peter Kuitenbrouwer, with file by Paul Brent
National Post
July 24, 2002

Senior executives at Ontario Power Generation Inc., which generates the bulk of Ontario’s electricity, are getting paid far too much money given the disastrous performance of the company, a top critic of the province’s energy policy said yesterday.

Tom Adams, the executive director of Energy Probe, a Toronto-based think tank, called OPG compensation levels "the next shoe to drop" in continuing scrutiny of the successor companies to Ontario Hydro.

"If we’re concerned about unearned bonuses and unrealistic compensation, let’s look at OPG," says Mr. Adams. "I’m much more upset about the behaviour of OPG than Hydro One."

Last Friday, Glen Wright, interim chairman of Hydro One, fired Eleanor Clitheroe, Hydro One’s chief executive, alleging misuse of the company funds on limousines, home renovations, car allowance and other expenses.

Hydro One distributes the power generated by OPG.

Last year, Ron Osborne, the president and chief executive of OPG, earned $1.66-million ($825,000 base salary, a $752,813 bonus and $81,841 in other compensation).

This year, he got an additional long-term incentive program payout of $587,500.

By contrast, Ms. Clitheroe last year earned $2.18-million ($750,000 base salary, an $806,250 bonus and $625,930 in other compensation, including $172,484 vacation pay).

In May, OPG, which produces 80% of Ontario’s electricity, announced its worst performance.

In the first quarter of 2002 it posted a loss of $217-million, compared to a profit of $102-million in the first quarter of 2001.

OPG also announced new delays in bringing the Pickering A nuclear reactor into service and said the project would cost about $2-billion, $800-million more than original estimates.

"They’re failing to deliver," says Mr. Adams.

"Their promises are no good. It’s having an impact on consumers and we can see it in prices today, and yet these guys are taking home huge bonus cheques.

"Hydro One has performed poorly but Hydro One had done much better than OPG," he adds.

Mr. Osborne could not be reached for comment yesterday. John Earl, a spokesman for OPG, says Mr. Osborne has promised to waive bonuses for top executives if the poor performance at his company persists.

"The bonus was for the year 2001. The board of directors believes that that was an appropriate bonus," says Mr. Earl. Referring to the pay scales, he adds, "You’re talking about an energy company comparable to the large companies in North America."

Graham Brown, chief operating officer at OPG, earned $1.2-million in total compensation last year. Eugene Preston, chief nuclear officer, earned about $1.7-million in total compensation. Those amounts included "long-term incentive plan" bonuses paid out this year.

Last month OPG dropped plans to privatize the corporation through a public stock offering.

That decision could prove a boon to at least one senior OPG executive. Mr. Brown, who joined the company from National Power, the U.K. power company, has a contract clause entitling him to terminate his employment if by the end of 2003 no non-government equity has been invested in the corporation and there is no reasonable prospect of such equity investment in 2004.

According to OPG’s latest annual information form, Mr. Brown can claim $1-million plus any outstanding signing bonus and all amounts accrued under the long-term incentive plan.

Margaret Wente
Globe and Mail
July 25, 2002

Eleanor Clitheroe’s limousine bills are scandalous, no doubt about it. But in the vast train wreck that is Hydro, they matter about as much as a broken light bulb in the caboose.

Sure, $330,000 is a lot of dough. But so is $22-billion. Which is more or less what public ownership of Hydro has cost the people of Ontario.

Capitalists may be rapacious villains. But governments are worse. The political mismanagement of Hydro stretches back a generation, and has been ruinously costly, and shows no sign of ending.

"Power and politics don’t mix," says Tom Adams, the executive director of the watchdog group Energy Probe. In his view, the overwhelming reason for privatizing the utility is one you’ll never hear from Queen’s Park. It’s to get it out of the reach of politicians. So long as the government owns it, they’ll always screw it up.

"The power system is prone to instability when it’s politically controlled," Mr. Adams says. "The role of the public sector ought to be regulatory – for price protection, and to regulate the quality of service. But when the public sector invests in the power system, it acquires a conflicted interest."

