July 19, 2004

Energy Minister approves OPG plan to restart Pickering nuclear unit

Ontario Energy Minister Dwight Duncan has approved Ontario Power Generation (OPG)'s plan to restart a laid-up unit at the Pickering A nuclear plant to help meet the province's rising demand for electricity in Ontario. The provincial government says the return to service of Pickering A, Unit 1 offers the shortest lead-time of any of the major electricity supply projects available in Ontario: the project could be completed within 15 months. The unit will generate 515 megawatts (MW) of electricity and the project is expected to cost OPG approximately $900 million.

The restart of the Pickering unit is a significant step toward meeting the government's commitment to replacing coal-fired electricity in Ontario. "The power produced from this project will go a long way toward cleaning up our air and replacing coal-fired generation in the province," Duncan stated, noting that the unit, once operating, "will deliver enough affordable electricity to power 350,000 Ontario homes, or a city the size of London."

A previous plan to restart Pickering A's Unit 4 ran aground when OPG reported major financial losses connected with the project. In December 2003, The OPG Review Committee was appointed to make recommendations on the role of OPG in the Ontario electricity market, the appropriate future structure of OPG, its corporate governance and senior management structure, and the potential refurbishing of Pickering A Units 1, 2 and 3.

A report presented to the Energy Minister in March documented extensive mismanagement on the part of OPG and a lack of oversight by the previous government. In response, Duncan appointed a new board of directors, chaired by former federal cabinet minister Jake Epp, and accepted the resignations of a number of senior OPG officials. A shareholder declaration was also passed to ensure that major decisions by OPG are approved by the provincial government.

"The lack of transparency and accountability at OPG under the former government led to a serious waste of money - we will do things differently," Duncan said. "I am not willing to write OPG another blank cheque. I have directed OPG to report regularly to the public on the progress of this project, and we have an independent auditor in place to help ensure the project stays on track."

"There are many differences in our approach to the Unit 1 project this time around," Epp said. "The project is ready to go and our third-party auditors will continue to monitor the progress of the restart. OPG is satisfied that every precaution has been taken to ensure that the refurbishment stays on track."

Schiff Hardin LLP's construction and energy law group will provide independent oversight during the Pickering A, Unit 1 return to service project. This group provides project control services for major construction projects being carried out by large energy companies, engineering firms and other vendors. In particular, the group focuses on representing utility companies and vendors. Their services have included monitoring of construction progress, cost issues, control and change order issues, analysis of contractor and owner claims and potential claims, and dispute resolution during projects. For the Pickering A, Unit 1 return to service project, the Schiff team includes Kenneth Roberts, co-leader of the firm's construction law group and consulting experts Jim Wilson of J Wilson and Associates and Daniel Meyer of Meyer Construction Consulting.

The Pickering A restart, added to the government's recent requests for proposals for energy from renewable sources, represent an additional 3,315 MW of cleaner, more efficient electricity. Further power will be obtained from the Niagara Tunnel project, approved last month.

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