Energy Probe

Tom Adams
Toronto Star
April 15, 2004

Letter to the Editor

The Toronto Star

Re: "Taxpayers are so done with the sorry Hydro saga" by Jennifer Wells, April 11, 2004. Without its failing nuclear program, OPG could easily avoid the outrageously excessive executive compensation it has grown accustomed to. The world’s troubled nuclear programs are driving up prices for managers who can credibly claim that they might solve nuclear problems. In the U.S., utilities like First Energy are dealing with corrosion-related nuclear safety deficiencies. The U.K.’s major nuclear company, British Energy, is being restructured in bankruptcy. In Japan, a long series of safety gaffs at reactors and also in uranium handling has shaken the nuclear industry. Canada’s own AECL is struggling with two major safety problems in its MAPLE reactor program. All these troubled nuclear investors and more are bidding for self-described nuclear turn-around experts. If the Ontario government accepts former federal finance minister John Manley’s proposals to attempt a restart of another retired reactor and build new ones, the only financial winners will be consultants and executives. Ontario taxpayers will be stuck with the bills, including more outrageous consulting and executive fees and salaries.

Tom Adams, Executive Director, Energy Probe
This letter has not been published by the Star.

The original article appears below:

Taxpayers are so done with the sorry Hydro saga

by Jennifer Wells

Dwight Duncan needs a new script.

The province’s energy minister has professed himself "surprised" by the number of Hydro workers making more than $100,000 annually.

And clearly appalled by the "obscene abuse" levelled at Ontario taxpayers by the $40-million pay-and-pension haul humped back to the U.S. by four self-billed nuclear experts.

As we have been living this tale for going on eight years, it would be more fitting of the circumstance if Duncan were to offer a more jaundiced and informed view.

There are no surprises here. None. Zilch. Nada. Better for Duncan to simply say, "I’m so done with being surprised."

Surely taxpayers are so done with the Hydro story. So beyond fed up.

Five years ago. Let me start that sentence again. Five years ago, taxpayers were informed of the top-flight salaries and benefits of the aforementioned nuclear pros. $1.35 million to someone named Brian Debs. $1.23 million to Warren Peabody. $1.31 million to Carl Andognini.

These are single-year payouts I’m talking.

At the time Chris Hodgson was management board chair in the Mike Harris government.

Here’s what he said: "That seems to me like a lot of money, personally. But it depends on their skill sets, I would presume."

Yeah.

Sean Conway, then the Liberal energy critic, said he thought the vast sums were an April Fool’s joke.

The strategy of the government of the day was to lower a veil of secrecy on payouts in excessive years.

Except that later securities filings for Ontario Power Generation, one of the Hydro successor companies, forced some disclosure.

By example, we knew that in each of the years 2000, 2001 and 2002, Gene Preston’s salary exceeded $1 million. That his bonus ranged between $76,000 and $323,000 in those years.

And that in 2002 he was paid an additional $1.4 million upon retirement, plus moving costs back to the U.S., plus the repurchase of his home at its appraised value.

I’m up to about $10 mil already.

Gene Preston was one of Carl Andognini’s top picks. Initially there were seven Americans hired to fix Hydro’s nuclear woes.

Gene Preston would become chief nuclear officer at Pickering, the individual responsible more than any other for bringing the four A units back online in a timely and fiscally responsible fashion.

It has become common to refer to the group pulled together by Andognini as the Dream Team.

I prefer Magnificent Seven, a label chosen by Hydro insiders at the time of the U.S. hires in 1997.

The idea of importing gunfighters to defend a village – "They were seven — and they fought like 700!" – is so much more animated than the dreary Dream Team.

In an earlier interview, a former Hydro executive captured their arrival this way: "I got the impression from the Magnificent Seven that they had been sent to the remotest backwater."

The Magnificent Seven left a mess. Successive reports made that point, and answer the question recently posed by some in the media. That is, what did we get for our money?

The hole in the doughnut, that’s what.

What’s less well known is that the Magnificent Seven gave birth to wave after wave of American nuclear workers infatuated with Hydro’s pay scale. Our nuclear operations were seen as a candy store. A cookie jar. A honey pot.

Per diems. Travel expenses. Outsized contract salaries. Pickering delivered a payday that these workers couldn’t even dream of in the U.S. No wonder the embittered Pickering workers took to calling their top bosses the million-dollar club.

I’ve written a couple of columns about a job shop called Power Source, which appeared out of thin air, run by a Chicagoan and incorporated in Nova Scotia. Power Source was pumped full of Pickering A contracts.

Older hands at Pickering were full of questions about Power Source and about whether any current executives were connected to Power Source in any way.

I’ve also written about the sudden disappearance of at least two key Pickering executives, Bob Tynan, who was paid via Power Source, and Mike Bagale.

Getting any information out of OPG has for years been akin to pulling teeth. Confirmation of the departures of these two was no different. And that’s subsequent to the investiture of the McGuinty government. The new OPG appears to favour stealth manoeuvres, just like the old OPG.

You can bet there’s a long list of over-the-top earners at Pickering. And their true cost can’t be known until the tab includes those travel expenses, and billed-to-the-company dinners at the favoured Pickering pub, for that matter.

And pension treats. Moving expenses. The whole nine yards.

This week, Dwight Duncan promises more disclosure on those $100,000-plus salaries. Who earned what.

If the McGuinty government truly intends to deliver transparency and accountability, it will take the opportunity of that news moment to give taxpayers more than they’re expecting.

To put itself, for once, ahead of one of the most unsurprising financial disasters the country has ever seen.

Tom Adams
The Globe and Mail
July 16, 2004

Letter to the Editor
Your authors, Swift and Stewart, might have learned more from Enron and the electricity experiences of Ontario and California if they took off their ideological blinders. The evidence the authors rely on to condemn electricity competition is the successful prosecution of private-sector market manipulators. If economic and environmental efficiency were a higher priority than ideology for Swift and Stewart, they would rank the honorable retirements that Ontario gave the public executives who provided us with the far greater Darlington catastrophe and the continuing employment of many senior engineers and managers involved in the failure-laden Pickering 4 restart as even greater scandals than Enron. For all its crimes, Enron never built any nuclear plants and Enron’s collapse left taxpayers and customers untouched whereas public power in Ontario continues to expand our already giant tax-payer backed stranded debts and has resulted in a Debt Reduction Charge tax on all our power bills.

Yet the evil-doers in Canada’s public monopolies never seem to do the "perp walk" – and Swift and Stewart seem to prefer that lack of accountability.

As for their claim that the consumer and environmental group, Energy Probe, worked with Enron to develop the Ontario market rules in 1998 and 1999, if they had checked the record, Swift and Stewart would have discovered that Energy Probe worked with academics and other groups to successfully block Enron’s attempts to transplant key elements of the California market design into Ontario, including Enron’s desire to have the public transmission operator isolated from the market pricing function.

