Energy Probe

Peter Gorrie
Toronto Star
December 5, 2003

The only surprise is that people are so shocked by yesterday’s damning report on the Pickering nuclear station.

As far back as 1916, experts issued warnings about the potential for huge cost overruns and management troubles at the crown corporation that generates most of Ontario’s electricity.

Repairs to four units at Pickering will cost about $4 billion instead of the $780 million originally forecast, and the job may not be completed until 2008 – six years behind schedule, says the report, by former federal energy minister Jake Epp.

"Am I surprised? Not in the least," says Tom Adams, executive director of Toronto-based Energy Probe and a long-time critic of nuclear power. History is repeating itself, he says.

"How can you be surprised when a damning report comes out on a project that’s way over budget and behind," says Jan Carr, managing director of Barker Dunn & Rossi, electricity industry management consultants.

Why it happened, though, isn’t so clear.

For Adams, the Pickering mess is the inevitable result of problems inherent in the old Ontario Hydro-Electric Commission and its successors – Ontario Hydro and the current Ontario Power Generation (OPG).

Carr says the major problem is that OPG is simply too big and complex to manage.

But a source close to the industry says senior management must accept much of the blame. Back in the early 1990s, then-chairman Maurice Strong – in an attempt to cover the cost of a rate freeze imposed by Bob Rae’s NDP government – pensioned off most of the engineers who knew how to run the plants.

Three years ago, president Ron Osborne decided to drop Atomic Energy of Canada Ltd. – which designed the Candu reactors used in Ontario – as the main contractor on the repair project. Instead, OPG brought in U.S. consultants who didn’t understand the Candu, which is much different from the American system.

Morale at Pickering plummeted; many employees simply let the new managers self-destruct.

"They didn’t offer up any advice," the source says. "They’d answer questions, but the guys at the top didn’t know what questions to ask."

While that’s a recent issue, Adams argues there’s a long-running malaise: From the time the Hydro-Electric Commission was created in 1906, it and its successors made bad decisions and spent freely, as if they were immune from the consequences of taking unwise risks.

James Mavor, a professor of political economy at the University of Toronto, saw the danger nearly 90 years ago, Adams says.

"Nothing is more usual in public enterprises of this kind than to disregard the element of risk," Mavor wrote in one of a series of newspaper articles that condemned the creation of the hydro monopoly.

The commission’s first project – the generating station at Queenston, on the Niagara River – went three times over-budget. And the pattern was set.

Despite occasional problems matching supply with demand, Ontario has enjoyed a reliable power supply for the past century, thanks to its abundant natural resources, Adams argues.

OPG has finally come to grief because of the decision, in the 1960s, to rely heavily on nuclear generating stations, he says.

Throughout its history, Hydro spent money in an odd way.

If a lot of money had already been poured into a project, senior managers and provincial politicians wouldn’t say "no" to spending even more when, as often happened, things went awry.

"’How much we’ve spent’ was an excuse to spend more," Adams says. "It’s like driving down the highway with only the assistance of the rear-view mirror," he says. "They smash into stuff all the time. They get bailed out, the car gets fixed and they crash into something again."

This worked, albeit expensively, as long as Hydro could depend on relatively simple power sources like falling water or burning coal, he says. To keep the system reliable, it built more generating capacity than was usually required. Electricity rates were kept artificially low, and debt piled up.

Quebec, British Columbia and Manitoba have power corporations similar to Ontario’s but they get by thanks to abundant water resources, Adams says.

Once Ontario switched to Candu reactors, however, the game couldn’t continue here. Ultimately, managers couldn’t paper over problems with cash.

It hasn’t helped that some Hydro and OPG executives were appointed because of their political connections, Adams says. But in any case, "the business is too large."

"Running such a range of obsolete technologies . . . it’s impossible for managers to stay on top of it." When you have, "an unforgiving, fragile, complex system, you can’t make a go of it."

But the industry source says Candu is not at fault.

Carr, too, isn’t hard on the Candu.

It has worked well in other countries, and repairs at the Bruce station, now privately run as a single operation, have run into much less trouble, he says. "I’d stop short of saying there’s a problem with the technology."

But he says Osborne and the two other OPG executives who lost their jobs yesterday are qualified, competent men with successful track records.

But the major problem is that running the corporation, with its mix of hydro, coal- and gas-fired and nuclear stations, is simply "too big and complex to have in one heap."

