Nuclear security fears mushroom

John Emshwiller, Michael Orey, Daniel Machalaba and Rebecca Smith
The Wall Street Journal
September 17, 2001

Measures to keep weapons from terrorists found to be weak

Oct. 17 — In February, Jamal Ahmed Mohamed al-Fadl, a longtime member of Osama bin Laden’s al-Qaida organization, gave some unsettling testimony in New York federal court: He helped arrange meetings in Khartoum, Sudan, in the early 1990s with the aim of helping al-Qaida acquire uranium. AL-FADL, WHO testified that he was told that “it’s easy to kill more people with uranium,” said he didn’t know whether the deal ultimately went through. His testimony came in connection with the federal indictment against bin Laden and others for their alleged roles in the 1998 bombings of two U.S. embassies in Africa.

The evidence that bin Laden’s group has tried to obtain weapons-grade nuclear material is sketchy and unverified. But it has sent authorities around the world rushing to shore up security measures that are in some cases surprisingly weak. The armed guards at nuclear-weapons depots often lose in exercises with mock assailants. Materials for making a nuclear bomb are accessible enough to support a black market.

The first reaction after Sept. 11 was to tighten security. Kansas officials are keeping fishermen off a lake near the Wolf Creek nuclear plant. Japan ordered round-the-clock patrols of the waters near its nuclear plants. France, which even encouraged school trips to its many nuclear-power plants to promote acceptance, has severely restricted access to facilities. Authorities in the Czech Republic tightened airspace restrictions over nuclear power stations.

The U.S. Department of Energy briefly halted shipments of nuclear materials. Just last week, the Nuclear Regulatory Commission temporarily closed its Web site, saying that it had to review all the material as part of “our mission to protect public health and safety.”

Corbin McNeill Jr., the chairman of the Chicago-based power company Exelon Corp., has a plan for making future nuclear plants more resistant to an airborne assault by terrorists: Bury them. He’s thinking that if and when Exelon builds a new-generation nuclear plant, most of the structure and equipment will be housed below the surface of the earth. “There should be no vital components above ground,” he says.

“The whole world has been turned upside down” by the events of Sept. 11, says Richard Meserve, chairman of the NRC, which oversees commercial security measures for nuclear-power plants. “We have to re-examine our entire capability to withstand a terrorist attack.” The means for carrying out nuclear attacks are scattered around the globe — in the form of hundreds of commercial nuclear plants, tens of thousands of nuclear weapons and tons of stored uranium and plutonium that could be fashioned into bombs. Efforts to make nuclear materials more secure have been hampered by tight budgets, geopolitical squabbling and inertia.

While security has frayed in many places, authorities believe that a nuclear assault by terrorists remains unlikely. Since Hiroshima, 56 years ago, there have been few significant breaches of security anywhere in the world that could have produced a nuclear weapon or incident, and there have been no incidents. Besides the technical barriers to making a nuclear bomb, nuclear weapons and bomb-grade material have always been relatively well-guarded.

Authorities have long counted on the technical barrier — namely, that designing and fabricating a nuclear device remains a formidable challenge. Despite the sophistication of bin Laden’s al-Qaida network, the prospect of terrorists going nuclear is still “highly unlikely,” says Graham Andrew, a senior official at the Vienna-based International Atomic Energy Agency, a United Nations-related body created to prevent the proliferation of atomic weapons. But the possibility remains. A draft report for an IAEA conference in May cited intelligence-agency and other reports of bin Laden efforts to obtain small nuclear weapons, with the devices to be possibly stored in Afghanistan. The draft report, prepared by Alex Schmid, officer-in-charge of the United Nations’ Terrorism Prevention Branch, stated that while he hadn’t seen evidence that the terrorist had succeeded, “it’s clear that bin Laden is actively seeking to acquire weapons of mass destruction.” Schmid declined to be interviewed. A U.S. intelligence official says intelligence sources also have reported efforts by bin Laden’s organization to acquire nuclear weapons.

The technical barrier also seems to have gotten lower. A 1998 report by the Carnegie Endowment for International Peace, a foreign-policy think tank in Washington, found that “a number of American college students have come up with plausible designs based on unclassified information.” The simplest bomb to build would resemble the one used over Hiroshima. It essentially involves placing two slugs of highly enriched uranium in a tube and driving them together with an explosive charge — a design that is considered so reliable that bomb experts say it doesn’t even have to be tested. Weapons experts say this sort of bomb could be built with about 125 pounds of uranium — though more-sophisticated designs require far less material.

Such a bomb would produce a blast equivalent to about 15,000 tons of TNT and, in a city, could kill more than 100,000 people, says Robert Gallucci, dean of the Georgetown University foreign-service school who worked on nuclear-proliferation issues for the State Department. Scientists estimate that the explosions and subsequent fires that took down the World Trade Center released energy the equivalent of about 1,000 tons of TNT.

BUILDING A ‘DIRTY BOMB’

Far easier to build, and much less deadly, is a “dirty bomb,” in which conventional explosives are used to spread radioactive material. The key to averting this and any other nuclear threat, security experts say, is keeping nuclear material out of terrorists’ hands, particularly plutonium or highly enriched uranium, which are what is needed to create nuclear fission.