Tom Adams, Executive Director, Energy Probe

The original article:

Electricity: learning from the shocks

by Jamie Swift and Keith Stewart, The Globe and Mail, July 15, 2004

In the wake of Enron, we need a regulated power system based on long-term planning, not the whims of the market.

They have become predictable spectacles, these ritual parades of men in fine suits and handcuffs. The "perp walks" are staged every time an accused corporate criminal is indicted for fraud, conspiracy, embezzlement or some other form of malfeasance.

Last week saw former Enron chief executive officer Kenneth Lay being led through Houston’s stifling heat into a courtroom amid much head-shaking about greed. Mere mention of Mr. Lay’s company elicits knowing nods, for the Enron brand has – for good reason – become synonymous with seemingly pervasive business swindles. The spectacle seems to promise justice and a crackdown on what is delicately called "white collar" crime.

But if Canadians want to avoid having their lights go out on hot summer days, we would do well to take a hard look beyond the spectacle and focus on the new energy rules that Enron helped write south of the border. It would also be a good idea to think about a regulated power system based on long-term planning instead of entrusting our electricity future to the whims of the market.

The deregulated free-market regime created exciting opportunities for enormous profits to be made from the manipulation of markets for essential utility services such as electricity. And they are coming to Canada, as the U.S. Federal Energy Regulatory Commission continues to push Canadian utilities to deregulate in order to gain access to the U.S. market.

It is worth remembering that Enron wasn’t simply filled with liars and thieves (although it was that, too). Enron went from being a medium-sized natural-gas company in the early 1990s to the seventh largest company in the United States by 2000 on the strength of being the leading U.S. energy broker. It began selling electricity as well as natural gas in 1994 and, by 1997, it was the largest electricity trader in the country.

The self-described "world’s greatest company" designed and implemented a system in which liars and thieves could make a killing. In the process, it spent millions on lobbyists, ad firms and political donations. Enron and other marketeers also set up phony front groups with populist-sounding names such as "Americans for Affordable Energy."

In December of 2000, Enron made a staggering $440-million (U.S.) in trading profits from California – the same month that the state was declaring Stage 3 power alerts and bracing for rolling blackouts because energy sellers were withholding supply to force up prices.

And they were praised for it. Fortune magazine named Enron "America’s most innovative company" for five years running, from 1996 until 2001. That is, until its "innovative" accounting practices made Enron the largest bankruptcy in U.S. history and brought its accountants down with it.

The Enron ideology, meanwhile, came to Canada. Unlike most of the country, Alberta never had a provincially owned power utility and was much closer to the U.S. model of privately owned but publicly regulated utilities. Ralph Klein’s Tories were the first to go down the Enron-style deregulation road. They are still paying for it. Prices jumped. But Alberta, awash in petroleum revenue, could write large cheques to defray rising electricity costs.

In Ontario, Enron not only inspired the marketeers, it even helped to write the Mike Harris government’s electricity legislation. And along with industrial power consumers, pro-privatization academics, Energy Probers and other privatization zealots, the provincial Tories put an Enron man on its market design committee to work out the fine print.

In hindsight (against the background of the biggest political train wreck in recent Ontario history), it is easy to smile with self-satisfaction at Enron’s Canadian vice-president for telling an Ontario legislative committee how the company’s market design would "make sure that consumers benefit and are protected from less than credible providers in the marketplace."

Yet, at the time, Enron and its advice were taken very seriously.

The province is still living with the legacy of years of laissez-faire thinking about its electricity future. Before that, Canada’s biggest power grid was run by a utility committed to a bizarre form of nuclear gigantism that drove the old Ontario Hydro so deeply into debt that it was easy political prey for the privatizers.

As the weather heats up, maybe those sinkholes for capital that are Candu reactors will provide the power to keep the lights on and the air conditioners humming. That is, if we fork over billions more to patch them up.

Contrary to popular belief, Ontario’s wholesale electricity market is not closed. Its effects are simply disguised for most consumers by a price cap and cheap hydroelectric generators. It looks like the new power supply will come from private producers as filthy coal stations close and the creaky Candus wind down, leaving behind their thousands of tonnes of deadly radioactive waste.

Ontario faces a stark choice. It can take the soft energy path of renewable power and conservation. Or it can repeat the nuclear errors of the 1970s and compound them with the shrill, let-the-market-decide mantra of the 1990s.

Just before Ken Lay took his perp walk, the Ontario government, spooked by the prospect of summertime blackouts, decided to spend $900-million on a mothballed nuclear reactor at Pickering. Meanwhile, having asked for proposals for 300 megawatts of green power, it got offers for 4,400 megawatts from windmills and small hydro dams. More than the entire Pickering station could produce if it actually worked. More than its Nanticoke coal plant – the largest source of air pollution in the country – generates on the hottest day of the summer.

Kingston writer Jamie Swift and Toronto Environmental Alliance campaigner Keith Stewart are the authors of Hydro: The Decline and Fall of Ontario’s Electric Empire, to be published this fall.

Eye magazine   December 23/2004

The process works  

Re: "Procedural pitfalls" by Gord Perks (Enviro, Dec. 16)

In criticizing the Ontario Energy Board for its passionless debate, Perks has overlooked the pattern of environmental success that arises from due process and meaningful energy prices.

The cumbersome and technical OEB process has helped the environment, for example by killing a huge and, ultimately, unjustified liquefied natural gas storage project proposed for Eastern Ontario in the early 1980s. Perks’ criticism misses the relative environmental success of the long history of regulated natural gas delivery rates compared with the long history of self-regulated electricity rates under Ontario Hydro and also compared with municipally regulated water utility rates.

Public regulation of gas delivery was one of the essential ingredients that gave Ontario one of the best gas delivery systems in North America without public expense.

Meanwhile, Ontario Hydro and its successor, Ontario Power Generation, continue to give us massive public debt and nuclear headaches. The municipal council in Walkerton used to pride itself on having the lowest water rates in the region.

Public utility regulation can be more effective in protecting poor customers than political control. Political processes are often the best tool we have for setting environmental standards, but Ontario’s experience in gas, electricity and water proves that overseeing the construction of smart infrastructure and charging rates that fully recover the associated costs is better suited for a quasi-judicial process like the OEB than the lobbying model Perks prefers.

Tom Adams, Executive Director, Energy Probe

Procedural pitfalls" by Gord Perks (Enviro, Dec. 16)

Last week, chance took me to the hearing room of the Ontario Energy Board. The OEB sets the rules for our energy system. If your electrical utility or natural gas provider wants to jack rates, it needs the OEB’s permission. The OEB has some features I’m tempted to love: it sets the rules in public, it explains its choices in writing and it listens to a wide variety of interests. Frankly though, I can’t think of less loveable entity.

Modern bureaucracy has a soul-deadening aesthetic. It has a thrifty, grey, fluorescent, plastic-and-concrete interior decoration chic that says: "There are no passions here. No colourful thinking or flights of imagination. Style and human warmth are dangerous and subversive frills." The OEB hearing room is an exemplar of this look.

