Utility Nuclear Program Draws Fire
Ontario's state-owned power company is loaded with debt, and costs continue to rise
ONTARIO Hydro, Canada's biggest electric utility and the largest government-owned business in the country, is in crisis.
The utility owes too much money, has huge cost overruns in its nuclear program, faces repair bills at its aging nuclear plants, and is causing a political furor by hiring more staff during a recession. Further, Ontario Hydro pays an average salary of $68,000 (Canadian; US $56,800) a year, more than double the national average.
"And that [average] includes the floor cleaners," says Norm Rubin of Energy Probe, an environmental group which is critical of Ontario Hydro's size, debt, and its expensive nuclear program.
The utility recently announced it plans to add more than 800 employees to its existing payroll of 28,396. But Hydro - as it is called here - says it needs the staff and is actually reducing its work force by cutting contract staff, mainly construction workers at its new nuclear power station.
One big personnel change is the departure of Marc Eliesen, the chairman of Ontario Hydro. After only 14 months at the post he is leaving his C$260,000 a year job to take over British Columbia Hydro with a cut in pay to C$195,000. While it is less money, he will have fewer worries.
Many of Ontario Hydro's problems stem from cost overruns in its nuclear power program as well as what its critics see as a bloated bureaucracy. The monopoly plans to hike electricity rates by almost 9 percent, more than double Canada's current inflation rate.
Electricity rates have risen so quickly in recent years that Ontario has lost its edge in providing cheap electricity costs to residential and industrial customers. A study by Energy Probe shows that as of next year, average monthly electric bills in Toronto will be more expensive than in the United States.
Critics say if Ontario Hydro were a private company it would be bankrupt. It is C$35 billion in debt; last year it paid C$3.6 billion in interest. At a recent Ontario Energy Board hearing the same critics claimed that borrowing needs of Ontario Hydro sap capital needed for private industry.
Hydro can continue to issue its own bonds to finance expansion. "Ontario Hydro can borrow what it needs because it backed by the provincial government. The two are viewed as one and the same by the marketplace," says a bond trader with First Boston in Toronto. If Ontario Hydro was a private company, its finances would be assessed independently, and it would probably not have the same access to capital.
"If you just waved a magic wand and said it is no longer a branch of government, it would be bankrupt," says Mr. Rubin. His group takes a radical (for Canada) free-market approach to energy and environmental issues.
ONTARIO Hydro, however, is not a private company. It is the 86-year-old creation of the idealistic populists of the early 20th century who wanted to bring cheap power to all areas of the province. They developed the station at Niagara Falls producing 1,600 megawatts of electricity. A transmission grid brought power to every farm and town in Ontario, all at the same price.
For the past 14 years, Ontario Hydro has been building a giant nuclear power station at Darlington outside Toronto. It will be the equivalent of two Niagaras, 3,600 megawatts. So far, though, only one of four reactors is operating, turning out 835 megawatts.
Darlington will cost C$13.8 billion, almost double the original cost estimates of C$7.4 billion.
The company has two other nuclear plants, the 3,200-megawatt Bruce plant on the shores of Lake Huron, and Pickering, a 4,200-megawatt plant just outside Toronto. Both need substantial repairs. Nuclear stations supply about half of Ontario's electricity, the highest percentage of nuclear electric power in any part of North America.
Environmentalists say Ontario Hydro should stop investing in nuclear and allow competition. The corporation says that because of economic conditions, demand is falling so it does not need any extra electricity.
"We encouraged nonutility generation in the past but not anymore. Now it looks as if we'll have surplus capacity," says Geoff McCaffrey, a company spokes-man.
Energy Probe wants the transmission grid to be a public-access facility for electricity. "The grid should be a means of connecting buyer and seller rather than an instrument of monopoly abused by one uncompetitive generator," Rubin says.
Some businesses and municipalities in Ontario agree. The city of Kingston has suggested separating from the Hydro grid and generating its own electricity. Ontario Hydro rejects this idea, maintaining that it paid for the transmission grid and Ontario law gives it the right to be the sole distributor and seller of electricity in the province. The current socialist government is unlikely to alter Hydro's monopoly.