OPG should be broken up, at least into two parts, he says.

National Post
December 5, 2003

 Toronto: The Liberal government is looking into lucrative bonuses paid to three top executives at Ontario Power Generation who were fired Thursday after a report blamed them for massive cost overruns in rebuilding Canada’s largest and oldest nuclear plant.

"We’re going to do something about it," Energy Minister Dwight Duncan said Friday, the day after the government fired chief executive Ron Osborne, chief operating officer Graham Brown and chairman William Farlinger.

Osborne received $100,000 in 2002 on top of his $850,000 salary, while Brown collected $865,000 in addition to a salary of $750,000, The Globe and Mail reported Friday.

Farlinger earned a $250,000 salary but his bonus was not revealed.

Duncan said he was "astounded at the bonuses and so on that have gone on."

The province moved swiftly Thursday to take control of the province’s giant electricity generating utility after a scathing report into the refit project at Ontario’s Pickering nuclear generating station.

The report blamed poor management for the cost overruns at Pickering, the restoration of which it said could end up costing $4 billion and take another five years.

The compensation packages are not subject to Ontario’s freedom of information laws, but Duncan said he plans to change that with an amendment next week.

"I can’t understand for the life of me how you get paid bonuses when a project of this magnitude and importance has been so poorly handled," Duncan said.

"I don’t get that, nor do the people who sent me here. That’s what we’re trying to fix."

In 1997, four units at Pickering A just east of Toronto were taken offline for safety reasons. Work to get them running again began in 1999.

Only one of the four units has returned to full service and that happened only in the last couple of months – more than two years late.

The cost to restore that unit was $1.25 billion – almost triple the original estimate of $457 million.

Brown’s and Osborne’s contracts stipulate they are owed one year’s salary and an amount equal to the previous year’s bonus if they are terminated without cause.

However, Duncan said he was leaving the problems of bonuses and severance up to government lawyers to negotiate, and wouldn’t say whether the government will claw some of the money back.

"We’re looking at a number of options," he said.

During a luncheon speech to the Toronto Board of Trade, Duncan said Ontario will have to rebuild virtually its entire electricity generating capacity over the next 20 years.

He said his top three priorities are "supply, supply and supply," but he didn’t offer any detailed plans.

Tom Adams, director of power watchdog Energy Probe, said Duncan’s speech exposed the fact the new government still doesn’t know where it’s going to get all that extra power.

"I think what they’re signalling is they’re not quite sure where the solutions are, but they’ve covered the waterfront: conservation, pricing, new supply and private sector (participation)," Adams said.

"There’s all the elements of a plan, without a plan."

The time is now to plan upgrades in order to meet future demand, Duncan said.

"We’re dependent on the hottest and coldest days of the year on power from outside of Ontario," he said.

The province’s nuclear plants are unreliable and there aren’t enough alternative sources to guarantee supply, he added.

There’s still no decision on whether the province will press ahead with efforts to get Pickering fully back in service.

Duncan promised more announcements next week on the future of Pickering’s three other reactors and a new interim board of directors at the utility.

John Spears
Toronto Star
December 9, 2003

A pair of government agencies snarled at each other yesterday as a Canada-U.S. task force probing the August blackout held a public forum.

Hydro One, which owns most of Ontario’s long-distance transmission lines, and the Independent Electricity Market Operator (IMO) clashed over who should be responsible for ensuring the reliability of Ontario’s power system.

Only nine speakers took the floor during a session lasting two hours, including a break.

Dave Barrie, senior vice-president of Hydro One Networks – the main operating arm of Hydro One – told the panel his company operates 97 per cent of Ontario’s transmission grid and is best positioned to ensure the over-all reliability of the system.

That may not be the case in a state like New York, where there are close to a dozen transmission companies and an independent system operator is needed to knit them together, Barrie said. But Ontario is different.

"The American model is needed when you have multiple transmission companies. It’s not needed when you only have one," he said.

"Our position is there is no need to have a separate, independent system operator," he said in an interview after his presentation. "The transmission company should do that."

That’s not how the IMO sees it.

Its brief to the panel stressed the need for an independent agency to police reliability of the electric system.

Bruce Campbell, vice-president of the IMO, said Hydro One’s perspective is too narrow.

"The Hydro One approach looks at it from a transmission point of view," he said in an interview. "For reliability, what we say is you have to look at much more than that."