And the way they talk! As a quasi-court, the OEB is all legal formalism. Nobody has a name. The Board members are "Board Members." Lawyers are "Learned Colleagues." The interest groups are "Intervenors." Nobody has values or beliefs, rather they "Present Submissions," and "Seek Relief." The OEB "Accepts" or "Rejects" reasons based on "Interpretations" of precedents or stated government policy. God forbid they might have hopes or cares either way. They are dispassionate neutrality embodied in conservative clothes and tidy haircuts. The day I was there, the head of the OEB hearing panel was turgidly churning through a ruling on energy conservation plans. Twice he apologized for using plain language. You’d think he’d farted in church.

That day, the "Matter Before the Board" (#RP-2004-0203) was the energy conservation plans of the six biggest electrical utilities in Ontario, including Toronto Hydro. Conservation means using less electricity, so that we don’t overheat the planet and kill people by burning coal and making smog. Here’s how the OEB decides how much money utilities spend saving the world:

"CDM Budget = 1/3 x (MARR), where: MARR = RATE BASE x [(CER x ROE)] + [(1-CER) x DEBT RATE)], Rate Base is fully explained on Pages 3-5 to 3-8 of the Rate Handbook CER is the Common Equity Ratio (inputted decimal places), ROE is the Return on Equity (usually 9.88 per cent and inputted as 0.0988), and, Debt Rate is the debt/equity split. For utilities with rate bases less than $100 million, the debt equity split was deemed to be 50/50 (inputted as 0.5)."

Now, OEB regulars know that CDM means "conservation and demand management," and MARR means "market adjusted revenue requirement." But nobody else would.

I’m tempted to try to explain what the formula means, but the thought fills me with ennui. I’d rather say why I was there. Utilities and governments want to help save the planet by charging more for electricity. (If people have to pay more they’ll use less.) Some environmentalists agree, but many of us think it’s dangerous humbug. We’d rather see tough energy-efficiency standards for appliances and heating systems. We hope for a government with the courage to invest in green power sources. We don’t believe people will unplug their air conditioners to save a dollar or two. And we have the example of Enron to show that free enterprise in electricity can be a dangerous fraud.

At the OEB hearing, we at the Toronto Environmental Alliance teamed up with anti-poverty types to point out that low-income families are screwed by the make-’em-pay approach. In fact, after unaffordable rents, energy costs are the most common money-related reason people get evicted. We intervened in hearing #RP-2004-0203 to try to force the big utilities to take measures to help low-income families conserve energy without going broke. The OEB said we raised an important point, but chose not to tell the utilities to do anything about it.

As I sat in that neutral grey temple of bureaucracy wishing I’d brought whoopee cushions, it occurred to me that we are complete suckers for Big Ideas that take the human beings out of democracy. The OEB is public. There are no specific exclusions about who can come make an argument. But the whole setting, style, language and approach exclude just about everyone from participating, and further insist that the few that do participate check their hearts at the door.

The same can be said about using free-market principles to solve environmental problems. It would be very nice for everyone concerned if Adam Smith’s invisible hand could guide us to a green prosperity, but it can’t. We actually have to sit down and decide what matters to us, and create ways of solving our problems all by ourselves.

It’s scary, hard work trying to figure out how to save the planet. It’s messy, tough politics deciding who pays for what. But that’s exactly why we need more people involved. We simply can’t rely on grey people in grey rooms or on the march of commerce to solve our problems for us.

Gord Perks is a campaigner with the Toronto Environmental Alliance. Enviro appears every two weeks.

Tom Adams
National Post
April 29, 2005

 Ontario begins to phase out coal power on Saturday, starting with the closure of the Lakeview coal-fired generating station west of Toronto. Inefficient and heavily polluting following decades of neglect by its previous owner, Ontario Hydro, Lakeview’s retirement will allow people downwind of it to breathe easier.

For all Ontarians, however, the loss of Lakeview’s electricity output – and that of other coal plants to come – makes an already dark power supply outlook darker still. Ontario urgently needs affordable, reliable, and environmentally acceptable replacement power. Cleaner coal – not no coal – is one of Ontario’s very best options.

Natural gas, once an attractive alternative to coal, has become unaffordable. Ontario missed the North American dash for cheap natural gas-fired power in the mid 1990s when gas was cheap. Instead, with gas prices now up about three times their 1990s level, Ontario is dashing in while most other North American jurisdictions – to avoid the higher and more volatile gas prices – are dashing out. Invenergy, a firm the Ontario government contracted to build a gas-fired unit, recently bought a partly built 620-megawatt unit in Washington State for 11 cents for every dollar sunk in it by its original investor.

Ontario’s vision of a complete phase-out of coal-fired power in Ontario by 2007 will not occur. Coal meets about 30% of Ontario’s power demand. Replacing this output with other forms of power generation would be tough even if cost were no object.

Ontario’s nuclear power production outlook remains poor and its cost outlook fares even worse, particularly after Ontario Power Generation, the reactor owner, discovered yet another unexpected ageing phenomenon recently during the renovation of Pickering 1. The Pickering 4 reactor, which was issued a clean bill of health after a total overhaul two years ago, is now suspect. Three other reactors now in operation are expected to reach retirement age around the end of this decade. Even if Ontario could afford more nuclear power, its poor reliability disqualifies it as a viable alternative to coal. Since Ontario’s nuclear performance went into decline in 1983, coal power has been the backup needed for unexpected and often extended nuclear shutdowns.

The Ontario government claims the province has at least 2,000 MW of new hydroelectric potential – about 30% of the coal capacity slated for shutdown. Yet after two decades of ceaseless promotion and massive subsidization by successive governments, Ontario has only managed to increase hydroelectric power output by about 700 MW, less than 10% of the coal capacity on the chopping block.

Ontario plans to import hydroelectric power from uneconomic new dams in Manitoba and Labrador, made less so thanks to federal government subsidies to their transmission lines. These power projects, if they occur, will come on line after 2013. Last week a political debate broke out in the Quebec National Assembly with the government and opposition both opposing any federal participation in any electricity matters in Quebec. The difficulty of relying on Quebec is further illustrated by the largest Ontario transmission projects in the last 10 years – a new high-voltage connection with Quebec south of Ottawa. After Ontario got the project underway in 1999, Hydro Quebec cancelled its share of the project, failing to build a corresponding transmission line on its side of the border to connect to Ontario’s new line.

Not that transmission line problems start at the Quebec border. Ontario Hydro’s 1989 agreement to buy power from the same remote hydroelectric site in northern Manitoba currently under government review, was cancelled in 1991 by Ontario Hydro due to its excessive cost.

Yet another risk of relying on long-distance transmission was illustrated earlier this week when freezing rain collapsed eight high-voltage transmission powers carrying power to Quebec from Labrador.

Conservation has enormous potential to ease the supply strain. Unfortunately, the Ontario Liberals discourage conservation. Since it froze electricity prices for most customers a month ago, prices at peak demand times – just when Ontario’s coal power are most needed – are routinely double the regulated price that most customers pay.

