Nuclear subsidies exposed


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Previously undisclosed long term nuclear subsidies have been pinpointed in Canada during the May-June hearings on the Ontario Hydro utility's 1995 electricity rates at the Ontario Energy Board (OEB) in Toronto. "The new revelations of the untenable economics of nuclear generation should boost the chances for wind power and other renewable energy technologies," says Jake Brooks, executive director of the Independent Power Producers' Society of Ontario (IPPSO).

Electricity production by Hydro's Nuclear Business Unit will lose an estimated $1.2 billion in 1994, according to analyses presented at the hearing by IPPSO. The public utility's accounting methodology overvalues its nuclear assets by C$11-12 billion, Hydro chair and CEO Maurice Strong admitted under questioning by IPPSO. Hydro is facing a crisis of public confidence and debt (C$34 billion compared to $44 billion in assets) which led to recent massive restructuring and downsizing.

"Hydro is making money on its hydraulic generation while losing money on nuclear," said IPPSO counsel Jay Shepherd, adding that hydraulic stations at Niagara Falls and elsewhere have been subsidising nuclear for the last one or two decades. Hydro witnesses did not refute this contention.

Hydro's new internal "transfer pricing agreement" (TPA) between its three semi-autonomous generating units (nuclear, hydraulic and fossil) enables critics to analyse their individual balance sheets for the first time. IPPSO found that the nuclear unit apparently receives $0.056 per kilowatt hour for the electricity it generates, compared to the average base load energy cost to direct customers and municipalities of about $0.042/kWh. The anticipated $1.2 billion nuclear loss is the difference between the cost of producing this energy and the revenues from its sale.

Hydro power is paid only $0.012/kWh, while fossil receives fully $0.097/kWh. TPA disbursements to the nuclear business unit include "balancing payments" of $0.038/kWh (for a total of $3.2 billion expected in 1994), to compensate for nuclear's entrenched debt and higher generating costs.

Outside the hearings, Shepherd said Hydro's financial crisis is "years of planning mistakes finally catching up with them. Hydro has accumulated a corporate deficit, directly from nuclear generation, of over $10 billion."

IPPSO expects that in the transition to the "open utility" envisioned by Strong, fair and transparent management will naturally select lower-cost and environmentally preferable independent power over utility mega-plants. IPPSO has long urged Hydro to design modest environmental adders for preferred renewable technologies, says Brooks. "Hydro's over optimistic nuclear performance projections led to the current needless and short sighted moratorium on independent power, including many promising renewable projects ripe for implementation."

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