Winter’s coming: Time to lock in your gas rate?

John Heinzl
Globe and Mail
October 9, 2004

Like a lot of homeowners, Bill Harang cringes when he opens his natural gas bill.

“It just shocks me when I look at the bottom line,” says the Bowmanville, Ont., resident, who has watched his heating costs soar since he bought his three-bedroom townhouse in the late eighties.

So this year, he signed a contract with Canadian RiteRate Energy Corp., one of several natural gas marketers that allow consumers to lock in their price for three to five years.

To homeowners such as Mr. Harang, a 46-year-old customer support manager in the software industry, locking in seems like a no-brainer. With cold weather looming and analysts warning of tight supplies and growing demand for natural gas, consumers want the security of knowing their heating costs won’t go through the roof.

“I’m a person who’s really cautious with my money. I don’t take any risks,” he says.

But locking in may not be such a prudent move — especially now, some energy experts warn. After leaping about 50 per cent in the past two years, natural gas prices will probably stabilize or fall in the years ahead, making this precisely the wrong time to lock in, they say.

“I think there’s better than a 50-per-cent chance that prices over the next three to five years are going to be in the range or lower than the current utility price,” says Tom Adams, executive director of Energy Probe. He has two words for anyone thinking about signing a contract: “Skip it.”

While the conventional view is that demand will grow and supplies will remain tight, Mr. Adams sees the opposite scenario unfolding.

Some of the biggest consumers of natural gas, such as the fertilizer industry, have either moved offshore or retooled to reduce their exposure to gas prices, removing a key source of demand, he says. And households are consuming less gas, thanks to more energy-efficient appliances and better-insulated homes.

At the same time, the supply outlook is hardly dire. New sources such as coal-bed methane – which accounts for about 9 per cent of natural gas production in the United States but a much smaller amount in Canada – and gas from conventional reserves that have yet to be tapped should help prevent shortages, he says.

That may be cold comfort to consumers who have been watching natural gas prices surge in the futures market as the heating season approaches. But some energy analysts say the current price spike is an aberration.

Gas prices have been driven higher by a combination of factors, including hurricane damage to gas rigs in the Gulf of Mexico, an influx of speculators and – perhaps most important – record high oil prices. Oil and gas tend to trade in tandem, because businesses often switch to whichever fuel is cheaper, thereby driving up the price.

But natural gas storage levels are at historically high levels and fall weather has been mild, suggesting gas prices may be poised for a correction. And if the price of oil falls from its record levels, it will almost certainly drag gas down with it.

The upshot for homeowners? “It’s a bad time to do a knee-jerk” by signing a gas contract, says Wilf Gobert, vice-chairman of Calgary-based brokerage Peters & Co.

To be sure, there are times when locking in would have been wise.

A typical Ontario homeowner who signed a three-year contract in October, 1999 – when the utility price of natural gas was just 10.6 cents for a cubic metre – would have saved $685.71, compared with the cost of buying gas at the floating rate, according to Energyshop.com, an independent source of information on natural gas rates.

But homeowners who signed contracts in April, 2001 – after the utility price had more than tripled to 36.2 cents – are kicking themselves now that the price has settled back down to 28.57 cents. They spent $366.92 more than if they hadn’t locked in.

For those who are still convinced prices are heading higher, Energyshop.com simplifies the process of finding the best deal on a contract. The website lists current offers from gas marketers in Ontario, Manitoba and Alberta, and enables on-line registration with certain companies, avoiding the high-pressure sales pitches that have given the industry a bad name.

Ian MacLellan, co-owner of Energyshop.com, says locking in remains popular with consumers and businesses. “I’m certainly doing that myself,” he says.

So are plenty of others.

Across Ontario, roughly 40 per cent of households with natural gas furnaces buy their fuel through a marketer, according to Enbridge Gas Distribution Inc., a regulated utility. That’s down from a peak of about 50 per cent in 2002.

In a bid to woo more customers, gas marketers are offering a range of contract options. Direct Energy Marketing Ltd., for example, offers a five-year fixed rate of 32.4 cents a cubic metre, or a five-year contract that starts at 33.9 cents and declines by a penny each year.

Canadian RiteRate Energy, a newcomer in the gas marketing field, offers a five-year fixed contract at 28.4 cents. For consumers who aren’t sure whether they should lock in or not, it also offers a “blended rate” in which roughly half the cost floats with the utility price while the other half is fixed – the option Mr. Harang chose.