The Ontario Liberal government is betting heavily on wind power. Although wind can help, that help is muted. The first utility-scale wind farm in Canada, located in Quebec’s Gaspe region, was financially restructured two and a half years ago. The cause: Production results averaged over the first five years of operation were just 60% of the expected output.

That leaves coal, Ontario’s neglected fuel. For decades, Ontario expected nuclear production to be so abundant that coal power would be largely unneeded. As a result, it did little to upgrade emission controls. In contrast, Ontario Hydro’s successor, Ontario Power Generation, has installed scrubbers on four of its remaining 15 coal units, making them among the cleanest conventional coal generators in North America.

Since 2000, Ontario has brought in more electricity than it has sold. With Lakeview gone, Ontario will become more reliant on imports. If Ontario implements its promised coal shutdown, some of the plants Ontario will be closing will be much cleaner than the imported power that will be making up the lost supply.

Earlier this week, the Ontario government released a study to boost its case for complete coal shutdown. None of the scenarios in the study considered high-efficiency uses of coal that capture waste heat, such as have been in common use in Europe for decades. Nuclear power scenarios, on the other hand, were unrealistically optimistic: The authors assumed that the refurbishment of old reactors can be completed for less than 60% of the cost of the last one completed in Ontario. Inexcusably, in determining coal’s environmental merits, the analysis lumped together Ontario’s cleanest coal units with its dirtiest, tarring all with the same brush.

One of the best sites in Ontario for an efficient power station is Toronto’s Lakeview – a refurbished plant there could produce power and inexpensive heating for both homes and businesses. In fact, the emissions of an upgraded Lakeview could approach those from the gas-fired stations the government prefers, without the unreasonable costs for consumers.

National Post   October 26/2005

Runaway nuclear   by Tom Adams

Without public review, let alone a consideration of competitive alternatives, the Ontario government has just entered into a 31-year contract for electric power with an odd consortium that includes TransCanada Pipelines, an investment wing of the Ontario Municipal Employees Retirement System and two electricity unions. The deal involves refurbishing the four oldest Candu nuclear reactors of the eight built at the province’s Bruce nuclear complex. It also involves risk-sharing provisions likely to lead to very costly power.

The four reactors at the Bruce A station, originally constructed in the 1970s by Ontario Hydro, fell into disrepair in the late 1980s and 1990s. To staunch the bleeding, then-Hydro chairman Maurice Strong wisely closed one of the Bruce reactors (Bruce 2) in 1995. Problems at the remaining three reactors forced Ontario Hydro to close them in 1998. The failure of Bruce A contributed to Ontario Hydro’s financial collapse that same year.

A private consortium, Bruce Power, then assumed operation of the four newer Bruce B reactors, with an option on the four non-operational Bruce A reactors, under a lease to Ontario Hydro’s successor, Ontario Power Generation (OPG), in 2001. The two most viable Bruce A reactors – units 3 and 4 – were partially refurbished between 2001 and 2004 at the consortium’s sole expense.

Ontario’s new Energy Minister, Donna Cansfield, reports that the cost to consumers to complete the refurbishment will be 6.3 cents per kWh. This claim is only true if nothing goes wrong.

The refurbishment costs could vastly exceed those projected. Consumers will be on the hook for every penny of the first $200-million of renovation cost increases for the Bruce 3 reactor renovation if the current estimate is adjusted upward before the refurbishment project commences in 2007. Three categories of force majeure events, many of which have previously occurred, will result in consumers absorbing up 25% to 75% of the cost overruns on all four planned reactor refurbishments.

No Candu refurbishment has been delivered on budget. The most cost-effective was the privately funded renovation of Bruce 3 and 4 between 2001 and 2004. Although investors were operating under the incentive of bearing all the costs, final costs were $725-million – 113% above the initial estimated cost of $340-million. Cameco, a firm that paid for about one-third of that refurbishment, declared a $63-million loss on it while exiting from the next Bruce A refurbishment.

Bruce Power blamed much of the cost overruns incurred during the Bruce 3 and 4 refurbishment on tougher security rules issued by the Canadian Nuclear Safety Commission, arising from 9/11. That factor, had the new contract been in place, could arguably be considered a force majeure event arising from "an order, judgment, legislation, ruling, direction or other intervention by a Governmental Authority restraining (the Bruce operator)". Such restraints are the normal approach to nuclear safety regulation in Canada. Once so identified, customers would be stuck with 75% of the extra costs. Applying the percentage overrun seen during the 2001-2004 Bruce 3 and 4 restart to the new refurbishment would result in consumers paying 11.1 cents per kWh.

This is almost 40% more expensive than recent wind-power contracts, whose 8-cents-per-kWh price also includes transmission costs, a factor not included in the Bruce deal. It is also more than double the current average frozen retail sales price for the commodity portion of household electricity bills. And it is as much as three times the cost of new power from a modern generation of clean coal plants.

The government’s four-reactor Pickering A refurbishment, undertaken from 1997 until 2003, fared much worse than its privately financed Bruce 3 and 4 counterpart. The Pickering A project was originally estimated in 1997 by Ontario Hydro to cost $780-million. In August, 1999, OPG estimated the cost for Pickering 1 alone to be $213-million as part of a then-estimated $840-million total package. In March, 2004, a committee chaired by former federal minister John Manley and including OPG chairman Jake Epp decided to complete the Pickering 1 refurbishment. The committee tallied the spending up until March, 2004, at $325-million and assumed incremental costs of $500-million while pledging vigorous cost control and tougher governance. OPG is now estimating $1.02-billion for the nearly completed project. Assuming no further problems, the incremental spending from March ’04 until project completion has been 39% more than the Manley committee’s judgment. Relative to OPG’s 1999 judgment, the overall increase has been 379%.

The new refurbishment agreements effectively convert Bruce A into an economically regulated utility. Fuel costs, refurbishment cost overruns and operating costs are all shared between the private operators and captive electricity consumers according to formulas resembling the arcane methods commonly used to determine rates charged to customers captive to monopoly energy pipelines. Inefficiencies typical of those that often plague consumers of other regulated energy services inhere to the Bruce refurbishment agreements. For example, there is no commercial incentive for the Bruce operators to deliver power when consumers need it most.

Although Bruce A has effectively become a regulated utility, its sister station – Bruce B – remains a largely unregulated station. Yet Bruce A and B will remain operationally integrated, sharing staff, overheads and in some cases revenues. This arrangement creates powerful incentives for the private operators to shift costs into the regulated operation and revenues into unregulated operations.

The success or failure of the Bruce project depends largely on the performance of the troubled federal nuclear agency, Atomic Energy of Canada Limited (AECL), which has guaranteed both the cost and completion time to replace key reactor core components at Bruce A. AECL’s only previous major nuclear refurbishment assignment was at Pickering A during the period of that project’s worst cost overruns. AECL was eventually removed from its management position by a frustrated OPG.