That means wiping out the shadowy black market for nuclear materials. The biggest potential source of such material is Russia and other parts of the old Soviet Union — though the IAEA considers all the ex-Soviet Republics, except Russia itself, free of nuclear weapons. Here, too, information can be incomplete and even contradictory. Take the Russian “suitcase” bombs. Republican Congressman Curt Weldon of Pennsylvania recalls that in hearings held in 1997, retired Russian Gen. Alexander Lebed testified that Russian authorities couldn’t account for dozens of portable nuclear bombs once in the Soviet arsenal and designed for use behind enemy lines to blow up specific objects, such as tunnels or power stations. Weldon said other top Russian military officials, including former Defense Minister Igor Sergeyev told him directly that such devices existed. More recently, both U.S. and Russian officials have issued statements denying the Soviets ever built such weapons. Portable atomic demolition devices produced by the U.S. military were all dismantled by 1989, a Defense Department official adds.

Watchdog groups such as the nonprofit Monterey Institute of International Studies in Monterey, Calif., which attempt to verify reports of nuclear proliferation, keep track of various incidents in which nuclear materials may have escaped the grip of governments. In the Monterey files is an example from 1998 when the Russian Federal Security Service announced that it had thwarted an attempt by employees at a facility in the Chelyabinsk region to steal around 40 pounds of nuclear material. Matthew Bunn, a nonproliferation expert at Harvard University, says an official with the Russian Ministry of Atomic Energy told him the material had been highly enriched uranium. Vladislav Petrov, a spokesman for Russia’s Ministry of Atomic Energy, maintains that this incident “did not happen.”

Some bomb-grade material does seem to have made its way out of Russia. In 1994, Czech officials seized nearly six pounds of enriched uranium from a car in Prague. Investigators in that case believed that the material came from one of two Russian facilities. Petrov, however, says the Czechs never allowed Russia to test the material to determine its origin. The information about the theft “was created by their special services,” he says, “to show that Russia isn’t in control of its uranium.” One of the suspect facilities in the Czech case is the Mayak nuclear materials production complex in the Chelyabinsk region, which is home to a number of nuclear facilities. In a visit to Mayak last year, former Energy Department official Rose Gottemoeller says she found several tons of plutonium “stored in simple bucketlike containers.” It would be “easy to carry,” she notes, “if you could get through the wooden door or nonbarred window.” Although a joint Russian-U.S. venture was in the process of upgrading security at Mayak during her visit, Gottemoeller notes, it was just starting to install a perimeter fence. That fence has now been completed, according to Sarah Lennon, a DOE official. She also says windows have been bricked up and that other security improvements are in progress.

Gottemoeller also visited Russian Naval facilities in 1999 and 2000, where she said that nuclear weapons being moved on and off of ships were kept in shacklike buildings on the base. The DOE’s Lennon says there is an “aggressive program under way” to improve security measures for the Russian Navy’s weapons.

BEHIND ON UPGRADES

For the past eight years, the U.S. government has been helping the Russian government shore up security at its nuclear installations. So far, though, upgrades have been completed for less than 40 percent of the more than 660 tons of enriched uranium and plutonium not contained in Russia’s nuclear-weapon stockpiles, says Bunn, who is also a former Clinton adviser on nuclear proliferation. In a Sept. 19 letter to President Bush and Russian President Vladimir Putin, Bunn wrote that “over the past five years, many of the major U.S.-Russian cooperative nuclear security programs have slowed” and “had their timelines unnecessarily extended into the future.”

Jonathan Kiell, a spokesman for the DOE, insists that major strides have been made in helping Russia secure its nuclear material and in redirecting the activities of Russian weapons scientists. However, he says, “following the attacks of Sept. 11, [the DOE] is evaluating possibilities of accelerating its [security program], based on guidance from the administration.” As the U.S. has pondered the post-Cold War nuclear threat, attention has focused on a “rogue” nation attacking the continental U.S. with a missile. But many national-security experts worry about a much simpler scenario, particularly now that the efficacy of suicide attacks in the U.S. has been proven. If overseas terrorists wanted to get a nuclear weapon into the U.S., the most likely means would be by ship, they say. About nine million shipping containers, typically 20 or 40 feet long, enter American ports each year.

For years, U.S. Customs Service inspectors have worn small devices to detect radiation in containers. So far, the searches have found radioactive cheese from Ukraine’s Chernobyl region and medical devices that use radioactivity for diagnostics. Officials also routinely review shipping documents looking for suspicious cargo, which are then subject to X-ray or physical searches.

But tearing apart containers is time-consuming and labor-intensive. On Oct. 5, for example, two customs inspectors in a warehouse at the port in Elizabeth, N.J., strained to lift and heave bags of birdseed out of a container that had arrived from Ethiopia. Another inspector removed boxes of sweatpants from Pakistan. An X-ray check had showed an oddly shaped object near the trailer door. “It could be a booby trap or a trigger for a device,” said Kevin McCabe, chief inspector for the Port of New York and New Jersey. It turned out that one of the pants boxes had fallen and wedged itself against the door.

