Liberal energy plan includes costly nuclear future for price hike weary consumers

By By Bob Stewart

Posted 1 year ago

As government announcements go, Ontario's Long-Term Energy Plan wasn't a big deal.

While it featured a formal announcement by Energy Minister Brad Duguid with words of support from Premier Dalton McGuinty and others, there was no big splashy photo-op news event — no 'full court press' as it were.

That there was no major media event surrounding the plan's release Nov. 23 wasn't surprising. There's nothing really new in the plan. All the components had been talked about, announced and alluded to previously.

Considering the price impact — a doubling of the price of power for residential and business users over the next 20 years — it's understandable the Liberals didn't want to make too big a deal of it. The ever-rising price of power has been a hot button issue with the Liberals lately, and it is going to get hotter as we head into a provincial campaign next summer. Prices, currently hovering between 14 and 17 cents a kilowatt hour, are set to rise to the 20 to 25 cent range over the next five years. And, according to energy plan projections, will top 30 cents by 2030. By comparison rates in neighbouring Manitoba and Quebec are currently about 8 cents a kWh, while they're about 10 cents to 12 cents in bordering northern U.S. states.

Supporters of the plan's key components — a continuation of the Liberal green energy program and the retention of nuclear generation as the mainstay of the province's electricity supply mix — endorsed the plan. Critics — of the high cost of green energy, those opposed to nuclear power itself, and those who question the government number crunching — did not.

So what's in the plan that consumers should be aware of?

Perhaps the most important facet is the formal commitment to nuclear power. That's not new by any stretch, but is critical to consumers.

Nuclear power has provided half this province's electrical energy needs for the better part of two decades. That's not going to change. It could, but it won't.

Ontario Power Generation — the provincial utility that owns the plants — and the government are comfortable with nuclear despite its costs, problems and liabilities. While they are willing to venture down the path of renewable energy and distributed generation — many tiny generating points instead of a few big ones — to replace the province's coal plants which provided about 20 per cent of the energy mix; they're not comfortable exploring that same route or any others for half the province's power needs.

The decision to embrace nuclear power was made in the 1960s and over the following three decades Ontario built and began operating three plants with a total of 22 reactor units — 16 are still operating with two more undergoing mid-life upgrades.

The 20-year energy plan calls for a total of 12 nuclear reactor-units in operation by 2030 — 10 of the current units will be upgraded over that time, while two new ones will be built at the four-unit Darlington station. The Pickering station, opened between 1971 and 1983, with six of eight units still running, will be decommissioned unit by unit as they reach the end of their life-cycles over the plan's two-decade time-frame. Two of the oldest units at the eight-unit Bruce plant will also be decommissioned.

This won't come cheap. The plan pegs the cost at $33 billion, but many argue that is a low-ball number and the real price tag will likely be double that. Nuclear power projects have a history of going over budget. Ontario's Darlington station — opened in 1993 — went 300 per cent over budget with a final cost of $14.4 billion during its decade-long build. A mid-life rehab of two units at Pickering six years ago went $2 billion over budget, nearly doubling original projections of $2.75 billion, while a current upgrade at the Bruce station — operated under lease by Bruce Power — is already $1 billion over budget with the final tab expected to be $5.2 billion rather than the original $3.8 billion.

The province says consumers won't be on the hook for the overrun, but that's just political talk. We all know the cost will show up somewhere on our bills. TransCanada Corp and the Ontario Municipal Employees Retirement System fund which are the main funders and majority owners, certainly aren't going to eat the loss. If that were the case they'd have cancelled the rebuild.

In addition to paying for new and upgraded reactors, electrical customers — and taxpayers — are on the hook for billions in other nuclear costs. Much of the $38 billion in debt reworked when Ontario Hydro was dismantled in 1998 was nuclear related, $4.5 billion a year (about 4 cents for every kilowatt hour used) is going to pay that down and it is now at about $29 billion. At current payment levels, about $20 billion will be paid off over the next decade, but $9 billion owed to the government won't be repaid until 2039-2041.

As well, two special funds maintained by Ontario Power Generation to cover the cost of decommissioning reactors and to deal with highly radioactive used fuel bundles are billions of dollars shy of what's needed.

Both funds, which currently rely on investment income for much of their growth, had just under $5 billion in them as of March 2010. The decommissioning fund should be at about $10 billion according to the Ontario Energy Board. Ratepayers are on the hook for any shortfall. The used fuel bundle fund is about $1.5 billion short of its needed level. Ontario taxpayers are on the hook for that shortfall under terms of an agreement the province has with the federal government for operating nuclear reactors in the country.

For good or bad, the Liberal energy plan means we're sticking with nuclear, and that means electricity customers will be stuck with the bill.

(Next week: Going green)

bstewart@bowes.com