If you’re serious about cutting your fuel bill, however, Mr. Adams says there are better ways to use your time than shopping for gas contracts.

“For the ordinary household it’s much, much better to invest in a little better attic insulation,” he says.

 

Posted in Natural Gas Utility Regulation and Commodity Deregulation | Leave a comment

Soaring costs trim earnings

Rick Westhead
Toronto Star
October 9, 2004

Canadian businesses are beginning to experience the energy industry’s version of sticker price shock.

Driven by the highest demand in a quarter century, oil prices this year have climbed more than 60 per cent.

The run-up comes amid increases in electricity and an expected seasonal jump in natural gas prices, leaving many Canadian firms facing an uncertain future.

“A lot of companies are just at the break-even point right now,” said Allan Skjodt, a controller with Plastmo Ltd., which employs 60 people and makes vinyl rain gutters. “Some may decide it’s just not worth operating anymore.”

Skjodt, whose Brampton company pays about $35,000 a year for electricity and a further $16,000 a month in the winter for natural gas heating, said he foresees energy-related expenses spiking at least 20 per cent over the next six months.

Skjodt’s Plastmo isn’t alone in anticipating unwieldy oil, gas and electricity bills. From the floors of tool and die factories to automotive assembly lines to courier and transportation companies, businesses across Ontario are bracing for record-high energy bills this winter.

Ken McLennan, part-owner of Stemac Industrial Equipment in Scarborough, said he has increased his hourly service charge to $55 from $45 over the past six months to offset added gas expenses.

“I need my expenses covered,” said McLennan, whose company repairs and refurbishes tool and die machines.

Crude oil futures have hit record highs in recent days and yesterday closed at $53.31 (U.S.) in New York. The price of crude has surged 30 per cent in three months, a climb mirrored in other energy markets.

The price of electricity in Ontario has climbed as much as 30 per cent over the past two years and natural gas prices are expected to increase as much as 40 per cent this winter, said Gerry Fedchun, president of the Auto Parts Manufacturers Association, a trade group that represents about 400 Canadian auto-parts makers.

With oil, gas and electricity all on the rise, and a 50 per cent surge in the price of steel, “the question has become which one of the pebbles will sink the boat?” Fedchun said.

Oil production in the Gulf of Mexico has yet to recover fully from Hurricane Ivan, while Nigerian oil workers are poised to join a national strike. Nigeria produces 2.45 million barrels of oil a day and is the fifth-largest source of crude for the United States. Canada, by contrast, produces 3.13 million barrels.

With all that trouble around the world, some oil analysts have estimated crude prices could reach $60 a barrel this winter.

“I don’t see any relief coming,” said Lauri Gregg, director of energy management for Noranda Inc. and Falconbridge Ltd., two of the province’s biggest power users. “I think demand will continue to outpace supply.”

Gregg said Falconbridge spends as much as $25 million a year on natural gas for its Ontario operations. The mining company buy natural gas contracts three years in the future, a process known as hedging, to help soften any price spikes.

“That way, you’re not hit with sharp out-of-the pocket increases,” Gregg said.

Some businesses can take conservation measures – such as blowing insulation into the roof of older factories and warehouses – but many are left exposed to the market’s fluctuations.

“They are going to take their lumps,” said Tom Adams, executive director with Toronto research group Energy Probe. “There is going to be economic impact. We probably are going to see some high energy consumers shut down.”

Not everyone believes oil and natural gas prices will continue their climb.

Ted Mallett, chief economist with the Canadian Federation of Independent Business, said the trade group’s members may be concerned about the rise in energy prices, “but they don’t see it as catastrophic.”

And Andrew Pride, a vice-president with the Minto Group of Cos., which builds and manages homes and apartments, said he expects oil to drop back to the mid-$40 range within the next six months.

“I just don’t think $51 oil is sustainable, and my crystal ball is as good as anyone else’s,” Pride said.

 

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Hot and bothered over heating

Tony Wong and Sharda Prashad
Toronto Star
October 9, 2004

Radcliffe Robinson isn’t looking forward to heating his home this winter.

Robinson, 38, and his wife Patricia, moved into a three-bedroom house in Whitby in January, just in time for one of the more dramatic oil-price upswings in recent history. When the Robinsons purchased their home, the price of light crude was around $33 (U.S.) a barrel; it closed yesterday at $53.31. That increase has paced a jump in heating oil from about 52 cents a litre at the end of last year to 64 cents today.