Since Sept. 11, the Customs Service has increased the number of inspectors and inspections nationally. At the New York/New Jersey port, the inspection force has expanded by more than a third to 100. The number of containers X-rayed has had an “appreciable increase” to about 500 daily, says McCabe. However, more than 5,000 containers enter that port daily. Given this river of cargo, officials admit something could slip by. “If you can smuggle heroin in containers, you may be able to smuggle a nuclear bomb,” says Charles Raymond, chief executive officer of CSX Lines, the container-shipping subsidiary of Richmond, Va.-based CSX Corp.

Some people argue that would-be nuclear terrorists can find what they need at U.S. weapons plants. With the end of the Cold War, security budgets shrunk at the weapons facilities, which are operated by the Department of Energy.

Since 1992, the number of guards at DOE facilities nationwide dropped about 40 percent to around 3,500, according to Edward McCallum, former director of the DOE’s Office of Safeguards and Security, in a statement last June to a congressional committee. The reductions have made it “questionable at some facilities whether the DOE Protective Force could defeat an adversary,” wrote McCallum, whose outspoken criticism of security measures contributed to his departure from the Energy Department in 1999.

For years, the DOE has used mock terrorists in simulated attacks to test security at weapons plants. Often, U.S. military personnel and plant guard forces do battle with harmless laser weapons as the attackers try to make off with objects that represent containers of plutonium or uranium.

In a Sept. 13 letter to Sen. Richard Shelby, an Alabama Republican and vice chairman of the Senate Select Committee on Intelligence, Peter Stockton, a former top Energy Department security consultant, said the DOE guard forces “lose well over 50 percent” of the time in these mock battles — “a clear indicator that a number of facilities cannot protect” their weapons and weapons-grade material. In one case cited by Stockton, attackers at the Los Alamos Nuclear Laboratory brought along a garden cart to haul off their booty. The Project on Government Oversight, a private watchdog group, issued a report earlier this month recommending that the government consolidate the tons of bomb-grade material from the 10 sites in two underground facilities, possibly to be protected by the U.S. military. Currently, the Energy Department contracts with private security firms.

Glenn Podonsky, a senior DOE security official, says the agency believes its weapons-grade material is adequately guarded. While there have been some reductions in guard forces, these partly reflect changing government security requirements and the closing of some facilities, Podonsky says. As for the mock attacks, “we don’t track the results on a win/lose basis,” he says. Rather, they are used to evaluate protection strategies and individual responses by guards.

After the Sept. 11 attacks, DOE facilities went to a heightened state of alert and the agency is reviewing what further steps might be needed. “Sept. 11 changes a lot for everybody,” says Podonsky.

At commercial nuclear-power plants, the main worry is that terrorists would turn a reactor into a sort of giant radiation-dispersal device. Disabling a plant’s safety systems could lead to a catastrophic radiation release, similar to the one caused by the 1986 accident at the Chernobyl nuclear plant. There, radiation releases contaminated a huge swath of land, quickly killed several dozen people and exposed tens of thousands of others to dangerous doses of radioactivity.

Like the Energy Department, the NRC runs mock terrorist raids against power plants. The NRC won’t reveal specific results, but “there have been instances where infiltrators have gotten far enough inside and stayed long enough where they could have planted bombs,” says an agency spokesman.

But the NRC has halted the mock terrorist attacks, at least temporarily. “This is not a wise time to be holding exercises,” says Meserve, the NRC chairman. “It could be used as the cover for an actual attack.”

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Nuclear Safety

Matt Bivens
The Nation
September 16, 2001

What happens if a suicide bomber drives a jumbo jet into one of America’s 103 nuclear power reactors? What happens if a fire fed by thousands of tons of jet fuel roars through a reactor complex–or, worse, through the enormous and barely-protected containment pools of spent nuclear fuel found at every such plant?

These questions are even more obvious and urgent than they may seem at first glance. Russian television reported on Wednesday: “Our [Russian] security services are warning the United States that what happened on Tuesday is just the beginning, and that the next target of the terrorists will be an American nuclear facility.” [See www.nci.org.] Meanwhile, eight years ago, in the wake of the 1993 World Trade Center bombings, the terrorists themselves wrote to the New York Times to warn that nuclear attack would follow.

That letter, judged authentic by federal authorities, talked of “150 suicide soldiers” who would hit “nuclear targets.” As if to drive home the point, those same terrorists had trained beforehand at a camp in Pennsylvania thirty miles from Three Mile Island. US law enforcement had them under surveillance at least a month before they struck–and at one point observed them conducting a mock assault on an electric power substation. That very same weekend, a man later judged to be mentally unwell drove his station wagon through the security barriers at Three Mile Island and parked next to a supposedly secured building. [See www.tmia.com.]

There are nuclear power plants outside many urban areas. There’s Indian Point on the Hudson River, some twenty-five miles northwest of New York City; Limerick Plant some twenty miles outside of Philadelphia; Calvert Cliffs, forty-five miles from the nation’s capital; and a handful of nuclear plants ringing Chicago, from Dresden to Braidwood. A terrorist strike at any such plant could not bring about a nuclear explosion–but there are a number of scenarios that would spread deadly radiation clouds across, in the NRC’s famous phrase, an area the size of Pennsylvania. On top of the tens of thousands of eventual radiation-driven deaths, there is the mass panic such an attack might cause. And if we can clean up and rebuild after the World Trade Center bombing, a radiological attack would force us to write off huge swathes of land as national sacrifice areas.