The obsolete Bruce A reactor design represents yet another problem for consumers. Although the scope of the refurbishment project is much greater than any previously attempted worldwide, the project makes no fundamental changes to the basic safety features of the reactor design. In a tacit acknowledgement of some of the safety concerns of its nuclear critics, the next generation of reactors proposed by AECL would fundamentally revise the physics characteristics of the reactor to correct inherent instability. A future regulatory decision to enforce modern safety standards could leave Ontario consumers in the lurch.

The Ontario government has signed consumers up for this sole-source contract to resurrect obsolete reactors without considering Ontario’s lower cost options for large amounts of much-needed new electricity supply. And without protecting Ontario taxpayers and consumers from a repeat financial meltdown.

Letters

Nuclear folly

Re: "Runaway nuclear," Tom Adams, Oct. 26

Tom Adams is strongly opposed to the contract between the Trans Canada Pipelines consortium and Bruce Power to refurbish the four units of the Bruce A nuclear plant.

Ideally, Ontario should invite proposals for state-of-the-art nuclear reactors from any possible supplier in the world, as China has done. The problem is time. Incompetence, neglect and weak government oversight have characterized Ontario’s energy policy for three decades. The current regime has neither the intellect nor the managerial ability to engineer a major change. Money and time have been frittered away on marginal projects involving wind, hydro and ethanol. Urgency is driving the government to refurbish Bruce A.

Tom Adams closes by urging the province to find "lower cost options for large amounts of much-needed new electricity supply". He does not say what those options are. Mr. Duncan, the recent Ontario Minister of Energy, has told us it would be natural gas. He has evidently not noticed that the price of natural gas has quadrupled in the last few years.

Energy Probe (which Mr. Adams leads) has recently demonstrated that state-of-the-art coal-fired plants are perhaps the best choice. But the Ontario government is too obtuse to consider this option. The minister said that proponents of coal were "Neanderthals." Should we laugh or weep?

Bob MacIntosh, Toronto, published by the National Post, October 29, 2005

National Post   November 4/2005

Coal comes clean   by Tom Adams

Once a dirty, low-tech energy source, the coal industry is reinventing itself, thanks to a scientific and engineering revolution that is sweeping the world. A new generation of coal plants, cleaner than most gas-fired plants, is now in operation in the United States, Japan and Europe, with even cleaner plants under development.

Coal’s transformation into a clean, high-tech fuel stems partly from economics ¨C high fuel prices justified the R&D that brought these innovations online ¨C and partly from pressure from environmental groups that have been demanding, and getting, cleaner coal technologies. The result is cleaner coal that costs a fraction of yesterday’s alternatives, such as natural gas and nuclear.

Ontario was, until recently, part of this success story. Starting in 1994, the province capitalized on earlier technological advances by upgrading several dirty plants, making them among the cleanest on the continent. For example, the pollution-control equipment installed on Ontario Power Generation’s Lambton units 3 and 4, although not as good as more recent technology, nevertheless lets these units contribute about the same amount of smog and acid rain as Ontario’s gas plants, and less than many of the gas-fired stations in neighbouring states from which we buy power. Unfortunately, because Ontario’s McGuinty government stopped the province’s coal-cleaning program to make good on an ill-advised election promise, clean coal units comprise only 13% of Ontario’s fleet.

The only significant difference between modern coal power and the McGuinty government’s massive gas-fired power expansion is in the cost to consumers. Coal has a large and growing cost advantage over gas in North America ¨C its historical advantage of 5 to 1 has become 20 to 1 and is predicted to increase further.

Because of this drastic fuel price difference, the smart money is abandoning natural gas: Many natural gas stations in the U.S. are available for resale, sometimes from creditors, and often for pennies on the dollar. Invenergy, one of the companies building gas-fired generation in Ontario under contract to the provincial government, bought a mostly-built $300-million gas-fired generator in the U.S. earlier this year for $21-million.

The clean Lambton coal burners today deliver power at less than four cents per kilowatt hour, about 40% cheaper than the price consumers pay for power from the Bruce A nuclear station. Power from coal is even more valuable, given its ability to meet peak-hour needs ¨C a flexibility that nuclear plants, which must run flat-out, do not have. Yet Premier McGuinty recently announced that he will close these clean coal units in 2007, despite severe power shortages that threaten Ontarians with blackouts at peak periods.

Converting some of Ontario’s dirtiest coal plants could deliver large amounts of flexible power for less than five cents per kilowatt hour. The only alternative available for meeting Ontario’s requirements for large amounts of flexible electricity output supply is gas-fired power, which currently costs about 11 cents per kilowatt hour.

Building new coal plants would deliver even cleaner power ¨C half that of Ontario’s retrofitted plants. Many excellent sites are already available, such as the former coal-fired generation sites in the Toronto Portlands and the Toronto suburb of Mississauga. The Mississauga site could supply coal through a pipe-based, just-in-time inventory system, allowing the Toronto Portlands site to be developed cleanly and on a small footprint.

Locating cleaner new coal plants inside cities is key to minimizing overall fossil fuel emissions and to hedging against tougher future emission rules. Urban power stations can replace conventional furnaces by piping waste heat to commercial, industrial and residential customers. This kind of district heating network has slashed emissions at the world’s cleanest coal plant, in Copenhagen, Denmark. Completed in 2002, the unit operates at triple the efficiency of Ontario coal plants and is designed to blend biofuels with coal.

Unlike nuclear power’s technical and commercial uncertainties, clean coal technology is mature, fast to construct and so reliable that coal-plant equipment suppliers now routinely guarantee the environmental and production performance of their equipment. Alberta’s cleanest coal unit ¨C copied from a new Japanese station ¨C was completed earlier this year on time and on budget after just 36 months of construction. Existing coal plants are being refurbished in just 18 months. By contrast, the last nuclear refurbishment, at Pickering unit 1, took seven years with consumers, not the builder, on the hook if it doesn’t perform as promised.

Ontario faces blackouts, soaring prices and even an increase in pollution if it shuts down its clean coal plants while importing dirtier power from nearby states. Yet this is the Ontario plan, recently reaffirmed by Dwight Duncan, a leading light in the Ontario Cabinet. Only "Neanderthals" would reject gas fired plants for clean coal, he stated.

WARMING TO COAL:

Poll margin of error: +/- 4% 19 times out of 20.

Power Workers Union poll conducted among 600 adults 18 years of age and older in Ontario from Oct. 13 to 20, 2005.

88% believe the government should rethink its energy plan.

73% favour keeping coal plants open if the use of new technology reduces the harmful emissions from the coal plants.

52% disagree that Ontario has enough electrical energy to meet it future needs.

91% support the installation of clean-burning coal technology.

88% believe the Ontario government should rethink its energy plan.

A reader responds

Clean coal: What about CO2?

Re: Coal comes clean, Tom Adams, Nov. 4

Mr. Adams goes to great lengths to extol the cleanliness, cheapness and flexibility of "clean coal." However, he conveniently fails to acknowledge the major environmental cost of burning coal ©¤ the continued release of massive amounts of CO2.