“This is just about the worst time for something like this to happen,” said Robinson. “You reach a point where you end up having to seriously juggle the bills.”

Even those who heat with natural gas face increases of up to 40 per cent this winter, according to some estimates.

Tom Adams of Energy Probe, a national consumer and environmental research organization, estimates that more than 3 million of Ontario’s 4.7 million households heat with gas.

It is overwhelmingly prevalent in urban areas, but rural residents are more likely to feel the pinch as oil prices rocket, Adams said.

Ted Garner, petroleum manager at The Sarjeant Co. Ltd., which serves more than 4,000 heating oil customers in Simcoe County, said he has been getting calls from concerned clients.

“They don’t want a big bill in the middle of the month, so we’ve been trying to spread it out for them,” he said. Although crude oil prices have gone up by more than 60 per cent since the beginning of the year, Garner says his company has tried to keep a lid on escalating prices.

“Our margins are a lot thinner, and we share the pain because I have to walk down the street and look these people in the eye every day,” Garner said.

The bill for an average 1,400-square-foot, three-bedroom house should be about $1,400 this year, around $200 more than last year, Garner said. Since he recently renovated and added insulation, Garner hopes that his own bill will be about $1,300 this year, up just $100.

Susan Watson, office manager at Air Plus Heating and Cooling in Scarborough, said that the company had four contracts to convert from oil to natural gas last week alone because customers were concerned about higher energy costs. The company’s service manager recently converted his own home from oil to natural gas in the summer, Watson said. “I think there is a real concern out there. We are extremely busy.”

Rita Marshall took possession of a home in south Etobicoke home in July. A condition of the sale was that the seller fill the oil tank, so Marshall has no idea of the cost of a refill.

“We’ve got this huge oil tank in the basement, and I’ve been kind of dreading calling the supplier to figure out how much it’s going to cost to fill it up once it’s finished,” she said. “We haven’t started it up yet, but we’re not looking forward to it.”

It’s not just the heating oil prices that pose a problem for consumers. Soaring crude prices mean double trouble for Robinson, who started a business importing salted cod from the East Coast this year for distribution in Toronto.

“It’s not just about heating your home. It’s also driving your car. After paying for gas, it really eats into any profits,” he said. “Something like this affects you on every level.”

Robinson said he filled his tank Thursday at 79 cents a litre. By Friday, prices had jumped to 83.5 cents at his local station.

According to Michael Ervin, petroleum analyst at a Calgary research firm, a rule of thumb in the industry is that every $1 rise in the cost of crude oil translates into another cent at the pump. Gasoline prices averaged 74.5 cents per litre last September in Toronto, compared with 83.9 cents this September, according to Ervin’s figures.

Robinson is hoping for a mild winter so he won’t have to turn up his thermostat. He already feels “lucky” that the summer was cooler than normal.

“I think I only used my air conditioner on two days, and one of those days was to test it to see if it was working,” he said.

Vincent Muia, the owner of Dominion Insulation Inc., has been in business for 32 years and says that while demand is steady, it does increase when there is an energy crisis.

Insulation is “the single most cost effective thing you can do to your house,” he said, noting that homeowners who invested $150 to $200 on insulation 25 years ago cut their fuel costs by 10 to 15 per cent a year, resulting in accrued savings of $20,000 to $30,000.

 

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E-dialogue on economics of green buildings in Canada

RoyalRoads University
October 7, 2004

Join a fascinating online dialogue on a topic that holds the possibility to transform our buildings and our communities – the adoption of green building practices. Economic issues must be addressed in order for green building to take hold and significantly contribute to environmental sustainability. Moderated by Dr. Ann Dale, Trudeau Fellow and Canada Research Chair on Sustainable Community Development, and Rodney C. McDonald, Royal Roads Masters in Environment and Management learner, the confirmed panelists include green building experts Anne Auger, Director, Buildings Division, Natural Resources Canada; Corin Flood, Facilities Planner, Mountain Equipment Co-op; Nils Larsson, International Initiative for a Sustainable Built Environment; Gord Shymko, G.F. Shymko & Associates Inc.; Paul Stephens, Senior Principal, ZAS Architects; and Alex Zimmerman, President, Canada Green Building Council.