So given the extraordinary events of this week, we’re taking extraordinary measures to protect our nuclear plants, right?

Well, in France, the defense minister has stationed troops around nuclear power plants… But in America, not much is being done.

The Nuclear Regulatory Commission on Tuesday in a statement said it had “recommended” that plants tighten security. Bob Jasinski, an NRC spokesman, said Friday that nothing had changed since then. (What about Wednesday’s Russian TV report? Or the repeated insistence by authorities that there are more terrorist cells out there?) The NRC also says there have been “no credible general or specific threats to any of these [nuclear] facilities”–and does not seem interested in reconsidering the specific and, it now seems, very credible 1993 threats of 150 suicide soldiers headed the NRC’s way.

 

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Ottawa eyes power exports to U.S.

John Spears
Toronto Star
September 7, 2001

Canada has a good chance to develop new electricity sources to supply the power-hungry U.S. market, federal Natural Resources Minister Ralph Goodale told a business audience yesterday.

But an industry critic said it’s less risky to free up power for export by reducing consumption at home.

Goodale himself acknowledged that doing deals with tough U.S. negotiators is far from easy.

“In dealing with the United States, in almost anything beyond saying `good morning’ there are significant challenges,” Goodale told a Toronto Board of Trade breakfast.

But he stressed that the U.S. market is a rich prize for Canada, which already ships 10 per cent of its electricity south of the border.

“It is clear that Canada should expect important new electricity market opportunities in the U.S.,” he said.

“This could be especially valuable in terms of the hydro power potential in Newfoundland, Quebec, Manitoba and British Columbia.

“Almost every province has expressed an interest in pursuing new supply opportunities to meet greater export demand,” he noted.

Goodale said the provinces must devise rules allowing power to move across provincial borders to U.S. markets.

That’s been a vexatious topic in Canada. The classic case is the Churchill Falls development in Labrador, power from which moves largely to the U.S.

Quebec negotiated a long-term deal forcing Newfoundland to sell the power to Quebec – at what is today a very low price – allowing Quebec to resell it at a huge profit.

Speaking to reporters after his speech, Goodale repeated that opportunities abound for Canada as the United States faces an energy shortage.

“They will need new power supply sources, and Canada may be in a very good position to provide some of that.”

Goodale said Canada will insist that Canadian principles of sustainable development must be met in any new deals, and that Canada will maintain its own regulatory systems.

“I do not see us catering to U.S. needs. I see us taking advantage of Canadian opportunities,” he said.

Tom Adams, executive director of Energy Probe, was skeptical of developing big new energy projects to supply the United States.

Financing risks are huge, as energy prices can fluctuate wildly, he said, and environmental risks are also great.

Cutting power consumption in Canada and exporting that surplus makes more sense, he said.

“If Canada was able to realize conservation savings from all the electricity waste that we’ve got going on in this country, we’d have at least a doubling of our export potential to the U.S. without any new facilities,” he said.

Adams also was skeptical that any big new hydro projects will be able to find private-sector financial backing.

 

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Goodale touts power sales to U.S.

Martin Mittelstaedt
Globe and Mail
September 7, 2001

Natural Resources Minister Ralph Goodale says Canada should build new power plants to export huge quantities of electricity to the United States, a bid to make money slaking the enormous U.S. appetite for energy.

“There are tremendous opportunities there as the United States goes through what it self-describes as an energy crisis,” he said.

Only about 8 per cent of Canadian electricity production is exported to the United States, compared with about 50 per cent of the country’s oil and gas, where a continental market already exists.

Mr. Goodale, speaking to a business audience yesterday in Toronto, extolled the benefits for Canada of building power plants for the explicit purpose of meeting U.S. electricity needs.

In 2000, Canada made $4-billion selling electricity to Americans, a small fraction of the country’s $50-billion in energy sales. Mr. Goodale said the country could reap added benefits by boosting electricity sales, including the construction of new hydro megaprojects.

“This could be especially valuable in terms of the hydro-power potential in Newfoundland, Quebec, Manitoba and British Columbia. There are indeed valuable Canadian opportunities to be pursued in more trade, new investment, jobs, skills, economic growth, regional and northern development, aboriginal advancement . . . .”

Until now, Canadian electricity stations have been built to meet local energy needs. Canada has relatively minor transmission connections to the United States, where it sells electricity that is surplus to domestic needs.

Under the new approach expounded by Mr. Goodale, the North American electricity market would become more integrated, allowing utilities to have bigger markets, but exposing Canadian consumers to the higher prices and supply problems that exist in the United States.

This step would also have implications for air pollution levels, and upset environmentalists who object to Canada’s practice of damming northern rivers for their power potential.

Some environmentalists were highly critical of Mr. Goodale’s call for exports, saying it could lead to increased pollution from greenhouse gases and smog, and to huge financial risks from energy megaprojects.

In Canada, for instance, the single biggest air polluter on federal records is the Nanticoke coal-fired power plant owned by Ontario Power Generation. The plant, on the north shore of Lake Erie, generates large emissions that are linked with global warming, smog and acid rain.

Tom Adams, head of Energy Probe, said the government should create surpluses for export through conservation programs rather than through building high-polluting new power plants.

