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Nuclear plant leasing deal will be costly, Auditor says

Taxpayers likely will have to pay hundreds of millions of dollars, Ontario report warns

Globe and Mail, June 7, 2002, p. A13
by Martin Mittelstaedt and Richard Mackie

The controversial deal signed by the Ontario government to lease its Bruce nuclear facility to a British company probably cost taxpayers hundreds of millions of dollars, according to a report by Provincial Auditor Erik Peters.

As well, Mr. Peters expressed concerns over the approximately $1-billion cost overruns and delays in restarting four nuclear reactors at the provincially owned Pickering generating station, problems he predicted will lead to increased electricity prices in the province.

But Energy Minister Chris Stockwell disputed the auditor's forecast of higher rates.

"It's not going to drive rates up . . . I'm not arguing with the auditor. What I'm saying is my information is we have adequate supply. When we get Pickering on, it will drive rates down."

The auditor's warnings were made yesterday before an all-party legislative committee, where Mr. Peters delivered a report analyzing whether taxpayers received good value for leasing Bruce, the world's largest atomic-energy facility, to British Energy PLC.

While Mr. Peters cautioned that it is extremely difficult to estimate long-term consequences for taxpayers, he said the lease caused Ontario Power Generation, the government-owned utility, to report a $214-million lower pre-tax profit last year.

The deal will result in unspecified lower profits in future; Ontario Power "will earn less over time. But how much, we don't know," Mr. Peters later told reporters.

As well, the province will suffer a $170-million reduction in cash flow, compared with Ontario Power continuing to operate the facility, largely because the new arrangement will lead to federal income-tax payments not required at reactors operated by the province.

The Bruce lease has been controversial almost from the day it was announced in July of 2000. The transaction valued the eight reactors at the site, which at full power are capable of supplying about a quarter of the electricity flowing through the province's transmission lines, at about half the prevailing price of U.S. reactor sales.

And after the 18-year lease expires, the cost of disposing of the waste nuclear fuel and decommissioning the site on the shores of Lake Huron will remain with taxpayers, unlike U.S. deals where transactions transferred this liability to the purchasers.

Bruce was put on the auction block because the government ordered Ontario Power to privatize about 60 per cent of its generating capacity, to create a more competitive electricity market.

In his report, Mr. Peters said a final assessment on whether the province made a good or a bad deal will depend on electricity prices, the cost of repairs to the plants and the remaining life of the plants.

"The cash-flow forecast for the lease and status-quo scenarios are still only estimates based on assumptions about the future, the accuracy of which will only be known with the passage of time," Mr. Peters' report says.

For instance, if electricity prices rise 10 per cent, having Ontario Power operate the reactors would be worth $565-million for the province, according to the report. But under the lease arrangement, the province would receive only an extra $280-million.

Mr. Peters also revealed that the government has kept in its treasury the initial $370-million payment made in May of 2001 under the lease. The government has not turned the proceeds over to the Ontario Electricity Financial Corp., the agency established to receive income from the government-owned electricity business to retire the $20-billion debt left over from Ontario Hydro.

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