Tune in to www.e-dialogues.ca to register in the e-audience and ‘listen’ to the expert dialogue, and ask questions of the panelists. Talk among yourselves about your experiences and views concerning the economics of green buildings in Canada.

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Next best thing to oil

(Sept. 18, 2004) U.S. President George W. Bush’s top energy regulator sparked stupor in Quebec this week when he said it might be possible for liquefied-natural-gas plants proposed for eastern Canada to meet much of the energy demand of New England. Continue reading →

Posted in Liquified Natural Gas | Leave a comment

Next best thing to oil

Nicolas Van Praet
The Montreal Gazette
September 18, 2004

U.S. President George W. Bush’s top energy regulator sparked stupor in Quebec this week when he said it might be possible for liquefied-natural-gas plants proposed for eastern Canada to meet much of the energy demand of New England.

Activists were outraged by Patrick H. Wood III’s words, saying there’s no way people in Quebec, New Brunswick or Nova Scotia should approve industrial energy projects rejected by their U.S. neighbours.

Officials with gas company Gaz Metro were insistent. Their multimillion-dollar gas plan doesn’t provide for any exports to the United States.

As for Wood, he was simply aware of his audience. It’s smart to tell Americans their energy needs could be secured by plants next door, especially when you haven’t had much success getting such plants approved at home.

Liquefied natural gas, or LNG for short, has received little public attention so far in Canada. But with six LNG-terminal projects in development across the country, including two announced this year in Quebec, it is about to become a big deal.

Why? Demand is one reason.

LNG, which is simply natural gas chilled into liquid form for transport by boat from places that have it to places that need it, is becoming a hot commodity by default.

“Quite simply, in the absence of an economic alternative to oil and gas as the primary fuel of global economic activity, and allowing for the decline in major oil provinces, still-abundant international gas will be the fuel of the 21st century,” Deutsche Bank said in a July research report.

Another reason is the resistance to LNG and the divisiveness it has sparked within communities. Plans for LNG facilities have pitted people who want to preserve traditional economic livelihoods like fishing against others who believe LNG will bring a far greater prosperity with a manageable risk.

Promoters have had difficulty persuading local populations of the merits of LNG terminals. The U.S. Gulf Coast area supports the technology. The U.S. northeast is lukewarm to it, at best. Seven communities there have rejected recent project proposals.

Of 41 LNG terminal projects announced for North America, experts say they expect a maximum of five to be operational by 2010.

Four are already online. They are plants that have been reactivated after years of neglect.

TransCanada Corp., whose plan for an LNG terminal in Harpswell, Me., was rejected by residents there this spring, is trying its luck again, this time in Gros Cacouna in Quebec’s northeast corner.

Meanwhile, Gaz Metro, Quebec’s natural-gas distributor, faces opposition to its LNG project from activists brandishing the same impact studies as those used by lobster fishermen in Harpswell. The utility recently polled residents to gauge their reaction to the project.

Detractors point to the few but spectacular explosions that have occurred at LNG facilities, and say natural environments will be ruined. They also argue demand for energy is being stimulated by business subsidies and unwise consumption.

“The risk of accidents is not justified by the demand for energy,” said Tom Adams, head of Energy Probe, a non-profit environmental and consumer group.

LNG promoters say scare tactics by activists and a North American public that simply isn’t informed enough are holding back development of a safe and reliable source of energy.

“A lot of what (companies) have learned is that they should just pour a lot of effort into improving the access to information about this product,” said Bryan Gormley, vice-president of the Canadian Gas Association.

The stakes are huge. The U.S. Energy Department says natural gas is the fastest-growing primary energy source. Trade in LNG grew by 62 per cent between 1995 and 2002, the department reports.

Proposals for liquefied-natural-gas terminals along the Canadian and U.S. eastern seaboard sprouted like weeds following two years of high gas prices and growing demand for natural gas, especially for power generation. The construction in 1999 of a plant in Trinidad to export to the nearby North American market also drove a renewed interest in LNG.

But experts like energy consultant James Jensen argue the major problem in making an LNG project work is being lost in the hype: supply.

Supply is the expensive and tricky part, Deutsche Bank noted in its recent LNG report. For a typical $5-billion project, producing the gas and cooling it – the supply side – represents 60 per cent of the costs. And project resistance can happen in supply countries, too.

“Lobster fishermen in Maine are no less challenging than lobster fishermen in Angola,” the bank said.