For politicians, Hydro is a vast pork barrel of potential goodies. Maybe their riding could use a nice transmission tower. Or their favourite companies could use a rate break. (Former energy minister Jim Wilson dished out plenty to his corporate buddies, then grandfathered them.) And rate freezes are always a big hit with voters. We had one for most of the ’90s, while Hydro’s debt grew and grew. Everyone conveniently forgot that what you don’t pay now, you’ll have to pay back later – with interest, presumably when some other party is in power.

But the worst thing about political control is that the politicians aren’t really in charge at all. The Hydro people are. They can empire-build to their hearts’ content. Politicians don’t know much about the finer points of generating capacity. It’s easy to bamboozle them with bafflegab, and it’s delightful to be bankrolled by the deep pockets of the state.

Andrew Roman, a seasoned lawyer who specializes in energy, knows how the game is played.

"They used to say to a succession of ministers, ‘Madam minister, do you want to be responsible for blackouts and brownouts?’ "The answer was always no, and the solution was always the same: Spend billions, build big. Hydro was a bloated bureaucracy, and Hydro managers were notorious meglomaniacs. That’s what happens in a state monopoly.

"There’s a widespread misconception that where you have public ownership, you have public control," says Mr. Roman. The truth is that the public has no control. No one is accountable, and no one ever pays for their mistakes. "In the private sector, you fall on your sword. But in the public sector, as long as you’ve got buddies at Queen’s Park, nobody will fire you."

The waste of money was colossal. Take a nuclear megaproject called Darlington. It was supposed to cost $2.5-billion, and came in at $11-billion. After it was built, it kept breaking down. Nobody was ever fired. Then came Pickering A, a notorious safety, management and technical debacle. Then, in 1997, Hydro hit the wall. It could no longer pay its bills, and the government was forced to act. It carved Hydro into pieces. The wires piece, headed by the hapless Ms. Clitheroe, prepared to privatize.

But Hydro One didn’t act like a private-sector player (except for the pay and perks of its executives). It kept spending big. So did Ontario Power Generation, the new Crown corporation that was assigned to fix up the mess at Pickering. The fix-up was supposed to cost $800-million and be done by now. The current estimate is $2-billion, and it may be done by 2005.

"These are unjustifiable projects," says Mr. Adams. "This dog would have died a long time ago without the care and feeding of the taxpayers."

Ron Osborne, the head of OPG, also has a compensation package of Clitheronian dimensions.

The big-spending habits of OPG and Hydro One scared off the potential competition. Who’d bother to compete against people who don’t need to pay attention to the laws of economics? And who’d invest in Ontario now, when it’s obvious the government changes the rules any time it wants to?

The main argument against privatization is that consumers will have to pay for the profits of the greedy capitalists who run the system. But Mr. Roman invites you to consider the alternative. "Capitalist profit is costly, but not as costly as political waste."

Fortunately for all three of our political parties, they’ve got Ms. Clitheroe and her country clubs and limos to kick around. They’re hoping we’ll get so mad over stratospheric salaries and corporate greed that we’ll forget all about that little item on our hydro bill called "stranded debt." It’s $22-billion, and counting.

Andrew Roman is a member of Energy Probe Research Foundation’s Board of Directors.

Bernard Simon
New York Times
July 26, 2002

TORONTO — The names of Hydro One’s directors have disappeared from the corporate Web site. So has the prospectus that Hydro One, Ontario’s dominant power transmission company, filed earlier this year for what was to have been the biggest public stock offering in Canadian history.

The absences are measures of the upheaval that has shaken the company over the last few months. Instead of stepping smartly into a new era as a publicly traded company with ambitious plans to expand in Canada and the United States, Hydro One remains in the arms of the provincial government of Ontario, distracted by a public furor over how it is run, and by whom.

In June, 11 of Hydro One’s 12 directors resigned. On July 19, the sole survivor, Eleanor Clitheroe, the chief executive, was fired by the new board and accused of repeated breaches of fiduciary duty, including using company contractors to renovate her house and making excessive personal use of a company-provided car service.