"Clean coal" technologies have not yet changed the basic chemical equation of combustion: (CH20+ O2 ->CO2 + H20). This means a tonne of coal burned with "clean coal" technology releases the same amount of CO2 into the atmosphere as a tonne of coal burned with "dirty coal" technology.

Among those who study global warming there is widespread agreement that CO2 emissions are the major factor in climate change making "clean coal" a major contributor to climate change.

When considering "clean coal" as an option for Ontario’s base load power production it is important for all Ontarians to understand that these plants will release CO2 into the atmosphere, non-stop, for many, many decades and in so doing will certainly ensure Ontario’s legacy as a major contributor to climate change.

Jane Forbes, instructor, Science and Technology, OISE/University of Toronto, November 19, 2005

Tom Adams responds: Modern coal technologies, such as those in use at world’s cleanest coal plant, in Copenhagen, Denmark, have demonstrated that coal plants can achieve lower carbon dioxide emissions than those of the natural gas-fired plants Ontario is currently building. Even without the most advanced technologies, carbon dioxide emissions from coal approximately equal those of gas, if the gas is derived from imported liquified natural gas, expected to be North America’s largest new source of gas.

Re: Clean Coal: What About C02?, Letter, National Post, Jane Forbes, Nov. 19.

Ms. Forbes, of OISE/U of T, should know more about combined-cycle clean coal technology before she criticizes it.

In a nutshell, the process entails the combustion of coal in a self-contained oxygen-deficient environment, and in stages results first in CO plus other gasses and then CO2, N2, NOx and H2. All gasses are captured, so that the CO2 can be sequestered and the H2 separated. In addition to heat, the H2 byproduct has energy value.

We had an excellent presentation by the Clean Coal Power Coalition at our CIM branch in Winnipeg about two years ago, and the industry estimate then was that electricity prices in the order of 8 cents per kWh were required. The current marginal cost of producing additional power from natural gas- driven co-generation likely exceeds that price at current natural gas prices, so here we are in the future.

Credit is due to a committed environmentalist like Tom Adams for being prepared to discuss appropriate use of coal within the discipline of a scientific framework.

S. Mark Francis, Winnipeg chair, Canadian Institute of Mining Metallurgy and Petroleum, Winnipeg

National Post   February 9/2006

Dark days ahead   by Tom Adams

Thanks to Premier Dalton McGuinty’s off-coal policy, Ontarians are now on track for 25%-plus power bill increases and the province’s Independent Electricity System Operator has been warning of the threat of blackouts. Premier McGuinty’s off-coal policy brings something else, too: dirty air. McGuinty’s fixation on ridding the province of coal is irrational from start to finish.

Ontario hosts two clean coal plants, Lambton 3 and Lambton 4 near Sarnia. Their emissions rank in the top 2% for cleanliness in all NAFTA. In contrast, Ontario imports much dirtier power from the U.S. The Ohio and Michigan coal plants within 160 km of the Michigan/Southern Ontario border ─ the province’s largest power import point ─ have average emissions of mercury 8.2 times higher. Closing Lambton 3 and Lambton 4 in 2007, as McGuinty has ordered, is a recipe for dirty air.

Without coal power, Ontario becomes massively dependent on gas-fired power. Wind mills and nuclear reactors aren’t up to the job of replacing coal because their output can’t be cranked up and down, as needed to meet the changing power needs of Ontarians and Ontario industry. Only gas power ─ and hydro-electric dams in the very few remaining sites that are available ─ can match coal’s controllability to meet changing consumer demands.

Even if cost was no object ─ and natural gas power costs three times that of power from Lambton 3 and 4 ─ it is only a matter of time before McGuinty admits that the coal closures scheduled for 2007 won’t happen. Replacement power cannot be in place in time.

McGuinty has banked on a handful of natural gas generating plants as replacements for the coal capacity he’s retiring. One ─ a large gas power station in Mississauga ─ was cancelled in December. The other ─ a large coal-replacing gas-fired station near Sarnia ─ is in limbo. Its main investor, Calpine Corp., recently went bankrupt.

Tellingly, Calpine’s dependence on gas-fired power killed the company. Record-high gas prices made Calpine plants uneconomic, convincing customers to flee to more economic alternatives and forcing Calpine to go under.

Even if the proposed Calpine gas power station can be rescued and McGuinty comes to his senses on coal, Ontario will gain nothing in power reliability. McGuinty located the proposed station adjacent to the existing power complex at Lambton, where transmission capacity is limited. The bottle-neck will idle half of generation potential in the area.

Another natural gas option ─ liquified natural gas ─ is expensive and years away. It is also insecure, since it comes from unstable countries like Algeria and Russia. If Ontario can secure liquified natural gas, it will do nothing for the environment: When used to generate power, liquified natural gas and coal release about the same carbon-dioxide when considered on a life cycle basis.

While Ontario is mired in energy insecurity, the cost of McGuinty’s coal-shutdown mania rises. On May 1, power consumers across Ontario will see sharp increases in residential power rates, in some regions as high as 25%. In coming years, the rate hikes will be greater still. Some of the May 1 increase, and most of the future increases, will be directly attributed to McGuinty’s extravagantly expensive power purchases.

Ironically, the best potential for a large-scale reduction in emissions from fossil fuel plants comes in better ─ not less ─ use of coal. And here, too, McGuinty has entirely missed the boat. Only four of Ontario’s 15 coal generators have modern pollution controls. Only two ─ Lambton 3 and 4 ─ have the full suite of end-of-pipe solutions. Because coal shutdowns have become official government policy, Crown-owned coal operator Ontario Power Generation is stalled in securing the labour, fuel supply and mechanical maintenance necessary to keep coal plants operating after the planned shutdown date of 2007. Pollution control upgrades are nowhere on the radar screen.

As a result, Ontario’s coal plants will be running beyond 2007 and most will be running dirty. Even our cleanest ones are primitive compared with the environmental performance of the leading units now running in the U.S., Japan, and Europe.

The leading European coal technologies, to protect against possible regulations that may require greenhouse gas reductions, have adopted new coal burners that blend coal with agricultural wastes. Since these wastes can be produced with close to carbon-dioxide neutrality, the ultimate power-related emissions of such dual-fuel stations can be controlled by adjusting the fuel mix to meet changing emission control rules. European farmers have gained new markets as these machines get installed.

Ontario should adopt new state-of-the-art coal plants to replace our worst generators and to fill Ontario’s frightening power supply gap. The sooner McGuinty reverses his senseless anti-coal policy, the better off our economy and our environment will be.

National Post   June 8/2006

Century of mayhem   by Tom Adams

Yesterday marked the 100th anniversary of the proclamation of the legislation creating the Ontario Hydro-Electric Power Commission. With this proclamation, Ontario Hydro’s career of state-sponsored theft, perennial profligacy, phony accounting and conflicted regulation officially commenced.