“If Canada was able to realize the conservation savings from all the electricity waste that we’ve got in this country, we’d have at least a doubling of our export potential to the United States without any new facilities,” he said.

 

But Mr. Goodale rejected concerns about increased pollution because new projects would have to conform to Canadian environment laws and demonstrate sustainable development.

Speaking later to the editorial board of The Globe and Mail, Mr. Goodale said the government would soon issue further measures to curtail the country’s emissions of greenhouse gases to comply with the Kyoto protocol, the international pact that calls on Canada to cut its discharges by 6 per cent below 1990 levels.

Canada has already committed to spending $1.1-billion over five years on conservation, energy efficiency and renewable fuels.

New policy directions favoured by Mr. Goodale include those proposed by the Clean Air Renewable Energy Coalition, a group of environmental and energy companies that is calling on the federal government to provide incentives for the production and consumption of so-called green power – energy from low- or no-pollution sources such as wind, biomass or solar cells.

Consumers might receive a rebate for buying cars that run on high amounts of ethanol, or a utility might receive more favourable accounting treatment for investments in wind-power farms.

Mr. Goodale also said Canada is considering an internal system for trading greenhouse gas emissions.

On water safety, Mr. Goodale said he favours national standards for drinking water, but he said such a policy move is complicated because the provinces are responsible for establishing these rules.

 

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Tory cuts contributed to Walkerton tragedy, judge told

Colin Perkel
Globe & Mail
August 24, 2001

WALKERTON, ONT. — The provincial Tories’ fixation on the bottom line contributed directly to deaths from tainted-water in Ontario, a lawyer for the provincial Public Service Employees Union argued Thursday.

Driven by ideological zeal, the government ignored numerous warnings about the risks its budget cuts posed to public health and the environment, lawyer Don Eady said in closing submissions to an inquiry into E. coli contamination that killed seven people and made thousands ill in Walkerton last year.

The government has argued that it is not responsible for the deaths and illnesses in May of 2000, saying the reckless dishonesty of water manager Stan Koebel, who violated safety guidelines, defeated a perfectly adequate system.

But speaking for an environmental coalition, lawyer Louis Sokolov rejected the government’s position as untenable, as he did Mr. Koebel’s attempt to minimize his responsibility.

“To find the contributing causes of the tragedy, you have to look to Stan Koebel and the Walkerton [Public Utilities Commission], you have to look equally to [Premier] Mike Harris and his cabinet, and you have to look to the Ministry of the Environment,” Mr. Sokolov told Mr. Justice Dennis O’Connor. During its 10 months of hearings, the inquiry heard allegations that the rush to privatize laboratories in 1996 caused widespread confusion in reporting bad water.

The government’s distaste for regulation ignored the need for important safety measures, such as one that would have required water operators to install equipment to automatically track disinfection levels, Mr. Eady said.

Justice O’Connor appeared to have difficulty with Mr. Eady’s contention, given that previous provincial governments had not implemented such policies. “If the deficiency was already there . . . how can I say the new policy, the budget cuts, was a cause of the deficiency?”

Mr. Eady conceded that previous governments could be faulted, but he said that doesn’t excuse the Mike Harris government, the cutbacks of which were distracting to the Environment Ministry.

Mark Mattson, a lawyer for the environmental organization Energy Probe, disagreed that the privatization of water-testing laboratories contributed to the disaster. But he blamed the Ontario government for failing to ensure appropriate safeguards were in place.

He blamed the Environment Ministry for failing to take legal action against the scores of public utilities that did not meet guidelines.

Mr. Mattson said the fact that hundreds of legal orders were issued in the months immediately after the disaster suggests the government too came to realize the error of its ways. “Certainly, their actions following Walkerton and this complete 180-degree turn would support that.”

 

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Fixed-price hydro no deal

John Spears
Toronto Star
July 27, 2001

Consumers who haven’t signed a fixed-price contract are likely to pay about 4.3 cents a kilowatt hour for electricity under Ontario’s new market system, says a study conducted for the Ontario Energy Board.

The study says prices in Ontario will closely track prices in Michigan and New York state when the competitive market opens. The market is due to open by May next year.

The energy price, which will be deregulated under the new system, is only part of the electricity bill. Consumers must also pay regulated fees for the power to be transmitted and delivered to their homes, plus a special charge to retire the debt of the former Ontario Hydro.

The non-energy part of the bill is likely to make up 40 to 50 per cent of the total.

The new study was conducted for the energy board by Charles River Associates of Washington, D.C.

It noted that Ontario Power Generation (OPG), one of the successors to Ontario Hydro, will be the dominant power producer in the opening years of the market.

To blunt OPG’s market clout, the price it receives for most of its production will be capped at 3.8 cents a kilowatt hour. If its average exceeds 3.8 cents it must give customers a rebate.

Although the price is allowed to sink below 3.8 cents, the study says OPG will have every incentive to gain the maximum price. OPG’s controlled price production will amount to about 70 per cent of Ontario’s total electricity supply, the study says.

Prices for the remaining power – generated by OPG and private facilities, or imported from Michigan, New York, Quebec and Manitoba – isn’t regulated.

Michigan and New York, where prices are higher than in Ontario, will have the strongest influence on the price of imported power, the report says.