In interviews published in several Canadian newspapers, Ms. Clitheroe said she offered a month ago to take a 25 percent pay cut to satisfy the new board’s concerns about her compensation, but got no response. She has said that all her pay and benefits were approved by the company’s chairman or by a board committee.

The Globe and Mail, a Toronto newspaper, reported this week that three executive vice presidents of Hydro One who were close to Ms. Clitheroe were on the verge of resigning because the new board wanted to cut their pay.

"We’ve got quite an unstable and unpredictable situation," said Thomas Adams, executive director of Energy Probe, a research group in Toronto. With the company "decapitated," Mr. Adams said, it will be difficult for anyone there to focus on its operations and finances.

Hydro One is one of the biggest power companies in North America, with an 18,000-mile power transmission network that supplies more than 90 percent of Ontario’s electricity. It was formed in 1999 when the province divided Ontario Hydro, its mammoth power monopoly, into a power plant operator, Ontario Power Generation, and a distribution company, Hydro One.

The company’s prospectus spoke hopefully of how consolidation in the United States power industry and Ontario’s location near American population centers "provide us with the opportunity to build the infrastructure for one of North America’s biggest electricity hubs."

Earlier this year, Hydro One won approval to lay an underwater cable across Lake Erie to link the Canadian and American power grids.

But a political shift in mid-April, two months before the planned stock offering, upset all the plans. The ruling Progressive Conservative provincial government chose a premier, Ernie Eves, who sought to improve his party’s poll standing by rapidly distancing himself from its previous pro-business policies.

Pressed by environmental groups and other opponents of privatization, Mr. Eves scrapped the offering and said the province would seek a "strategic partner" to buy up to 49 percent of Hydro One instead.

"They’re listening to their voters," said John Wilson, a former Hydro One director and prominent campaigner against selling the company.

The government also ordered the company’s board to review executive compensation, especially that of Ms. Clitheroe, who was paid 2.2 million Canadian dollars ($1.42 million) last year, including six-figure car and vacation allowances. The board — including the chairman, Sir Graham Day — refused and resigned.

Andrew Roman, an energy specialist at the Miller Thomson law firm in Toronto, said: "My fear is that while we may save a million dollars in Ms. Clitheroe’s salary, it will be at the expense of billions of dollars in politically motivated projects. The failure to privatize means decades more of Soviet-style electricity planning."

Andrew Roman is a member of Energy Probe Research Foundation’s Board of Directors.

Terence Corcoran
National Post
July 27, 2002

The Eves government of Ontario, in an obvious attempt to humiliate one of its own corporate appointees, had no trouble digging up and releasing details of Eleanor Clitheroe’s compensation as CEO of Hydro One. At this rate, we should all soon be reviewing Ms. Clitheroe’s expense account chits and tax returns. Which is all great political sport if you’re in the business of trying to convert policy disasters into victories.

If only the government could bring the same push for disclosure to its key electricity structures. While everybody in the province is marvelling over the cost of Ms. Clitheroe’s limos and club memberships, nobody is paying attention to the Enron-like black hole created by the government’s bizarre break-up of the old monopoly, Ontario Hydro. Off-balance sheet, restatements, no reports – you name it, Ontario’s power market has it.

The financial centre of this business is Ontario Electricity Financial Corp., an off-balance sheet vehicle the province used to shuffle off $19.4-billion in debt left over when Ontario Hydro slipped into de facto bankruptcy. OEFC is required by law to file an annual report "within 90 days after the end of every fiscal year." The year ended March 31, which means OEFC has been in breach of the law since July 1.

Oh well. No problem. The Ontario Securities Commission has no jurisdiction; and, anyway, it’s busy chasing phantom accounting scams in the private sector. Imagine if Nortel were to simply decide not to issue statements as required by law.

