Bruce woes threaten power drop

By PAUL WALDIE
Saturday, September 7, 2002 – Print Edition, Page B3

British Energy PLC’s financial problems could cause electricity shortages in Ontario next year and drive up power prices for consumers, analysts warn.

British Energy owns 82.4 per cent of Bruce Power LP, which runs eight nuclear reactors in Ontario. The British utility has said it faces insolvency if it does not receive a bailout from the British government.

Currently four of Bruce Power’s reactors are operating and two more are slated to come into service next summer. Restarting those two reactors is expected to cost $400-million.

Tom Adams, head of Toronto-based Energy Probe, said yesterday that given British Energy’s financial problems, it is doubtful those reactors will go on line. That means Ontario’s power supply, which has been stretched to capacity this summer, could suffer.

“It was just through the aid of our neighbouring utilities that we were able to make it through the summer,” Mr. Adams said.

Electricity demand and prices were at record levels this summer which forced the province to import power from outside sources. However, Ontario’s transmission system is limited in how much power it can import and Mr. Adams said the province surpassed its limit this summer.

The supply situation “was bad enough when we had a solvent operator running Bruce Power and now that that’s a question mark, the overall supply reliability perspective is more gloomy.”

In a recent 18-month forecast, the Independent Electricity Market Operator, or IMO, which runs Ontario’s power market, warned of price hikes if the Bruce reactors do not come into service.

The effects of the two Bruce reactors not coming on line “include upward pressure on market prices and limited opportunities for the IMO to approve the release of generators for planned maintenance,” the report said.

Duncan Hawthorne, Bruce Power’s chief executive officer, declined to comment yesterday on British Energy’s troubles. “However, I can say that during discussions with the British Energy board of directors, I received no change in direction with respect to our activities at Bruce Power,” he said in a statement.

British Energy’s problems deepened yesterday as three credit rating agencies downgraded the utility’s debt rating to junk status.

Moody’s Investors Services said the downgrade means British Energy will have to post added collateral for some financial commitments.

“Moody’s believes that the additional liquidity requirements are of the order of hundreds of millions of pounds,” the agency said.

In a recent securities filings, British Energy noted that some of Bruce Power’s energy contracts require the parent company to have an investment grade rating. If British Energy’s rating is below investment grade and it cannot provide alternative credit support, the contracts can be terminated, the filing said. Bruce Power has contracts with large customers for 65 per cent of its production.

Bruce Power has also been told by the Canadian Nuclear Safety Commission, or CNSC, to provide assurances by next week that it still has access to $222-million in emergency “shutdown money”.

That guarantee has been provided by British Energy, but the CNSC is now concerned that the company can no longer meet the commitment.

In the security filing, British Energy said that if the commitment cannot be properly satisfied, “the CNSC may terminate Bruce Power’s licence to operate the Bruce nuclear station.”

Mr. Adams of Energy Probe also yesterday urged the CNSC to increase its safety supervision of the Bruce station.