Combining OPG’s controlled price with the import-influenced prices means that consumers without fixed-price contracts can expect to pay about 4.3 cents a kilowatt hour when the market opens.

That price will be adjusted regularly as markets change.

Tom Adams, executive director of Energy Probe, noted that 4.3 cents a kilowatt hour is considerably less than fixed-price contracts now being marketed.

Retailers are selling fixed-price contracts of up to five years at up to 5.95 cents a kilowatt hour.

Adams cautioned that the price projections in the energy board study are hedged with many assumptions. Fluctuations in natural gas prices, coal prices or more aggressive exporting by Hydro Quebec could change the outlook, he warned.

“It’s just a forecast. We shouldn’t give it more credence than someone quoted in the newspaper saying the stock market will be higher or lower in a year’s time.”
– Tom Adams, Energy Probe executive director

“It’s just a forecast,” he said. “We shouldn’t give it more credence than someone quoted in the newspaper saying the stock market will be higher or lower in a year’s time.”

A spokesperson for Energy Minister Jim Wilson said the study is “consistent with our internal analysis.”

 

Posted in Reforming Ontario's Local Electrical Distribution Sector | Leave a comment

Hydro utilities lag in plans for new market, board says

John Spears
Toronto Star
July 25, 2001

Many local utilities are months behind schedule preparing for Ontario’s new competitive electricity market, according to the Ontario Energy Board.

In a letter to utilities sent yesterday, the energy board (OEB) said it is extending a key deadline by four months because so few utilities are on schedule.

Even with the four-month delay, the board said the market should still be able to open by the May, 2002 target date set by the provincial government.

However, it would appear to dash hopes that the market could open earlier than next May, as the province would have liked.

The letter from energy board secretary Paul Pudge said the board has reviewed questionnaires submitted by local utilities about their state of readiness for a competitive market.

The market will change the utilities’ current practice of buying almost all their electricity from Ontario Power Generation, one of the remnants of the old Ontario Hydro, and selling it under a single rate schedule.

With the new market, many generating companies will be selling power. Some will sell direct to large customers and others to retailers who then will resell to house and apartment dwellers.

Local utilities will need complex systems to track who is delivering power, who’s buying it, and at what price. Those systems were supposed to be tested by Aug. 10.

“The results of this review indicate that only a few distriubutors are on track with the current market readiness plan,” the board letter said.

“The assessment of other distributors’ filings indicates that a large number, representing the bulk of the consumers, are behind schedule.”

Because so many are unprepared, the board is extending the deadline for testing until Dec. 14. After that, it hints, it may consider fining the laggard utilities.

Tom Adams, executive director of Energy Probe, termed the new delay “bad news, but not fatal.

“It is an indication of some of the chaos going on within the ranks of the distribution utilities,” he said.

 

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Natural gas price drops 11% in July

John Spears
Toronto Star
July 10, 2001

The retail price of natural gas has dropped 11 per cent this month, and is likely to drop another 20 per cent or more early this fall, says Enbridge Consumers Gas.

That’s good news for gas users who decided not to sign long-term, fixed-price contracts last winter when gas prices soared to record levels.

Enbridge Consumers Gas has knocked off a surcharge of 3.9 cents a cubic metre as of July 1 – two months earlier than planned – because of falling prices.

That drops the rate to 32.1 cents a cubic metre for customers who are not locked into a fixed-price contract.

That price is likely to fall to 24 or 25 cents a cubic metre by early fall, said Janet Holder of Enbridge. And that’s where Enbridge expects prices to remain through next year’s heating season.

Over the course of a full year, an “average” home – three bedrooms, with four people using gas for both heat and hot water – would save about $400 at 25 cents a cubic metre, compared with the 36 cents they’ve been paying since March.

In fact, the average cost for the current year will be less than 36 cents.

Enbridge uses a year starting Oct. 1. For customers who haven’t signed fixed price contracts, it estimates what the price will be a year in advance, and charges customers that rate.

At the end of the year, Enbridge compares its actual cost of gas with its estimated costs. If it has overcharged customers, it gives them a refund or a credit.

If it has undercharged, it asks customers for an additional payment to make up the difference.

This past year, Enbridge set a price of 24.2 cents a cubic metre, but had to hike it to 32.2 cents on March 1 because of soaring prices.

It also slapped on a temporary surcharge.

Prices have steadily retreated since the spring, however. The spot price hit 11 cents a cubic metre for one day last week.

Enbridge wouldn’t say yesterday what it expects the actual average price will work out to be at the end of the current heating year.

Craig Alexander, senior economist with TD Bank Financial Group, said in an interview that lower gas prices should stick around for a while.

Gas inventories have increased this spring, he said – aided by moderate weather over much of North America so far this summer, which has limited the use of air conditioners. Natural gas is increasingly being used to fuel electric power generators.

Businesses that were ambushed by last winter’s natural gas price spike have also found ways to reduce their dependence on gas, he said.

Don’t feel too sorry for the gas producers, Alexander said. Even at current, lower levels, gas is selling for substantially higher prices than during the late 1990s.

That means they’ll have every incentive to keep producing and maintain a reasonable supply flowing into the market.

Tom Adams of Energy Probe reiterated his earlier advice to consumers that they should avoid long-term gas contracts for now.