Today’s supply crunch is due to factors that include a move by South Korea and Japan, the world’s largest LNG buyers, to purchase more gas.

Problems at supply plants have also resulted in a situation where demand is now outstripping available product. Deutsche says four of the world’s estimated 150 tankers are sitting idle with no product to carry. At the same time, existing LNG plants in the U.S. have not hit capacity.

It is within this environment that energy companies are announcing LNG terminal projects in North America. These typically consist of a pier, three or four storage tanks, and a building to convert the liquid natural gas back into gaseous form.

Companies with good partners that have a solid chain built from supply to sale will succeed, Jensen said. Companies doing it all themselves – from supply to transport to marketing – will also be winners, Deutsche said. It named Exxon Mobile and Shell as two examples.

LNG projects operate like a game of musical chairs, Jensen said. Those left standing without a contract or an essential partner often defer or abandon their projects.

Companies also try to posture and hope to psych rivals out.

“In an environment in which there are more projects than will finally be realized, part of the gaming means that you try to convey to the market that you’re way ahead and that the other guy hasn’t got a hope,” Jensen said. “The guy who blinks first is the guy who goes.”

The gaming is now on in Quebec between the Gaz Metro consortium and the rival partnership of TransCanada and Petro-Canada. It’s made even more interesting by the fact Gaz Metro is launching its Rabaska project for the sole reason of freeing itself from its dependency on TransCanada, from which it gets its natural gas pumped in from Alberta.

The market for LNG clearly exists. But with a public that’s still somewhat unconvinced, uncertain supply, and business interests championing competing visions of economic opportunity, anything can happen.

 

Posted in Liquified Natural Gas | Leave a comment

Nuclear waste – burying a problem, or a solution?

Quirks & Quarks, Canadian Broadcasting Corporation
September 18, 2004

In Canada, we are now storing more than 20-million kilos of nuclear waste in pools and concrete storage facilities around our nuclear reactors. If no new reactors are built, when the current reactors are decomissioned, there will be twice that amount. The waste will be lethally radioactive for hundreds of years, and toxic for tens of thousands of years. At the moment, we have no long-term policy for dealing with it.

For thirty years scientists have been working on ways to deal with this waste but, to date, the only permanent solution that seems workable is burying the waste in stable geological repositories – chambers built in ancient and undisturbed rock, where it can remain forever. Scientists like Dr. David Shoesmith, a professor of Chemistry at the University of Western Ontario, and Lawrence Johnson, senior scientist and research and development coordinator at NAGRA, the Swiss government’s nuclear waste management agency, believe in geological disposal. They worked on developing a plan for a Canadian repository at Atomic Energy of Canada Limited’s Whiteshell research Laboratory before that lab was closed down.

That proposal, however has met with considerable criticism from people like Norm Rubin, director of Nuclear Research at Energy Probe, a Toronto-based environmental group. He doesn’t trust the idea of burying nuclear waste in the ground and forgetting about it. He’d like to wait to find a better solution in the future.

Liz Dowdeswell, President of Canada’s Nuclear Waste Management Organization, says that may be a viewpoint shared by much of the Canadian public. The problem is, scientists think there is no better solution on the horizon, and delay may not necessarily be reasonable. We could lose the technical ability to dispose of the waste over time, and if we don’t take responsibility for solving the problem now, it might never get solved.

Download a low bandwidth MP3 of the entire program.

To listen to a Real Audio stream of the entire program, please see the Quirks & Quarks Web site at: http://www.cbc.ca/quirks/archives/04-05/sep18.html#top

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Restarting Bruce reactors tricky

John Spears
Toronto Star
September 10, 2004

Critics point to Bruce’s repair needs. Power companies say plant is needed.

Ontario’s decision to open negotiations on restarting two idle nuclear reactors is getting a mixed reception.

Two watchdog groups condemned the move, but the lobby group for the province’s generating companies said the move is an inevitable part of securing a supply of electricity.

Energy Minister Dwight Duncan has hired David Santangeli to advise the province on negotiations with Bruce Power, which operates six units at the Bruce nuclear station near Kincardine.

Bruce Power is considering restarting two mothballed units, both of which need extensive repairs, but says it needs to know more about the market for power before it embarks on the huge project.

Tom Adams, executive director of Energy Probe, warned that the project is fraught with uncertainty, in part because the technical issues are daunting.