At the beginning of the 20th century, electricity cost more than 20 times the current price, removing inflation. Adam Beck, Ontario Hydro’s founder, championed a popular solution – public power. Beck’s public power movement drove the provincial government to renege on contracts under which private power suppliers had purchased access to Niagara River water flows. The public power movement also negated legislation protecting privately funded electricity suppliers from take-over by suppliers backed by government loan guarantees. Beck’s intention was to bankrupt the private producers, then obtain their assets without having to pay for them. To ensure success, Beck empowered Ontario Hydro with regulatory authority to set electricity prices.

Beck’s plan worked. Investors were destroyed. The benefit of their assets, scooped by Ontario Hydro and allies such as Toronto Hydro, allowed the public power system to drop rates and expand rapidly.

By the 1930s, Ontario Hydro had exhausted its right of free access to all of the waterfalls owned by the provincial government that were attractive for development. The provincial government and Ontario Hydro decided the solution lay in another scheme to expropriate without compensation. This time the victims were aboriginal people in northern Ontario. Ontario Hydro seized waterfalls and surrounding areas on treaty lands, often without prior notice to the inhabitants. Dams, roads, power lines and transformer stations were constructed on aboriginal land. Villages were bulldozed, religious sites dynamited and graves flooded. Aboriginal people watched as the bones of their ancestors washed up on the shores of the new artificial lakes. Language barriers and the indifference of white society meant the harm Ontario Hydro caused was barely recorded and rarely noticed. Boosted by the fresh confiscated assets, rates dropped again and Ontario Hydro kept growing.

Rates kept dropping until the 1960s and then remained static until the 1970s. Then nuclear power operations began, along with a relentless climb in prices. Ontario Hydro needed new schemes to delay rate increases. For the first dozen years of the nuclear program, Ontario Hydro declined to recognize any liabilities for nuclear waste disposal and nuclear decommissioning – effectively imposing a portion of the 1970s power bill on future consumers and taxpayers.

In 1983, beset by a nuclear accident at Pickering and massive cost overruns at all of its ongoing nuclear construction projects, Ontario Hydro came up with yet another cost-hiding scheme. Notwithstanding new information learned from the accident showing premature reactor ageing, Ontario Hydro extended the depreciation period for its nuclear reactors from 30 years to 40 years. For the 15 years until Ontario Hydro became insolvent, fantasy-based depreciation policies allowed the utility to pile on more debt. When finally forced to admit its insolvency in 1998, Ontario Hydro transferred $22-billion in debt to the provincial government, in part because the Ontario government admitted that reactors become worthless in less than 30 years.

Huge cost overruns plagued Ontario Hydro’s major power projects from the beginning, not just its well-known nuclear cost overruns. Adam Beck’s Niagara project, completed in 1922, suffered so large a cost overrun that it nearly brought down the government. Ontario Hydro’s Atikokan coal-fired generating station, completed in 1985, was one of the most expensive coal plants ever built, anywhere in the world.

Ontario Hydro’s collapse due to self-inflicted wounds was forecast more than 80 years in advance. Between July and December of 1916, the illustrious University of Toronto political economy professor James Mavor wrote a series of 16 columns in the Financial Post condemning the monopoly’s formation.

Mavor, one of the leading reformers of the day, railed against Ontario Hydro’s confiscation of private property. He argued that competition among the private generators would reduce the cost of power while maintaining the fees and taxes that government then received from the private enterprises. Foreshadowing Ontario Hydro’s later tendency toward megaprojects, he warned, "Nothing is more usual in public enterprises of this kind than to disregard the element of risk."

Warning of the incentives against keeping proper accounts, Mavor anticipated a tendency that reached its fullest form only during the nuclear age. "Even when they do nominally set aside depreciation and reserve funds, they frequently, as in the case of the Hydro-Electric, employ these funds for the extension of the system or otherwise, instead of using them as such funds ought invariably to be used."

Mavor argued, "In Ontario . . . there is little need for governmental attempts at industrial monopoly." He urged the public to look beyond "rhetorical exaggeration and appeals to prejudice." He concluded his series of columns with the warning that "the community of Ontario as a whole will suffer for years from the effects of the foolish optimism of the promoters of the movement for public power."

In 1998, Ontario Hydro’s torch was passed to its legal successors, Ontario Electricity Financial Corporation (OEFC) and Ontario Power Generation (OPG). Since it was created, OEFC has been committing future electricity ratepayers and taxpayers to new expensive long-term power purchase contracts and new stranded debts.

Notwithstanding the Harris government’s multi-billion-dollar bailout in 1998, OPG still can’t pay its bills. In 2004, Ontario Premier Dalton McGuinty created yet another Beck-inspired power agency, the Ontario Power Authority, with an updated populist mandate – conservation subsidies and rate stabilization – on top of the old populist central planning role. Meanwhile, the Ontario Energy Board, historically a strong independent agency, has been afflicted with conflicts, as the government transfers responsibility to the regulator for setting prices paid to government-owned power agencies.

One hundred years later, Adam Beck’s legacy still darkens Ontario’s power future.

National Post   December 21/2006

Parkinson’s flaw   by Tom Adams

On Dec. 8, Tom Parkinson, CEO of the Ontario government-owned power utility Hydro One, with $11.7-billion in assets and $4.4-billion in revenue, left his job under a deluge of condemnation from politicians, the media and the public. The government said he resigned. Here is what really happened.

At home one weekend earlier this year, Parkinson received a dreaded call from his brother – their mother was about to lose her battle with cancer. To see her alive, he had to get to Australia immediately. Hydro One’s CEO could not have anticipated that his next two calls would precipitate his political electrocution, and a new politicization of Ontario’s power system.

Hydro One’s chair, Rita Burak, got the first call. A former top bureaucrat often decorated for her service in Ontario, she expected the call too. Take as much family time as necessary, she told him. Parkinson’s employment contract provided an allowance for a set number of flights home. Burak agreed that Hydro One would buy the ticket.

Parkinson’s second call went to his secretary, for help arranging the tickets. The secretary used her corporate charge card, rather than his, to buy the ticket. That was Parkinson’s first mistake.

His second mistake came later this year, during the August long weekend, when he was alone at his cottage with his 10-year old son. A massive summer storm had demolished hundreds of kilometres of power lines. Nearby, in roadless terrain near Massasauga Park, work crews were dealing with two high-voltage towers on the vital Sudbury to Toronto circuit. Emergency work was wrapping up.

The superintendent tackling the storm damage to the power system, knowing Parkinson was nearby, sent him an e-mail. A chopper was in the air in his area. Would Parkinson join the exhausted guys for a BBQ on the right-of-way, and then join the helicopter search for storm damage south toward Toronto? In Ontario’s entire power history, few line crews have celebrated a completed storm repair by lunching with their CEO under newly restored wires. Parkinson wanted to be with his crew but initially resisted – he couldn’t leave his son alone. The superintendent countered by saying there was a spare seat in the chopper. Parkinson decided to join his crew for the BBQ, son in tow.

