British firm eyes Hydro's reactors

Proposal involves taking over three

The Globe and Mail - Monday, January 12, 1998
By Paul Waldie

Nuclear-power giant British Energy is in talks with Ontario Hydro about running some of its 19 nuclear reactors.

"We have had several meetings with British Energy along those lines," said John Murphy, president of the Power Workers Union, which represents most Hydro workers. "I know they have also been meeting with senior management within Ontario Hydro."

Robin Jeffrey, British Energy's deputy chairman, will be in Toronto this week for further discussions, Mr. Murphy said yesterday. British Energy operates eight nuclear reactors that supply about 21 per cent of Britain's electricity.

Mr. Murphy said the discussions include everything from British Energy buying the reactors to running them for a fee. He said the union is working with British Energy on a proposal for it to take over management of at least three reactors that are scheduled to be laid up.

Hydro "should explore groups like British Energy and other interested groups out there to see if in fact there could be a good business proposition put together," he said.

A spokesman for Hydro would not comment on the discussions. Other officials from Hydro and British Energy were unavailable.

Mr. Murphy said the talks began shortly after the release of a scathing internal report on Hydro's nuclear division last August. The report said the nuclear operations were safe but operated at a minimally acceptable level.

Hydro has since announced plans to lay up seven reactors. It will also spend up to $8.8-billion over five years to refurbish reactors and buy replacement energy.

The Ontario government has proposed splitting Hydro into three entities -- a generating company, a transmission company and a business devoted to paying down Hydro's $32-billion debt. It has announced plans to deregulate Ontario's energy market and open competition to more suppliers.

Analysts say deregulation in the United States has already forced several power companies to consider selling their nuclear reactors because they are too expensive to operate.

In the past three years, Ontario Hydro's nuclear-power production costs have increased 16 per cent, while the cost of power from fossil fuel has dropped 23 per cent and the cost of generating hydroelectric power has fallen 20 per cent.

British Energy, which was privatized in 1996, turned a profit of $7.1-million in the first half of 1997. The company has also announced plans to expand outside Britain.

In September, it formed AmerGen Energy Company with Peco Energy Co. of Philadelphia. AmerGen's objective is to buy and operate a chain of nuclear reactors. Peco currently runs four reactors around Philadelphia.

Mr. Jeffrey has previously expressed an interest in Ontario Hydro's reactors. In a speech in September in Toronto, he said he was "interested in discussing" potential partnerships with Hydro.

In October, Mr. Jeffrey also appeared before an Ontario legislative committee reviewing Hydro's nuclear plans. During his presentation, he advocated private ownership of reactors.

"We have demonstrated that nuclear plants can be operated so successfully and can be profitable in the demands of a liberalized electricity market," he told the committee.

Mr. Murphy said British Energy officials are keen to manage all of Hydro's reactors, but he doubts that will happen. "What we have told them is that while there may be some business sense to take over 19, politically that's not likely to happen in Ontario."

He is urging the company to take over management of the three reactors at Hydro's Bruce A complex on Lake Huron west of Owen Sound. Those reactors are being laid up and are expected by many analysts ultimately to close.

"There would be strong community support and certainly strong union support for the concept of a public-private partnership taking over operations of Bruce A," Mr. Murphy said.

"It would provide cheaper power than imported power. It would protect jobs and protect the impact on that community."

Mr. Murphy said the huge cost of Hydro's plan to refurbish the reactors should prompt the utility and the government to consider other alternatives. He added that the report of the legislative committee also urged Hydro to reconsider all of its options.

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