The boilers that produce the steam to drive the electricity generators are badly damaged and must be replaced, but they are encased in the concrete that surrounds the reactor core. Cutting them out and replacing them will be a complex task.

Another unknown is how many of the hundreds of pressure tubes in the reactor core must be replaced. The tubes contain the uranium fuel that powers the reactor.

In addition, Adams said the safety shutdown systems of the Bruce A plant, which is one of the province’s oldest, aren’t the same standard as the systems in newer plants.

The Canadian Nuclear Safety Commission might decide to order upgrades before permitting the Bruce units to start up, Adams said.

The potential for big cost increases is great, Adams said, and inevitably Bruce Power will want the province to underwrite much of the risk.

“We’ve got the makings of a poisonous public-private partnership,” he said.

When times are good, Bruce Power will want the profits, he said, but “on the bad days the public are the owners.”

Dave Martin of Greenpeace was equally skeptical.

“They are going to guarantee a market for nuclear power in the province and it will have a huge cost for ratepayers,” he said. “It will subvert the electricity market. It will be a huge disincentive to conservation and renewable energy. And the risk will be substantial.”

“The question is: How much of a sweetheart deal will the McGuinty government give Bruce Power?” he said.

The province has given local utilities an initial limit of $225 million to fund conservation programs, he said, yet they are prepared to negotiate a multi-billion dollar nuclear deal.

Dave Butters, president of the Association of Power Producers of Ontario, said negotiations with firms like Bruce Power are inevitable as the government moves toward a hybrid electricity system – part regulated and part market-driven.

“This is just a kind of reality we have to deal with to ensure that Ontario has the supply that it needs at the price it can afford,” he said.

The important thing is to make sure whatever deals are negotiated are “even-handed and transparent,” he said.

Glen Estill of Sky Generation Inc., a wind power firm, said there are valid reasons for having separate discussions with companies like Bruce Power because nuclear reactors have unique features.

But he said the discussions should be geared to protecting the public from hidden costs such as the expense of decommissioning worn-out plants. Nuclear operators should also have to bear the full cost of insuring against serious accidents, he said.

Without those features spelled out, “nobody knows what the cost is,” he said.

“It puts an almost unlimited liability on the province.”

Posted in Nuclear Economics | Tagged | Leave a comment

Pickering backup system to cost OPG $250 million

John Spears
Toronto Star
August 21, 2004

More than double earlier estimate
Reactors worse off than expected

Ontario Power Generation Inc. will have to spend up to $250 million, more than double earlier estimate, to install backup generators at its limping Pickering B nuclear generating station.

Inspections have also shown the station’s reactors are in worse condition than previously thought, forcing the company to do more inspections and to advance and lengthen planned shutdowns.

The news comes in OPG’s second-quarter results. They show the company lost $41 million in the three months ended June 30, compared with a profit of $8 million a year earlier. Revenue was $1.349 billion, down from $1.467 billion a year earlier.

OPG’s earnings are dampened by the fact it must rebate a portion of its revenue to customers because of its market dominance. The rebate totalled $208 million in the latest quarter, compared with $221 million a year earlier.

The rebate curbs power prices, but also cuts OPG profits that are supposed to help retire the unfunded debt of $20.2 billion left to taxpayers by the former Ontario Hydro. Far from being paid off, that debt continues to increase.

On the bright side, provincially owned OPG benefited during the latest quarter from a 27 per cent increase in output from its low-cost hydro-electric generators compared to last year. Higher output from three nuclear units that have returned to service in the past year, one operated by OPG and two by Bruce Power, also meant that OPG had less output from its high-cost fossil fuel units. Fossil fuel output was cut almost in half.

While production costs fell, the benefit was offset by higher pension costs and higher depreciation related to the planned 2007 shutdown of all OPG’s coal-fired generating stations.

The second quarter had yet more detailed news of problems at the Pickering B nuclear station, whose performance has been overshadowed in recent years by the huge cost overruns of restarting the mothballed Pickering A plant.

Last year’s blackout showed that Pickering B had inadequate backup power supply to run critical safety, communications and operating equipment.

Three months ago, OPG estimated it would have to spend $100 million to install better backup generators.

Now, the company says it will have to spend $40 to $50 million immediately to provide temporary backup “while a permanent solution is investigated.” That will take several years and cost another $100 to $200 million, for a total of up to $250 million.

OPG spokesperson John Earl said technical staff need to study the size, type and configuration of backup units.