"Reliability is not just a transmission issue. It requires the co-ordination of actions on the generation side, on the transmission side, on the load (customers’) side. Everybody has to do their part."

The IMO also runs Ontario’s wholesale electricity market and that needs to be part of the mix as well, Campbell said.

Barrie still disagreed. "There is tremendous overlap and duplication between the two of us, because we’re both interested in the same thing," he insisted.

John Wilson, an energy consultant and former director of Hydro One, criticized the interim report of the task force for not examining the role that deregulation of electricity markets played in the blackout.

Deregulation pushed electric utilities to neglect proper maintenance of their systems in the pursuit of profit, Wilson said.

"The underlying cause of the blackout is electricity deregulation," he said.

The task force should note that utilities in the U.S. and Ontario have trimmed a total of 200,000 employees from their payrolls, he said, including 40 per cent of the staff of Hydro One.

Jimmy Glotfelty of the U.S. department of energy, said the task force, of which he is a member, will consider the role played by energy market restructuring in the blackout.

"Everything is on the table for consideration," he said in an interview. But he noted the first transmission lines that failed, starting the chain reaction that ended with the blackout, were operating below their rated capacity. That doesn’t support the view of private operators overloading systems.

Tom Adams, executive director of Energy Probe, told the task force it should look at a more decentralized power system, with more, smaller power sources linked in a web, the way the Internet links computers.

Tyler Hamilton
Toronto Star
July 7, 2007

Hot days ahead and a desire to keep cool could spell trouble for the province’s electricity system.

Ontario Power Generation said yesterday its two Pickering A nuclear units, which have been down for unplanned maintenance for a month, will now be out of service for most of the summer.

The lengthy outage means the province will be short 1,000 megawatts of domestic power generation just as southern Ontario enters its hottest weekend of the year so far, with little relief expected as we pass through the muggy months of July and August – typically a period of high electricity demand because of increased dependence on air conditioning.

"What it does is increase the need for imports, particularly during hot and humid weather," said Terry Young, spokesperson for the Independent Electricity System Operator, which manages demand and supply on Ontario’s electricity system.

One megawatt powers about 1,000 homes in Ontario.

Young said Ontario has the capacity to import up to 4,000 megawatts of electricity from Quebec and the United States, though such power can often come at a cost premium and from coal-based generators that spew pollution across the border.

"Beyond that, there are other measures to maintain reliability," said Young, adding that a public appeal to reduce energy consumption would come first, complemented by demand-response programs and power line voltage reductions if necessary.

Nobody is using the word blackout just yet, but industry officials concede that the risk increases with any long-term loss of generation.

In addition to such a risk, some observers say the timing of the Pickering A outages calls into question whether Ontario ratepayers are getting value from more than $2 billion worth of refurbishments to the facility’s two remaining Candu reactors.

"The rest of the summer? This is a real blow to OPG, and it represents a very serious challenge for the government’s reputation," said Tom Adams, an Energy Probe analyst.

Reactor unit 1 was put back into service in September 2005 after being idle for seven years, while unit 4’s refurbishment was completed in September 2003. The government decided to mothball units 2 and 3 in 2005, calling their restoration economically unviable.

Adams said the same argument should have been applied to units 1 and 4. He called refurbishment of the units a "terrible financial mistake" and said their track record has been "very poor" since coming back into service.

"Unplanned outages are not a good sign, and being caught by surprise is a harsh verdict. They should have been able to predict the production cycle more accurately."

OPG took the units offline on June 5 to do work on a backup electrical system, with the expectation that the reactors would be back in operation by mid-June, in advance of any steamy summer weather.

"We found it’s going to take longer to do the modification," said OPG spokesperson Jacquie McInnes, adding that the units will remain out of service for several weeks.

Pickering A has had a rough ride in recent years, particularly unit 4, which has been shut down several times since early 2005 – in one case for three months.

OPG recently reported that Pickering A’s capacity has plunged from 91 per cent in the first quarter of 2006 to 63.5 per cent during the same period this year.

But Steven Erwin, a spokesperson for Energy Minister Dwight Duncan, defended the decision to refurbish the Pickering A units, pointing out that it’s the backup system – not the reactors – that are the problem.

"It’s not like they can’t operate," said Erwin, adding that the maintenance is just a precaution.

