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OPG cuts Pickering top jobs, contracts

Mothballed nuclear units' future uncertain
Cost of restarting entire plant now more than $3B

Toronto Star - February 7, 2004
by John Spears

Ontario Power Generation Inc. has let go "eight or nine" vice-presidents and as many as 60 contract engineers in a major round of cost-cutting, says acting chief executive Richard Dicerni.

And all engineering work on two of four units at the Pickering A nuclear generating station has been halted because OPG still doesn't know whether the mothballed units will ever be restarted, Dicerni said in an interview yesterday.

The decision to halt work drew praise from the Society of Energy Professionals which represents OPG staff engineers on the project.

"It's only reasonable they try to minimize spending the amount of money on a project they're not sure is going to proceed," Andrew Muller said. OPG — the province's largest producer of electricity — has halted work on Units 2 and 3 at Pickering in order to concentrate on planning for the restart of Unit 1. Unit 4 got up and running last fall, the first unit to restart since the plant was mothballed in 1997.

But Dicerni said the decision to get back to work at Units 2 and 3 — and even the decision to proceed with restarting Unit 1 — can't be made until a panel headed by former finance minister John Manley completes a report scheduled for March 15.

After that, it will be up to the provincial government to make the call on proceeding with the restart of one, or none, of the remaining reactors. The cost of restarting all four reactors is now estimated at $3 billion to $4 billion, and it could take until 2008 to complete according to a review panel that reported in December.

"If the Manley panel endorses these other units, there will always be time to restart them," Dicerni said.

At full power, each of Pickering A's units delivers 515 megawatts, enough to supply 2 per cent of the province's electricity needs on a day of very high demand. At peak times, Ontario uses up to 25,000 megawatts and is often forced to import power.

OPG's principal business is the generation and sale of electricity to Ontario and other markets.

Dicerni said OPG has internal cost estimates for restarting Unit 1, but won't discuss them publicly because it has been "badly burned" in the past by disclosing previous estimates that turned out to be inaccurate. But many of the materials needed to restart the reactor have already been purchased and delivered, Dicerni added.

Halting work on the other units "dovetails with our attempt to start reducing expenditures throughout the company." Restarting Pickering A was first discussed in 1998, and approved by the board of directors in 1999 with a cost estimate of $1.3 billion, with the first unit back in service by late 2000. So far, it has cost $1.6 billion to get the first unit back in service three years late.

The company is also facing a financial squeeze, running short of cash while it has been burning $25 million a month on the Pickering A project.

Ontario Energy Minister Dwight Duncan fired OPG's top executives and installed Dicerni on Dec. 10. He reports to a new board of directors headed by former federal energy minister Jake Epp.

The company-wide cost pressures have led to a series of economy measures, including thinning the executive ranks.

Four vice-presidents at OPG's energy trading division have been let go since Dec. 10, Dicerni said, partly due to refocusing and partly due to scaling back of Ontario's electricity market.

OPG's executive salaries have not been published in the past. Most crown corporations have to publish salaries paid to individuals who make more than $100,000 a year, but the former Conservative government exempted OPG from the requirement. The Liberals have ended the exemption, but salaries haven't yet been disclosed.

Along with the top level staff, OPG is letting go of 50 to 60 engineers, hired through a contractor, PowerSource Canada, who are working on Units 2 and 3. Also, OPG has sliced the wages being paid to many contract engineers at Pickering, he said.

Dicerni wouldn't comment whether the old pay rates were unreasonably high.

"The project management team took stock. ... We retained those individuals we needed at a rate we thought to be competitive," he said.

The use of highly paid contract engineers at Pickering, many imported from the U.S., has been a source of friction with OPG staff engineers at the project.

"Very little" engineering work has been done on those units, Dicerni said, despite the fact that the project is now in its sixth year. Halting the work now in progress will make very little difference to the final cost of restarting the two reactors, should the government decide to proceed, he said.

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