In addition, OPG says inspections have shown that Pickering B’s fuel channels, which contain uranium bundles in the reactor core, are in worse shape than previously thought. That will trigger more inspections, lengthening planned shutdowns.

As well, maintenance work planned for 2007 to 2008 and costing $25 million to $50 million will now have to be done from this year through 2006.

That will further drag down Pickering B’s performance record. The station ran at 62.8 per cent capability in the past three months, little changed from 60.5 per cent a year earlier. It has run at 67.2 per cent over the past six months, compared with 62.2 per cent a year earlier.

(The newer Darlington nuclear station, by comparison, has run at better than 80 per cent for the same period.)

Longer shutdowns at Pickering B will put more pressure on Ontario’s over-all electricity supply. An industry task force warned in January that Ontario could have “insufficient power to meet its peak requirements” by 2006.

The news should raise some hard questions about the future of Pickering B, said Tom Adams, executive director of Energy Probe.

“The writing’s on the wall for a multibillion-dollar rehabilitation decision on Pickering B coming up forthwith,” he said.

The station reaches the end of its normal operating life by about 2009, at which point it will require a major overhaul.

The latest news raises questions about whether it’s worth continuing to spend money on the plant, especially if more unexpected problems crop up, Adams said.

Posted in Nuclear Economics | Tagged | Leave a comment

Bruce’s burning secrets

Stephen Salaff
NOW magazine
August 5, 2004

There’s no hint in the cool summer winds blowing off Lake Huron onto the sandy beaches of the lower Bruce Peninsula that nuclear managers have developed plans to turn the shoreline into a vast radioactive waste sacrifice zone.

But a look at internal documents suggests that anti-nukers and worried locals have it exactly right. NOW has examined Ontario Power Generation’s Environmental Assessment Study Report to the Canadian Nuclear Safety Commission of March 2004 and discovered not only that OPG is seeking permission for three more radioactive waste storage buildings at the Bruce nuclear park, but it also wants to increase the volume of low-level radioactive waste it incinerates by some 33 per cent between 2004 and 2008.

Yes, you heard that right – incinerates. Of all the worrisome atomic waste issues, this discharge of poisons into the atmosphere above Bruce County, 250 kilometres northwest of T.O. and the same distance from Detroit, has traditionally received the least public scrutiny in Canada.

But just as shocking is the fact that the Ontario Ministry of the Environment (MOE), which bans many other forms of incineration, adamantly refuses to regulate this one. Many environmental orgs are infuriated by this lethal abstentionism and are calling on the province to own up to its environmental and health protection responsibilities.

OPG’s report to the Canadian Nuclear Safety Commission, obtained by NOW, reveals that some 50 to 70 per cent by volume of all so-called low-level radioactive waste transported to the nuclear park from across Ontario is being incinerated. (Knowledgeable critics believe that in utility jargon “low level” or “intermediate level” may not mean gloves, mops and brooms, as the industry alleges, but rather any waste that isn’t spent nuclear fuel.) Further, the report forecasts that when OPG ramps up its new incinerator design, radioactive waste volumes incinerated at the park will soar annually from 3,000 cubic metres in 2004 to 3,500 cubic metres in 2006 and 4,000 cubic metres in 2008.

NOW has also obtained the controversial MOE certificate of approval, dated January 2004, for an incinerator with a design capacity of 2,270 kilograms (about 5,000 pounds) per day of various radioactive waste types at Bruce.

But Ontario law, as an air pollution prevention measure, has prohibited the incineration of many forms of waste since the mid-90s.

How is it that the ministry is nonetheless providing OPG with a certificate of approval?

Says Energy Probe’s Norm Rubin, this favouritism toward nuclear waste incineration is part of a “long and persistent history of the environment ministry’s abdicating its responsibility to protect the Ontario environment from radioactive pollution.”

The world was staggered when a Chernobyl nuclear reactor exploded in April 1986, violently dispersing enormous quantities of volatile radioactive contaminants around the globe. The toxins injected accidentally into the atmosphere included tritium and radioactive iodine – exactly the same pathogens that have been dispersed deliberately and by design since 1977 at Bruce. We’re talking about poisons that are most hazardous to living organisms. Tritium, a long-lasting radioactive form of hydrogen and a human carcinogen, enters the water cycle and cannot be removed by conventional means. Radioactive iodine settles in the thyroid gland, where it often causes childhood cancer.