"Should it have been caught earlier? We wish we could have caught it earlier. But the units themselves are operating just fine."

Bernard Simon
The New York Times
June 18, 2004

With Ontario on the brink of an energy supply squeeze, and some of its aging nuclear plants facing an uncertain future, moves are under way in the province, Canada’s most populous, to build the first nuclear reactor in North America in more than two decades.

Memories of last August’s power blackout, which was felt in a wide swath of southern Ontario as well as in the Northeast and Midwest of the United States, have only increased pressure for the province to become more self-sufficient.

Ontario’s energy minister, Dwight Duncan, said in a recent interview that in any overhaul of the power sector, the province would have to consider nuclear energy. "The use of nuclear power is controversial," he said. "We have some significant decisions to make."

Introducing a bill to streamline regulation of the power sector and to attract private sector investment, Mr. Duncan said earlier this week, "It is absolutely critical that we move forward quickly to boost new supply, increase conservation and maintain price stability for consumers."

A new nuclear plant would most likely be built on the shore of one of the Great Lakes, where Ontario’s three existing nuclear plants are.

It would be the first in North America since confidence in atomic energy was shattered by an accident at the Three Mile Island plant in Pennsylvania in 1979.

Energy policy in Canada is largely in the hands of the provinces, and a committee set up by the Ontario government to examine power supplies concluded in March that "the right nuclear strategy will play a key role in ensuring that Ontario has reliable, competitively priced power over the long term." The panel, whose chairman was John Manley, a former deputy prime minister of Canada, said that the province "must begin planning now to supplement and ultimately replace its aging nuclear assets with new and better generations of nuclear technology."

Mr. Duncan, Ontario’s energy minister, said in an interview that his government would probably decide this fall on the future role of nuclear power in the province.

According to Roger W. Gale, chief executive of GF Energy, an industry consulting firm based in Washington with clients on both sides of the border, while "the United States is at the study stage, Canada could potentially be at the doing stage."

Canadian authorities are more likely to support the nuclear industry than their American counterparts, he and other experts said. Ontario is facing tight energy supplies, and a government-owned Canadian company ready and eager for new business has supplied every existing nuclear reactor in the country. The approval and other regulatory processes for new nuclear plants is also simpler in Canada. And public opposition will probably be more muted north of the border.

The last fulfilled order for a nuclear power plant in the United States was in 1973; Canada’s last was in 1978. Since then, almost all sizable generating stations built in either place have been fueled either by coal or, more recently, natural gas, though several other countries, like China, Japan, India and Russia, have continued to build nuclear plants.

Ontario’s existing nuclear power plants have been dogged by problems. Several units of the Pickering plant, east of Toronto on the shores of Lake Ontario, and the Bruce plant, on the shores of Lake Huron, have not been restarted since they were taken out of service seven years ago for safety reasons.

Nuclear power accounts for 45 percent of electricity generating capacity in Ontario, but 14 percent in Canada.

That compares with 20 percent in the United States, where several proposals for new nuclear plants are inching forward. Various consortiums – among them, one that includes the Exelon Corporation of Chicago and the Entergy Corporation of New Orleans, two of the country’s largest nuclear plant owners – are in the early stages of applying for licenses to build and operate new plants.

In May, the Department of Energy agreed to finance half the $4.25 million cost of a detailed study by a different group, led by the Tennessee Valley Authority, to build two nuclear generating units at a site near Hollywood, Ala.

Construction of any American projects is not expected to start before 2010 at the earliest, however, said J. Scott Peterson, a vice president at the Nuclear Energy Institute, a trade group in Washington.

The sense of urgency is considerably greater in Canada, where, experts say, construction could begin a couple of years earlier.

Mr. Duncan said Ontario needed to refurbish, replace or conserve 25,000 megawatts of generating capacity by the year 2020, equal to 80 percent of current power supplies. He estimated that these investments would cost 25 billion to 40 billion Canadian dollars ($18 billion to $29 billion).

At the same time, the provincial government, seeking to cut pollution, has pledged to phase out all five of Ontario’s coal-fired generating stations by 2007, plants that now generate about a fifth of the province’s electricity.

Compounding the drive for new capacity is uncertainty over the future of three idled units at the big Pickering plant, run by the government-owned Ontario Power Generation. The estimated cost of repairs to these and another unit that was restarted last year, originally 1.1 billion Canadian dollars, has escalated to 3 billion to 4 billion Canadian dollars. The authorities are now mulling whether to press ahead with the repairs or abandon the reactors.

