Bruce Power a good deal for Ontario

Energy Minister Dwight Duncan on April 5 released a report by Ontario's Auditor General on the Bruce Refurbishment Agreement announced in October 2005.

"At our request, the Auditor General reviewed the agreement. In 2005, we announced that we had successfully transferred much of the operating and cost overrun risks from the ratepayer to Bruce Power. The Auditor's review confirms this conclusion," Duncan said. "We appreciate the Auditor General's comments and thank him and his team for their hard work."

The Auditor's report assessed whether the decision-makers had what was needed to ensure that the agreement was a good value for Ontario taxpayers.

The report found that the province had considered and addressed risks and issues and had all of the information and expertise needed to negotiate an extremely complex agreement. It noted that external financial advisors found Bruce Power's rate of return on its investment was within an acceptable range.

It also reviewed some of the choices made in the negotiations to arrive at the agreed-upon price.
"This was a good deal when we signed it, and it's a good deal today," Duncan said. "We will get a clean supply of affordable electricity for the next 30 years, and transfer appropriate risk to the private sector. In return, Bruce Power will get a fair price."

Over the past 18 months, the price paid to Bruce Power has been 6.1-cents-per kilowatt-hour.

This is lower than the agreed-upon price of 6.3 cents per kilowatt-hour as a result of lower fuel costs.

The agreement was signed in order to secure a long-term supply of base load power for Ontario homes, businesses and hospitals.

Between 1995 and 2003, Ontario's net supply of power had fallen by more than 1,800 megawatts, the equivalent of Niagara Falls running dry.

As part of the agreement, Bruce Power is investing $4.25 billion to restart Bruce A Units 1 and 2, refurbish Unit 3 and replace the steam generators in Unit 4. The addition of 1,500 megawatts of clean, base load supply to the Ontario electricity grid is enough power for 1.2 million Ontario
homes.

The terms of the agreement were subject to detailed due diligence by financial, legal and technical advisors, and approved by the Ontario Cabinet.

In October 2005, CIBC World Markets provided the Ministry with an opinion that the principal financial terms of the transaction were fair.

Over the next 15 years Ontario will need to refurbish, rebuild or replace 25,000 megawatts of supply. In addition to this agreement, the McGuinty government is also maximizing the potential for cleaner energy through hydroelectric and renewable power and conservation.

Contracts are now in place for 1,300 megawatts of “green power” to come online over the next several years.

The Ministry of Energy has also authorized the Ontario Power Authority to invest upwards of $2 billion in conservation as part of the province's commitment to foster a culture of conservation in Ontario.

Copies of the Auditor General's report are available on line at: www.energy.gov.on.ca

Copies of CIBC World Market's Fairness Review are also available on line at: www.energy.gov.on.ca

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