Even when OEFC’s annual report is released sometime in the undetermined future, it would take Al Rosen six months’ worth of billing to unravel the mysterious items and trace the ebb and flow of cash and notes between the government and the various parts of the province’s electricity industry. One thing appears certain, however. Debt that was supposed to be going down over the last few years has gone up, possibly to much more than $20-billion. It hit $20.3-billion in March of 2000, after $447-million in "adjustments" to earlier figures.

The debt is going up because the province has failed to carry out key market reforms, and even when it had a reform underway – privatizing Hydro One – it pulled the plug. By killing the privatization and staging a high-profile humiliation of Hydro One’s board and top executives, the government has left Ontario taxpayers open to bigger liabilities.

Selling Hydro One would have generated up to $6-billion, which would have gone to pay down the debt. But now the province says it will only sell up to 49% of Hydro One, which in the post-purge environment is unlikely to fetch as much money. The new buyer or buyers would be looking at investing in a decapitated company, likely filled with demoralized managers, with an erratic Eves government holding on to 51% control.

Even Ontario’s fat-cat pension funds, more tolerant of government than some other investors, are going to be looking hard at the prospect of getting into the same bed with people who change policies and personalities whenever the political winds shift. Another possible buyer is the big British power transmission giant, National Grid. It already owns transmission firms in the United States, and would probably like to tuck Hydro One into its portfolio, spreading its risk around nicely. What a grim irony that would be: Ontario sells its grid company to a British firm Margaret Thatcher privatized a decade ago. Because we can’t or won’t do it ourselves, we have to bring in foreigners.

Among many policy gaffs, the biggest is the failure to introduce competition to generation. With much fanfare, the province introduced retail market deregulation earlier this year, But there’s no competition in the supply of power. Ontario Power Generation (OPG), created out of the generating assets of Ontario Hydro, virtually controls the market. Its only real competition are nuclear facilities bought by British Energy, but it only sells base load power that doesn’t figure in the daily business of setting prices. And, thanks in large part to the policy collapse, there are no signs the private sector is ready to invest big dollars to supply the province with new power plants.

OPG, despite its market power, is struggling to keep its head above water. Its biggest assets, nuclear power plants, are sucking up vast sums of money. A refit of major Pickering nuclear units was supposed to cost $800-million and start pumping out power three months ago. Tom Adams of Energy Probe says the best guess right now is that the units will begin production early next year, with the cost rising to $2-billion. Others say the final cost will be even higher. Worse, Pickering’s return to full production won’t occur until 2005, about three years behind schedule.

Any day now, somebody is going to have to blow the whistle on the growing mess. The most likely whistleblower is the Independent Market Operator. It oversees the overall market and determines long-term supply and demand needs. With demand growing and supply frozen due to government bungling, it’s only a matter of time before the IMO is forced to declare a possible crisis.

The lights are still on in Ontario, but the Conservative government’s mishandling of electricity deregulation puts Ontario at greater risk of a dark future.

National Post
July 30, 2002

Concerns over the remuneration of Eleanor Clitheroe, the former Chief Executive Officer of Ontario’s electricity distributor, Hydro One, are not unfounded. Last year, Ms. Clitheroe earned $2.18-million in salary for running the public company. According to the government, she also billed $330,000 for limousine service over three years, joined seven clubs at public expense, and used $40,000 of Hydro One funds (only recently repaid) to renovate her house. In short, she received opulent and arguably excessive rewards from the public purse.

But it is equally arguable that Ms. Clitheroe has been made a scapegoat for the woes and wimpishness of the Ontario provincial government. While it is alleged that she took more perks than her contract permitted, the bulk of Ms. Clitheroe’s package was in the form of salary, and she can hardly be blamed for accepting it. Who wouldn’t? If her package was improperly big, the bulk of the blame belongs to the Hydro One board that offered it. Her compensation was also not out of keeping with private-sector salaries – and Ms. Clitheroe’s job was to steer Hydro One successfully into the private sector.