With the coal plants destined for oblivion and the attraction of natural gas diluted by volatile prices, some consider nuclear the clear favorite for expansion of the province’s base load power capacity.

"There’s certainly a climate now where it’s being seriously considered," said Duncan Hawthorne, chief executive of Bruce Power, the company that operates the 6,200-megawatt Bruce station on Lake Huron.

Another factor favoring the nuclear option is the development of a new reactor by Atomic Energy of Canada Ltd., a government corporation known for its heavy-water Candu – Canada Deuterium Uranium – plants. All 17 reactors currently operating in Canada are Candu models. Ian Dovey, a company spokesman, said it expected to win regulatory approval for the new model, known as the ACR-700, by the end of 2006.

According to Tom Adams, executive director of Energy Probe, a Toronto-based research group that campaigns against nuclear power, the climate is friendlier toward the nuclear industry in Canada than in the United States in large part because of government support for Atomic Energy of Canada.

Mr. Gale, the Washington consultant, said that if all went smoothly, construction work on a new nuclear plant in Ontario could begin by 2008.

But numerous obstacles must be overcome. According to Mr. Hawthorne of Bruce Power, there needs to be greater certainty on the cost and financing of a new plant, as well as the selling price of its output.

Bruce Power’s 2,300-acre site, 150 miles northwest of Toronto, is a possible location for a new plant. Mr. Hawthorne said that the company would probably decide within the next year whether to refurbish those of its eight existing reactors nearing the end of their lives by 2012, or build new ones, or both.

The prospect of new nuclear plants has so far raised little public concern in Ontario. Glenn R. Sutton, the mayor of Kincardine, the town closest to the Bruce plant, describes the local community as "pro-nuclear."

Most of Bruce Power’s 3,000 workers live in or near Kincardine, population 12,000.

Still, nuclear power is not without critics in Ontario, and protests could grow as the planning process moves forward.

A recent report by the Ontario Clean Air Alliance, an environmental group, concluded that the Manley committee’s findings were based on unreliable assumptions.

In an interview, the group’s chairman, Jack Gibbons, rated the chances that a new nuclear station would be built in the province as "extremely low," because the province’s needs could be met by cheaper and more reliable power sources, like natural gas and hydro and wind power and by conservation.

Besides, said Frank de Jong, chairman of the Green Party of Ontario, "people are still not convinced of the safety of nuclear power."

John Spears
Toronto Star
November 6, 2004

Atomic Energy of Canada Ltd. and its partners are proposing to build a new-design nuclear plant in Virginia and expect to receive up to $250 million (U.S.) in funding from the U.S. government, AECL chief executive Robert Van Adel says.

The money will help fund the consortium as it moves through a five- to six-year process to license the AECL technology in the United States, Van Adel said in an interview.

The AECL group, led by Dominion Resources Inc. and including Bechtel Power Corp. and Hitachi America Inc., has been selected as one of two that will go through the U.S. licensing process.

The U.S. announcement should encourage Ontario to move forward in its examination of the new technology, Van Adel added. AECL has proposed building as many as eight new reactors in Ontario to replace the province’s aging nuclear plants.

Yesterday, however, he was focusing on the U.S. development.

"It’s, in our view, a huge win for us in the sense that we’ve established ourselves as the leading next-generation technology in North America," he said.

AECL’s new design is called the Advanced Candu Reactor, or ACR-700. The 700-megawatt units, bigger than the 515-megawatt ones at the Pickering nuclear station, but smaller than the units at the Darlington and Bruce nuclear stations, are designed to be built in pairs.

"The fact that we’ve been selected in the U.S. will, I believe, have a huge impact on markets like China and other markets around the world, including Europe," Van Adel said.

The government money will help fund site design, environmental studies and regulatory expenses.

"The numbers are obviously under discussion," Van Adel said. The forecast contribution from the U.S. government, however, is in the order of $250 million (U.S.), with another $80 million to $85 million from "partners and others."

It’s a "very substantial contribution to the launch of our technology in the U.S," Van Adel added.

"It shows the level of commitment the U.S. government has to driving forward with the rebuilding of their nuclear fleet."

Canada’s federal government has contributed about $85 million to date toward funding ACR development.