These two offences – widely characterized as scandalous perks taken at taxpayer expense – would lead to Parkinson’s firing. In fact, the motivation for his firing had nothing to do with these "offences" – conduct that would have been laudable in many people’s minds had they understood. Parkinson’s real offence came from his no-nonsense management style, which the unions resented and his political masters found embarrassing.

Parkinson had sought to control bloated industry-wide pay scales left over from Ontario Hydro. In 2005 Parkinson, challenged the inflated compensation demands of Hydro One’s management union. With his board’s support, Parkinson drew his line – existing entitlements would remain but new staff would only get market rates. Parkinson’s prepared so well for the negotiations that when the union struck for 105 days and consumer demands hit records, the lights stayed on. Unable to take the heat as the strike worn on, Premier Dalton McGuinty caved to the union, thereby saddling consumers with excess costs more than $100-million per year.

In March, speaking to a trade association, Parkinson let fly. Government had mired critical projects in duplicated bureaucracy and indecision. New transmission to accommodate the government’s nuclear and wind power purchases in Bruce area are so stalled that massive amounts of power, already paid for, will stay locked in and wasted.

The more Parkinson became critical of government interference, the more the government resolved he had to go. To eject Parkinson, the government had three aces.

It could cultivate whining about Parkinson’s compensation, which originated with the Harris government’s original privatization strategy, conceived when Ontario Hydro collapsed into insolvency in 1998. Parkinson, a privatization-savvy grid expert with a record of success in Australia’s power privatization, agreed to uproot his family and come to Ontario because of the opportunity that lay in a privatized Ontario Hydro. The deal: relatively low base pay, incentives to maximize the company’s value to taxpayers, limited ex patriot travel, a car allowance, and an opportunity that the next owners might keep him on. In 2001, Parkinson joined as head of a subsidiary.

As Parkinson moved up the ladder, the components remained but his compensation shrank as Hydro One’s drifted back towards a Crown corporation. In 2005, under Energy Minister Dwight Duncan’s scrutiny, a five-year contract was negotiated with much of the payment geared to results. The contract also contained a $3-million penalty clause should Parkinson be fired without cause.

The government could also count on the public’s memory of the last Hydro One CEO, Eleanor Clitheroe, who left amid scandal. Complaints against her focused on her compensation, perks, and glamorous image.

The government also knew it had the upper hand with directors on Hydro One’s board – they require reappointment every January.

One option the government did not have was firing Parkinson for cause. When he took the helm, he refocused the company on its core wires business. As a result, Hydro’s performance is way up. Serious accidents dropped from 95 to 68 per year. High-voltage customer satisfaction more than doubled to 91% in 2006. Interruptions at key delivery points dropped from 0.8 to 0.6 events per year. The grid around Toronto was reconfigured on time and budget, including a completely new high-voltage transformer station. Hydro One finally got around to cleaning up dangerously overgrown rural lines neglected by the old Ontario Hydro. A new Grid Control Centre was completed in Barrie on time and budget in 2004. Two months ago, it was certified by the continental power reliability regulator as best in class in North America. Hydro One’s credit rating also improved; progress that will directly save consumers tens of millions.

Then came the annual report of the Provincial Auditor. The report was issued Dec. 5. Hydro One endorsed its recommendations. Notwithstanding the fact that the report found no wasted funds, the adjective-of-the-week the media used when referring to the report was "scathing" due to an incidental observation made in the report, unrelated to any recommendation: "In one case, a senior executive’s secretary charged over $50,000 to her charge card for goods and services, a significant portion of which was for the person to whom she reported. The senior executive then approved the purchases, whereas Hydro One’s policies require that the executive’s superior approve the expenses. This practice also exempts these expenditures from an annual review of senior executive expenses conducted by the corporation’s external auditor."

The report’s criticism, in fact, was aimed not at Parkinson – who had merely followed company procedures – but at what the auditor viewed as a poor management procedure. The press also misread the report by thinking that most of the $50,000 involved personal expenses. In fact, most related to office moving and furniture due to relocation, office supplies, business meeting expenses, and cell phone bills – the only personal item was $11,000 for Parkinson’s last ticket to see his mother. That $11,000, moreover, was taxable and tracked routinely by the payroll process to include on Parkinson’s T4.

According to Hydro One vice-president Peter Gregg – confirmed by several direct sources – the ticket was approved in advance by the board chair as per Hydro One’s reporting rules. The expense was properly payable by Hydro One. Gregg and all sources I interviewed for this story noted that, in addition, the internal audit staff of Hydro One had flagged the expenditures, and the chair signed off a second time on the cost of the ticket, this time formally. The approval procedures used and the purpose of the spending were appropriate.

Both the chair’s prior approval and the employment contract were directly brought to the attention of the auditor by senior Hydro One people during the audit review and upon review of the draft report in October. A senior audit staffer read Parkinson’s employment contract in the presence of Hydro One’s former general counsel, now acting CEO, Laura Formusa, who pointed out the provision for flights.

Neither the auditor nor his staff interviewed Parkinson on the secretary’s charge-card items, although Parkinson attended meetings with the auditor, consistent with the auditor finding no fault with Parkinson’s conduct.

Yet the NDP leader stated: "Parkinson spent $45,000 of public money on personal expenses and tried to hide it on his secretary’s credit card. Now we find out that these so-called personal expenses include vacation flights to Australia." Sheltered by parliamentary privilege, the NDP’s Peter Kormos screamed, "Hell, he shouldn’t just be losing his job; he should be going to jail."

McGuinty agreed with the NDP leader, saying "things that have happened there which are unacceptable, to reduce it to one word."

John Tory came closest to the truth, demanding to know why $3-million in severance was paid since the government claims that Parkinson resigned.

The government’s claim of resignation is a deliberate half truth. Hydro One’s board of directors remained united in their support for their embattled CEO to the end. On Dec. 7, under direct political pressure and Question Period in high rant, Hydro

One’s board held an emergency meeting. All in attendance realized the board member’s jobs were at risk.

A deal was stuck. In a tacit admission that there never was cause for firing, the government accepted the contractual severance in return for a resignation. To make its views clear, the board issued a public statement announcing Parkinson’s departure, heaping praise on his contribution.

Parkinson also accepted the deal. "I had no effective alternative. This was an abusive relationship and I’m glad it’s over," he said in an interview. "This was about commercial compensation in a business that is about to lose the commercial mandate and become a Crown corporation. The writing is on the wall for others."

What can we expect? Parkinson again. "H1 is too complex, too valuable and too important to the Ontario economy to be in government hands. Career politicians and mediocre ex-CEOs are not up to the complex challenge of running companies like these. The price of chronic government interference is enormous."

When he came to power, McGuinty promised to depoliticize the power system, to give Hydro One a commercial mandate, and let it operate like a business. McGuinty executed not just Parkinson, but also a 180-degree flip-flop. "We will work more closely with the board," says McGuinty now.

Ontario’s power system now has all the stability, foresight and focus that Question Period affords.