Esteemed radiation protection professional and biostatistician Rosalie Bertell, retired president of the International Institute of Concern for Public Health, tells NOW that “the radioactive iodine discharged from the Bruce incinerator is being widely distributed over time, both on land and in water. This environmental contaminant will have an immediate effect around the point of release from the incinerator, and far into the future as it is recycled by the earth back into the global food web.”

Such concerns are now making it onto the agenda of nuclear monitoring orgs like Don’t Waste Michigan. According to spokesperson Kevin Kamps, U.S. senators have already expressed alarm to the State Department over the 2,000 casks used for high-level radioactive waste on the Lake Huron shoreline at Bruce. Now, he says, “Michigan residents are learning about the alarming incineration of large quantities of so-called low-level waste. This assault on the Great Lakes basin must be stopped.”

Energy Probe’s Rubin says, “Radioactive wastes don’t hurt people because of their excessive volume, but because they are extremely poisonous and hard to contain. Instead of incinerating radioactive waste, OPG should focus on reducing and curtailing its production of radioactive toxins and keeping the remainder out of the environment. If the nuclear industry needs to incinerate radioactive waste, then it is not a safe or sustainable industry and should be phased out.”

How great is the danger? The size of the radiation dose received from combustion depends on many factors, including the height of the emissions plume, the concentration and type of the radioactive materials involved and the length of time the plume persists.

To accurately compute the harmful effects, and to compare them with Chernobyl’s, we would need full disclosure from OPG and the Canadian Nuclear Safety Commission of the toxic content of the plume, a mathematical model of the plume pathway and comprehensive data on the radiation burden delivered by the plume to humans and other receptors.

Alas, such disclosure eludes us. Many argue that funding for nuclear-safety disclosure should certainly receive higher priority than the rebuilding and restarting of OPG’s Pickering A. When this reporter asks Hugh Morrison, OPG’s Tiverton-based director of nuclear waste operations, to explicitly describe the pathways of toxins from nuclear waste incineration, he sidesteps the question by replying that such hazardous emissions are regulated by the MOE certificate of approval.

But the MOE disclaims responsibility for monitoring and regulating radioactive emissions from the Bruce incinerator. Spokesperson John Steele says the ministry lacks the clout and juridical competence to measure and regulate radioactive pollution.

Conventional emissions, he explains, are regulated by his ministry, while the Canadian Nuclear Safety Commission regulates radioactive substances. “The ministry is assuredly authorized and empowered to regulate the mercury, dioxin and furan discharges from the incinerator, and we are vigorously performing that role,” he says.

Why is that mandate so narrow? “The Ontario Environmental Protection Act Regulation 346 explicitly prevents MOE from regulating airborne radioactive substances,” he says. But despite follow-up written requests, Steele has thus far failed to point out the language in Regulation 346 that he claims prohibits Ontario from regulating airborne radioactive pollution.

A look at the reg reveals that the MOE, in consultation with the Ministry of Health, is mandated “to curtail the operation of sources of air pollution.” The reg then continues to discuss measuring instruments for quantifying air pollution.

For its part, the Canadian Nuclear Safety Commission is smugly satisfied with the environmental performance of the Bruce incinerator. A May 2004 major regulatory document proclaims without apparent proof that incinerator operations “do not result in significant effects on the atmospheric environment.” After many e-mails and phone calls to media relations staff going back several weeks or more, CNSC has not yet produced anyone in authority who can speak to this document.

Environmental lawyer Mark Mattson, president of Lake Ontario Waterkeeper, deplores MOE staff’s “passive and narrow interpretation of the law and the Canadian Constitution. Sadly, they are getting away with it at many hazardous waste sites along Lake Ontario and elsewhere in Ontario. Waterkeeper has frequently asked the Ministry of the Environment to explain why it avoids regulating radioactive pollution. Yet the ministry has never been willing to provide us with formal legal justification.”

Mattson says Regulation 346 is long and complex, but he disputes that it contains any provision instructing MOE staff to neglect the regulation of airborne radioactive substances.

“Waterkeeper and our allied NGOs Energy Probe, Sierra Club of Canada and Port Hope Nuclear Environmental Watchdogs all urge that the government of Ontario proactively regulate radioactive emissions,” says Mattson. “We think Regulation 346 is, in fact, sufficiently broad to define radioactive emissions as air pollution.”

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