"I would argue this development in the U.S. should provide even greater confidence in the Ontario government that Candu technology is a world leader and has met all the tests in the toughest market in the world, the most competitive market," he said.

AECL currently has about 300 scientists and engineers working on the ACR project, and the U.S. development means another 100 will probably be added to the team, Van Adel said.

Tom Adams of Energy Probe said in an interview U.S. regulators have been reluctant to license AECL reactors because of a design feature that could lead to a reactor speeding up if one suddenly loses coolant. Reactors in use in the United States slow down on losing coolant.

AECL has maintained its reactors are safe, and are designed with multiple shutdown systems.

The new-style ACR, which uses a slightly different fuel from traditional Candu designs, should avoid the problem of a reactor speed-up in the event of a coolant loss, according to an article posted on AECL’s website.

Persuading U.S. regulators that AECL’s new reactor deals with the concerns is a hurdle AECL and its partners must overcome, Adams said.

AECL says it hopes to have permission to start construction of a proposed nuclear station in Virginia by 2009.

John Spears
Toronto Star
January 18, 2005

Atomic Energy of Canada Ltd. says it will concentrate on developing a larger version of its next-generation nuclear reactor after being knocked out of a crucial race to have its technology licensed in the U.S.

AECL was dealt a heavy blow Friday by Dominion Resources Inc., which decided not to use AECL technology in its pursuit of a licence for a new Virginia nuclear power station.

Dominion had assembled a group including AECL, Bechtel Power Corp. and Hitachi America Inc. for the project, and had been selected by U.S. regulators to move through the complex five- or six-year process of obtaining an operating licence.

Getting the technology licensed in the U.S. would have opened the U.S market to AECL for the first time. And it would have given AECL a boost in marketing the reactors in Ontario, where the current fleet of reactors is rapidly aging.

AECL is "clearly disappointed with Dominion’s decision," chief executive Robert Van Adel said in a statement.

It was a sharp contrast to his mood two months ago, when the Dominion-AECL group had been selected to start the licensing process.

"It’s in our view a huge win for us, in the sense that we’ve established ourselves as the leading next-generation technology in North America," Van Adel had told the Toronto Star at that time. He had predicted the decision would have a "huge impact" on AECL’s prospects for marketing the technology elsewhere around the globe.

The Dominion-AECL group was in line to receive up to $250 million (U.S.) in funding to assist it through the complex technology licensing process in the U.S.

The drawback to the plan was that AECL’s nuclear technology has never been licensed in the U.S.

Company spokesperson Dale Coffin said Dominion discovered that using AECL’s technology would likely lengthen the licensing process.

"They won’t use our technology because of the timeframe," he said in an interview.

Dominion is now looking for a new technology partner for its consortium, he said.

AECL has just completed a major project in China, but has been actively looking for new opportunities including the U.S. partnership.

"I think it’s fairly big for AECL," Tom Adams, executive director of Energy Probe, said of the new setback.

"They’ve always wanted a presence in the U.S. market. It’s been on their to-do list for 20 years."

The new reactor comes in two sizes, one of 750 megawatts and one of 1,200 megawatts; the smaller sized reactor had been picked as the candidate for the licensing process.

With the U.S. licensing opportunity off the table, AECL will turn more attention to developing the 1,200-megawatt reactor, Coffin said.

In Ontario, reactors range in size from the just over 500 megawatts at the Pickering nuclear station, to nearly 900 megawatts at the Bruce B and Darlington nuclear stations.

Duncan Hawthorne, chief executive of Bruce Power, had questioned AECL’s decision to pursue the smaller reactor.

In an interview last fall, he noted that Bruce Power’s current units will reach the end of their operating lives in the coming years, but "It’s hard for me to make the economics work by replacing 900-megawatt units with 700-megawatt units."

AECL has applied to have its new technology licensed in Canada as well. Coffin said the company is about half way through the process, but expects it will take another two years or more to complete.

Robert Van Adel
Financial Post
January 26, 2005

Tom Adams is once again completely and utterly wrong in his Jan. 14 rant (New Nuke Sinkholes). I certainly welcome a dialogue with our industry critics, but it is not helpful when those critics simply refuse to acknowledge the facts. The facts are that:

# AECL has shared the risk with the private sector via fixed-price contracts (e.g. 50%) and has used this model in delivering successful projects over the past decade.