This brings us to the most important point: None of the present fuss would have happened had Premier Ernie Eves not botched the biggest privatization in Canadian history. The Premier cannot be blamed for the court decision that blocked the privatization plan, but he could have passed the necessary legislation and put Hydro One swiftly back on track toward the productive sector of the economy where it belongs. Instead, the government vacillated and finally performed a U-turn – deciding to sell only 49% of the company and thus to retain public sector control.

Mr. Eves should have stuck to the Tory guns and privatized Hydro One. Free from political interference, the company would have been free to raise capital, upgrade service and pursue new ventures inside and outside the province. Ultimately, it might have become an important player across the continent, generating billions of dollars in new revenue for its owners. Instead, it will be subject to the same shopworn and cumbersome political controls. Investors have received a slap in the face. And consumers, denied the $5-billion proceeds of privatization, will continue to finance the company’s $21-billion debt through a 0.7 cents-per-kilowatt surcharge.

Hydro One is now in worse shape than it was when privatization was first announced. Swift enabling legislation to regain the privatization momentum would have created controversy. But by seeking to avoid it, the Eves government has manufactured a crisis and eroded its credibility. Putting Ms. Clitheroe into the public stocks has proved a great distraction and served to distance the new premier from his predecessor, Mike Harris, but the people of Ontario deserved better.

Paul Vieira
National Post
July 30, 2002

One of the closest advisors to Ontario’s premier, Ernie Eves, has been named chief executive of the agency that issues the province’s bonds and manages the former debt of the old Ontario Hydro monopoly.

Michael Gourley is the new CEO of the Ontario Financing Authority (OFA) and the Ontario Electricity Financial Corp. (OEFC). His appointment took effect this month, and the job will pay between $225,000 and $300,000 a year.

Mr. Gourley was the deputy minister of finance, from 1995 to 1998, when Mr. Eves held the finance portfolio under the government of Mike Harris, the former premier. In addition, he was chairman of the Ontario Financing Authority and served as the secretary of the cabinet committee on privatization.

He left government to take on a partnership at PriceWaterhouseCoopers, but resigned this year to form an independent firm. Sources say the firm had one client: Mr. Eves.

Insiders say Mr. Eves relies heavily on Mr. Gourley, and has turned to him, particularly on the electricity file.

"Eves brought him in to clean up the whole mess in respect to Hydro One," a government insider said, adding Mr. Gourley took over many of the responsibilities formerly held by David Lindsay, the CEO at Ontario SuperBuild Corp. and Mr. Harris’s former principal secretary.

A Bay Street insider said Mr. Gourley represents "a safe set of hands" and it’s good news for the province’s electricity industry.

"He’s a well-respected guy," the insider said. "He may bring a bit more sanity to the place. There’s been way too much emphasis on management issues and personalities, and not enough on the stranded debt."

The OEFC is the successor entity of Ontario Hydro responsible for managing the debt of the former Crown-owned power giant. The total debt leftover from Ontario Hydro stands at $38-billion, $19.7-billion of which is currently "stranded" – or what the ratepayers are on the hook for.

The OEFC was required to file an annual report for the 2001-02 fiscal year, ended March 31, by July 1 but has failed to do so. There’s concern the stranded debt has grown. It hit $20.03-billion in March of 2000, after $447-million in "adjustments" to earlier figures. Also, worries abound that the province will get reduced payments from Ontario Power Generation and Hydro One, as required under the province’s reforms to the power sector, because the two companies have recorded weaker earnings over the past year.

Paul Vieira
National Post
July 30, 2002

The Bruce Power consortium, made up of British Energy PLC and Cameco Corp., says it will be able to restart two of the idle units at its Bruce A nuclear station ahead of schedule, which will boost profit and provide Ontarians with much-needed power before next summer.

Duncan Hawthorne, Bruce Power’s chief executive, said yesterday Unit 4 of Bruce A could be supplying electricity to the Ontario market as early as next April, ahead of its planned restart of the summer of 2003, and Unit 3 would follow "shortly afterward," on the condition it gets regulatory approval from the federal nuclear regulator.