Gas marketers are currently offering three to five-year contracts at prices ranging from 26 cents to 30 cents a cubic metre.

During the peak natural gas prices, marketers were offering to lock homeowners into contracts at more than 30 cents a cubic metre.

Like Alexander, Adams expects gas prices to remain at a moderate level.

“It would be crazy to be signing a gas contract now” at prices of 26 cents a cubic metre and up, he said.

 

But Alexander said that consumers who did sign contracts shouldn’t be kicking themselves.

Signing a fixed price contract is a bit like buying insurance, he noted. You don’t complain about wasting money on an insurance policy if your house doesn’t burn down.

The point of locking in a price is to have certainty, he said, and consumers with a contract still have that.

 

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Future now for fuel cell?

Dana Flavelle
Toronto Star
June 4, 2001

“Around here, we call it Saudi Arabia in a box,” says Andrew Stuart, patting the washing machine-sized metal box that can turn ordinary tap water and household electricity into fuel for cars.

Its technical name is the “personal fuel appliance.” It’s like having your own personal gas station in your garage, except this one pumps hydrogen for cars that run on fuel cells.

Sounds too futuristic to be real? Well, yes and no, says Stuart, president and chief executive officer of Stuart Energy Systems Inc., the Toronto-based company that’s developing them.

“It may seem slow to the casual observer, but to those of us involved it seems like it’s happening at lightning speed,” Stuart says.

Fuel cells have long been touted as the cleaner, more efficient fuel of the future, able to power everything from light bulbs to cars, not to mention their potential to reduce North America’s growing dependency on Middle East oil supplies, while producing virtually zero emissions.

Lately, the energy crisis in California, along with U.S. President George Bush’s controversial energy program, has thrown the spotlight on the emerging fuel-cell industry, in which Canada is a significant player.

The White House task force on energy emphasized increased output of conventional sources of fuel, but also recommended a tax break for buyers of vehicles that rely partly on fuel cells.

While fuel-cell cars have captured the public’s imagination, the more likely short-term applications of this technology lie elsewhere.

In fact, some fuel-cell products are already on the market, though not in the places most consumers would expect to find them.

They’re hanging on the racks in Wal-Mart and other leading consumer electronic retailers, where they’re being sold as backup power packs for cellphones.

Sold under the brand name Instant Power, they’re made by Electric Fuel Corp. Ltd., a New York-based company with operations in Israel, using a fuel-cell technology based on zinc, rather than hydrogen.

It’s all part of the vast and complex world of the fuel-cell industry, where the number of players is expanding rapidly, each armed with slightly different technologies with different applications, and different game plans.

Fuel cell is a generic term for a non-mechanical device that operates like a fuelled battery, as opposed to conventional batteries that operate on stored energy.

Most Canadians, when they hear the term fuel cell, think of Ballard Power Systems Inc. The Burnaby, B.C.-based outfit is a world leader in this emerging technology.

The company has deals to supply fuel cells to major auto makers, including DaimlerChrysler AG, Honda Motor Co. and Nissan Motor Co.

But at least half a dozen other Canadian companies are exploring the market. They include:

Fuel Cell Technologies Corp., of Kingston, which is developing a fuel cell that would power the home. The company expects to have a device on the market by 2003. Its Solid Oxide Fuel Cell is powered by natural gas or propane, but gives off lower emissions than conventional power sources.

Its initial target market is remote locations, sites that require uninterrupted power, or have severe weather.

Global Thermoelectric Inc. of Calgary, is also developing fuel cells for the home. The company expects to deliver the first unit for testing later this year.

It has a strategic alliance with Enbridge Inc., the natural gas distributor to 1. 5 million homes in Canada. Enbridge invested $25 million in the company last year.

Hydrogenics Corp., of Mississauga, makes fuel cells for all applications. It also makes fuel cell test beds and components for auto makers, fuel-cell developers and government agencies.

The company was co-founded by University of Toronto research engineer Pierre Rivard in 1995.

Methanex Corp., of Vancouver, produces methanol, one of the potential sources of hydrogen for fuel cells.

Several of these companies have raised millions in the past year by going public.

However, big questions remain about how long it will take to achieve the economies of scale that make fuel cells financially competitive with conventional sources of power and whether this new industry will realize its environmental potential.

“There’s a lot of hype around fuel cells,” says Tom Adams, spokesperson for Energy Probe. “Like all good hype, there are some threads of truth mixed in there.

“There are workable technologies and, in the long term, the prospect for non-mechanical, purely chemical engines for converting gaseous fuels to electricity has potentially great benefits.

“I’m a fan in principle.”

Like other environmental activists, Adams has reservations about how the technology will be applied.

 

Another critical issue is where the hydrogen comes from in the first place, says Peter Tabuns, executive director of Greenpeace Canada.

Hydrogen can be extracted from a variety of sources. Most people think of water, where hydrogen is the H2 in H20, as the cleanest, most ubiquitous source.

But you can also get hydrogen from gasoline and natural gas.

Also, one of the ways to separate hydrogen from oxygen is by electrolysis. In effect, using electricity that may have been produced by coal-fired plants.

“You’d actually have more pollution than you have today,” said Tabuns.

So, how will this new fuel lessen our dependence on the old ones?