# AECL has completed six CANDU power projects in three countries over the past decade – all on time and on budget.

# AECL’s commercial CANDU business is profitable for AECL and the hundreds of leading-edge companies making up the Canadian nuclear industry supply chain.

# AECL has never had to pay out contractual penalties for being late on delivering CANDU reactor projects.

# Sophisticated business analysts recognize that risk-sharing contracts assumed by AECL are in line with other market-based, private-sector commercial ventures.

# AECL constructed and delivered the one-off MAPLE radioisotope reactors for MDS Nordion on time; AECL is expediting a lengthy and complex commissioning process with the parties involved.

# AECL is operating under a cost-recoverable contract with MDS Nordion. The government has no exposure, as it is not party to the contract.

# AECL’s CANDU 6 reactor ranks among the best in the world. CANDU 6 reactors in New Brunswick, Quebec, South Korea, China, Romania and Argentina have been on line, safely producing electricity 86% of the time since 1983.

AECL and Canadian nuclear power technology are outstanding commercial success stories and hardly a "taxpayer sinkhole." The industry has generated more than $170-billion in GDP benefit to Canada via power production, R&D, CANDU exports, uranium, medical radioisotopes and professional services. At the same time, CANDU plants have avoided well over a billion tonnes of greenhouse gas pollution.

Robert Van Adel, president and chief executive officer, Atomic Energy of Canada Limited.

TOM ADAMS RESPONDS

Robert Van Adel describes Atomic Energy of Canada Limited, the Crown corporation he heads, as an "outstanding commercial success." AECL certainly does stand out, but not for any commercial success. AECL is utterly dependent upon government subsidies to keep itself afloat.

In the period 1997 to 2004, for example, AECL received $1.24-billion in direct parliamentary appropriations. In addition, the federal government indirectly assisted AECL by granting aid to AECL customers that agreed to purchase AECL’s CANDU reactors. In 1997, the Chinese government received a subsidized loan of $1.5-billion under the government’s Canada Account program to enable it to purchase two reactors from AECL. In January, 2003, the Romanian government received a $328-million Canada Account loan to support the eventual completion of a second of the five reactors ordered in the 1970s. The Canada Account is a pot of money dispensed by the federal Cabinet, entirely at its discretion for purposes that are "in the national interest."

AECL’s domestic customers – Ontario Power Generation and New Brunswick Power – also benefit from provincial subsidies. In 1998, Ontario Power Generation’s predecessor received a provincial bailout of $21-billion, overwhelmingly for nuclear writedowns. In 1999, provincially-owned NB Power wrote off $450-million against its AECL-constructed reactor, resulting in a hit to the province’s books of more than $400-million. All considered, Bombardier’s federal and provincial subsidies are tiny compared with those received by AECL.

Mr. Adel claims that six CANDU power projects have been completed on time in three countries over the past decade. He overstates. The Cernavoda I reactor in Romania required almost 20 years from the point that it was committed in 1977. First concrete was poured in October, 1980. Originally intended to be completed in the early 1980s, it was actually completed in December, 1996, more than 10 years behind the original schedule.

CANDU power plants aside – these are immense undertakings with correspondingly immense logistical challenges – AECL claims to have constructed and delivered the MAPLE radioisotope reactors for MDS Nordion on time. The only reactor based on AECL’s MAPLE technology that is now in operation was built by the Koreans, who completed it in 1995. AECL’s own MAPLE reactors have not seen completion. Two were ordered in 1996 by the medical firm MDS Inc. – MDS Nordion’s parent – for completion in 1999 and 2000. Neither of these two reactors is now working – they are both plagued by safety problems that the Koreans had previously discovered. MDS is threatening to litigate its dispute with AECL.

Mr. Adel assures us that the federal government has no exposure for the business failures of this wholly owned subsidiary of the federal government. This claim is the opposite of what AECL told the NB Public Utilities Board in 2002. When this provincial regulator formally asked AECL at a public hearing whether AECL could live up to the commercial guarantees it was offering, AECL assured the NB Public Utilities Board that the federal government stood behind AECL’s promises. In its written decision, the provincial regulator then noted: "Upon review, the Board is satisfied that the contractual obligations incurred by AECL in its contracts with NB Power will be adequately supported by the Government of Canada due to the statutory principal-agent relationship created in the Nuclear Energy Act."

Tom Adams is executive director of Energy Probe, a national think-tank on energy issues.