(December 4, 1997) Ontario Hydro's estimation of the cost to restore seven reactors is probably too low. This is one of the conclusions in a report by a management consultancy. The report also challenges several key assumptions on which the utility's nuclear recovery plan was based.
(482.4780) WISE Amsterdam -According to an independent report by management consultancy Ernst and Young, the plan to restore seven ailing Canadian nuclear reactors, could be more expensive than initially thought. The seven reactors were closed in August after the Canadian government s review of Ontario Hydro's management of nuclear operations were found to be "slipshod, complacent and unaccountable". The overall rating given was "minimally acceptable" (see WISE NC 477.4730). Ontario Hydro, the operator of the four reactors at Pickering-A and three at Bruce-A, estimated the costs to upgrade the reactors at Cd$8 billion (US$5.7 billion). However, Ernst & Young say, the utility did not include "certain major expenditures that may prove to be significant". The consultancy did not indicate how much more the programme could cost, just that costs not taken into consideration by Ontario Hydro could boost the final price tag. Costs such as severance pay for laid-off workers, expenditures to relocate workers, financial impact of project delays and possible capital costs such as replacing cables or undertaking seismic modifications. Furthermore the plan does not take into account inflation and assumes Ontario Hydro will be able to improve productivity and capacity factors in excess of the historic performance.
The report also challenges several key assumptions on which Ontario Hydro's recovery plan was based, suggesting the utility's board was not sufficiently well informed when it approved the rescue plan. This is a major blow to Ontario Hydro's reputation and embarrassing because it casts doubts on Carl Andognini, the chief nuclear officer brought in to lead the programme. The chairman of the utility, William Farlinger, told an Ontario provincial parliamentary inquiry that the board of directors tested Andognini on all aspects of the plan, and "why the plan was the necessary one."
- Financial Times, 31 October 1997
- WISE NC 477, 12 September 1997
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