One of the applications both Tabuns and Adams say makes the most sense is in the home.

A fuel-cell device hooked up to the existing natural gas supply in the basement could deliver enough electricity to light your home. The by-product, waste heat, would replace the need for a furnace.

In the auto industry, on the other hand, environmentalists fear manufacturers will fall back on gasoline as the main source of hydrogen.

“We see that as really bad news,” Tabuns said. Hydrogen from gasoline won’t produce the desired environmental or energy benefits, he said.

“The issue is not as straightforward as it looks.”

Over at Stuart Energy, the enthusiasm remains high despite the challenges ahead.

Andrew Stuart, who presides over the company his father and grandfather co-founded 50 years earlier, agrees there are still issues to be resolved.

And he’s the first to agree that mass commercialization of the fuel-cell car is still a long way off. However, he’s quite sure it’s coming.

“We’re very optimistic we’re going to see a period starting in the next few years, when we see a transition away from gasoline toward a hydrogen-based economy,” Stuart said.

“The potential of this is enormous,” he added.

“Even if hydrogen covered only 1 per cent of the market it would be a very large business opportunity.”

 

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The real agenda in Walkerton

Terence Corcoran
Financial Post
June 30, 2001

Ontario Premier Mike Harris survived his appearance yesterday before the Walkerton inquiry. More than survived: He triumphed. Facing an orchestrated ambush by smirking union lawyers, hired activists and placard-carrying demonstrators, Mr. Harris rose so far above the low politically motivated smears of his prosecutors that many citizens of Ontario must now be wondering about the validity of the Harris caricature they have been fed for most of the past year.

No doubt somewhere in the hours of testimony some news clips can be found to highlight an apparent contradiction or make Mr. Harris look bad. But throughout the session, as his questioners dug their cynical holes, Mr. Harris conveyed a sense of integrity and honesty they lacked. The issue, in some ways, is how Mr. Harris mustered the generosity last year to appoint an open inquiry that handed his political enemies a platform for his own prosecution.

For anyone who watched yesterday, moreover, it must have been eye-opening to realize that the lawyers questioning Mr. Harris were less interested in getting at relevant truths than in scoring ideological points. At times, the sessions slipped below the level of Question Period in the legislature.

The inquiry’s chief council, Paul Cavalluzzo, is a former NDP policy advisor who occasionally could barely resist mugging for the camera when he thought he’d scored a point. Paul Muldoon, whose clients are supposedly a group called Concerned Walkerton Citizens, is in fact also a front for organized labour. A media favourite, Mr. Muldoon’s grilling of the Premier revealed the bias he displayed in a recent paper funded by public service unions. “There is no criteria for which the private sector has an advantage over the public sector in providing water services.”

Their main point, of course, is that Walkerton was the product of spending cutbacks, privatization and a right-wing government hell-bent on a corporate-style business plan aimed at trashing the environment. If only that were true. If there’s any underlying lesson to come out of the Walkerton inquiry it is that the Harris government did not bring in a corporate-style business. They did not privatize, they did not bring in the structural reforms that their critics are now attacking.

The Harris government is under attack for a policy it failed to implement. In August, 1996, the Harris cabinet agreed to a program that would bring private investment to Ontario’s water and sewage system. The plan was to phase out the system of provincial grants and subsidies, which had proved distortive and ineffective, and replace it with local responsibility, local ownership, and, where appropriate, privatized services. Excerpts from the cabinet document appear below.

Privatized water systems, accompanied by full cost pricing, would bring numerous benefits over the current system. This was no crackpot cost-cutting conspiracy. The benefits were outlined by David Crombie, who headed a government advisory panel, in a memo later that year. The old subsidies system, he said, created overbuilding in some areas. Consumers don’t pay full cost for water, and therefore have no incentive to conserve and local governments have no incentive to invest wisely, if at all. The subsidy system also “dampens innovation and the pursuit of creative management practices.”

A former red-Tory mayor of Toronto, Mr. Crombie is no right-wing ideologue. But he said, “Clearly the current situation is financially and environmentally unsustainable.” He and his colleagues called for a major overhaul of water and sewer services, along the lines approved by the Ontario cabinet. But the program, as we now know, was never carried out.

Why not? Who knows. Former Environment Minister Norm Sterling, during testimony last Wednesday, conceded the government did the opposite. Under questioning from a lawyer representing the Energy Probe Foundation, Mr. Sterling was asked whether the cabinet plan remained in effect. “Well,” he said, “nothing happened.” In fact, he said, the government introduced legislation “which almost discouraged it.” Instead of ending grants, it provided new ones that acted as a disincentive to privatization.

The Walkerton tragedy is beyond any doubt the product of public ownership, buck-passing local bureaucrats, beer-drinking incompetents and decades of destructive public funding. All this long pre-dates the Harris government.

If anyone should be on trial at this inquiry, it’s the clients, policies and ideologies that the Cavalluzzos and Muldoons have long represented. The real campaign here is not to get to the bottom of Walkerton and its causes. The objective is to stave off programs and policies that would finally end the union and public stranglehold over government services.

Correction: Paul Cavalluzzo, chief counsel to the Walkerton Inquiry, is not now and never has been a policy advisor to the NDP or any other political party.

 

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