Adding the two units would bring another 1,500 megawatts (MW) of power to Ontario’s market, and go a long way toward alleviating the strain the province’s power system is currently under. It may also put downward pressure on electricity prices. (One megawatt can serve 1,000 households.)

Reserve power margins are tight in the province, largely because new plants have not come on board as quickly as expected and Ontario Power Generation has yet to restart its big Pickering nuclear facility. Earlier this summer, a power warning was issued, saying the province could be hit with rolling brownouts unless consumers cut back on power consumption.

The Bruce Power nuclear facility, the largest in North America, consists of two complexes: Bruce A and Bruce B, each containing four reactors. Bruce B is currently operating, while Bruce A has been mothballed since 1998.

The Bruce B, at full capacity, can provide 3,200 megawatts of power to Ontarians, or 15% of the province’s $10-billion market. However, one of the units in Bruce B is down for maintenance, but is expected to be up and running shortly.

Bringing two more units onstream will boost profit from the venture, Mr. Hawthorne said. (British Energy owns 80% of the consortium, while Saskatoon-based Cameco, the uranium miner, has a 15% stake.) According to Mr. Hawthorne, British Energy earns about $49-million per unit with four reactors on stream, and that will increase to $61-million per unit once Bruce A’s Units 3 and 4 are restarted.

Bruce Power obtained control of the nuclear facility in May, 2001, through a lease deal with OPG. Under the terms of the deal, Bruce Power made an upfront payment of $625-million and, for the next 18 years, will make annual payments to OPG – some of which fixed, some of which vary with electricity prices and productions. The annual payment for 2002 is expected to be $150-million.

Moreover, Bruce Power will spend $800-million to replace turbines and complete upgrades on the four reactors at the Bruce B generating station.

Martin Mittelstaedt
Globe and Mail
August 2, 2002

Bruce Power says it will restart a reactor at the mothballed Bruce A nuclear generating station as early as next April, ending a five-year shutdown caused by safety problems and poor operating performance.

But the reopening will likely draw renewed attention to safety concerns at the plant, where construction began in 1970. The plant is considered relatively old by nuclear-industry standards.

An antinuclear activist accused Bruce Power of cutting corners by proposing to reopen the plant without installing new pressure tubes that would improve safety margins.

"An advanced early restart raises the whole spectre that we feared the most – that profit is going to be put before safety and that they are going to push safety to the limit in order to get production out of these old reactors," said Dave Martin, nuclear adviser to the Sierra Club of Canada.

The company also intends to reopen a second idle reactor at the sprawling nuclear complex on the shores of Lake Huron before next summer.

The startup of the two reactors will cost $400-million and will add 1,500 megawatts, enough electricity to supply about 500,000 households, to the provincial grid.

Bruce Power, a branch of British Energy, the largest electricity producer in Britain, said it was able to set a timetable for the restart after federal nuclear regulators fixed dates for licensing hearings into the proposed reopening.

Chief executive officer Duncan Hawthorne said output from the station will reduce Ontario’s reliance on expensive electricity imports and will help prevent power shortages during peak summer months, when demand for air conditioning is highest.

Yesterday, the government agency operating the province’s electricity market once again called on consumers to voluntarily curb power use in order to help avoid brownouts and blackouts.

"If you look at it right now, you can see there is a pretty chronic shortage. You’re importing into Ontario more or less every day now," Mr. Hawthorne said.

Mr. Hawthorne discounted worries about the pressure tubes and said the company has inspected them and believes one reactor can be safely operated for another eight years and the second for 13 years before retubing will be required.

Before the station was shut, its pressure tubes were also viewed as vulnerable to sagging that engineers speculated might lead to blisters and dangerous cracks. Mr. Hawthorne said the company is installing new equipment to forestall the problem.

Because it is not retubing, Bruce Power will be able to reopen its reactors at a far lower cost than at Pickering A, where Ontario Power is restarting a similarly mothballed station for $2-billion.

Based on this expenditure, Ontario Power is paying about 3.5 times more than Bruce Power for each megawatt of generating capacity it is bringing back.