Bruce Power and the Independent Electricity System Operator (IESO) have entered into an amended long-term agreement to secure 6,300 megawatts (MW) of electricity from the Bruce Power site, through a multi-year investment program.

Since 2001, Bruce Power has returned the site to its full operational capacity, with eight units providing 6,300 MW of carbon-free electricity to Ontario’s grid. This was accomplished through the restart of Units 3 and 4 in 2003/04, the refurbishment of Units 1 and 2 in 2012 and a range of life-extension investments on Units 3-8 over the past 14 years. To achieve this, Bruce Power has invested $10 billion private dollars into these publicly owned assets since 2001.

In 2005, Bruce Power entered into the Bruce Power Refurbishment Implementation Agreement (BPRIA) to enable the restart of Bruce Units 1 and 2, to return the site to its full operating capacity of eight units.

The amended agreement entered into today will enable the company to progress with a series of incremental life-extension investments through Major Component Replacement (MCR) and Asset Management (AM) to secure a clean, reliable and affordable source of electricity for Ontario families and businesses for decades, as outlined in Ontario’s 2013 Long-Term Energy Plan (LTEP).

Price of Electricity

Bruce Power currently provides over 30% of Ontario’s electricity at 30% less than the average residential cost of power. In fact, Bruce Power is the source of about half of Ontario’s nuclear generation and is the lowest cost source of nuclear energy in the province.

On Jan. 1, 2016, Bruce Power will receive a single price for all output from the site of $65.73 per megawatt hour (MW/h). This compares to the current price paid to Bruce Power of $64.90 MW/h against an average residential price of electricity in the province of $101 MW/h (2016).

The table below illustrates the important role the electricity from the Bruce site plays in keeping prices affordable for families and businesses.

Electricity Prices Paid by Consumers

ElectricityPrices

(click to enlarge)

The price paid for Bruce Power nuclear is fully inclusive of all costs, including capital investments that have been made, funding for fuel, waste and decommissioning liabilities, and every element of the company’s operation. Under Bruce Power’s site lease with Ontario Power Generation (OPG), and through this agreement, the company will continue to fund decommissioning and waste management costs. The cost to manage these liabilities will be determined through the Ontario Nuclear Fund Agreement (ONFA) process and are reflected in Bruce Power’s price of power.

There is often a misperception that, because of the upfront capital costs associated with nuclear energy, the cost of power will be high as a result. Due to the large volumes of electricity generated from nuclear facilities, and their high reliability, this is not the case as outlined by the price comparison above, which is fully inclusive of all costs related to this form of generation.

Investment Program

As a private sector operator, Bruce Power is responsible for meeting all site investment requirements and the implementation of this program. Through the amended agreement, Bruce Power will make life-extension investments in Units 3-8 to enable a coordinated Major Component Replacement (MCR) schedule that has been developed with the IESO. The commercial discussions between Bruce Power and the IESO since the release of the LTEP in 2013 have optimized this schedule further, based on extensive due diligence.

The agreement will optimize asset life and manage investment requirements to achieve the lowest price possible for consumers, while also ensuring Bruce Power can make long-term investment decisions and adequately plan and prepare for projects.

Bruce Power Major Component Replacement Schedule

MCR refurbishment schedule 2016

(click to enlarge)

The optimized MCR schedule also allows for a coordinated program that will ensure the site meets Ontario’s electricity needs during the MCR period, while also maximizing the work program on site. It also ensures adequate time for Bruce Power to prepare to successfully execute the MCR Project starting with Unit 6 in 2020.

The MCR program will be limited in scope to focus on the replacement of key major components, including steam generators and reactor components. This approach was developed from lessons learned from the refurbishment of Units 1 and 2 and the company’s site life-extension activities since 2001. Items outside of these major components will be carried out through a program referred to in the agreement as Asset Management (AM), which started in 2016 and will continue to 2053. All of the activities that are part of this investment program have been successfully completed on Bruce Power’s units since 2001, and the work plan will build on this extensive experience into the future.

The AM approach allows the company to manage the scope of work during MCR, balance the work program and extend the life of the units before MCR begins, through targeted inspections and investments that will add an additional 30 reactor years of life. This optimizes the life of the assets and enables a coordinated MCR Project.

There is a transparent process to determine the cost of MCR following a defined project management process. It’s estimated the six MCRs in the agreement are targeted at a cost of $8 billion ($2014). In addition, $5 billion ($2014) has been allocated through a range of other AM activities from 2016-53. In the short term, between 2016 and 2020, the company will be investing $2.3 billion ($2014) in both AM and MCR activities as part of this plan. This is incremental to the company’s ongoing financial investments to sustain eight units of operation. The total investment program outlined in this agreement – between MCR and AM – is approximately $13 billion ($2014).

Consistent with the LTEP, a series of off-ramps have been built into the agreement related to projected MCR costs, and, by extension, past refurbishment performance, a change in market conditions not requiring the site output, or if there’s an economic impairment. If any of these off-ramps are triggered, the investment program will be adjusted, although the agreement expects that Bruce Power will optimize the remaining life of the units if an off-ramp is exercised, to allow time for alternate supply options and to ensure the benefit from past investments is realized.

ECONOMIC IMPACT

In October 2014, a coalition of respected business, economic development, trades and union leaders released an Economic Impact Study on the positive role the Bruce Power site plays in the province. ‘Affordable Power. Jobs & Growth.’ highlights the positive impact Bruce Power’s eight nuclear units have on keeping power prices stable and low, while providing a major boost to the province’s economy. The study outlines the importance of extending the life of Bruce Power’s remaining six units, which will ensure the long-term stability of power prices, create thousands of jobs, increase Ontario’s tax revenue and boost economic growth for decades.

The study was jointly authored by the Provincial Building and Construction Trades Council of Ontario, Canadian Manufacturers & Exporters and Bruce Power.

Based on this report and the economics of the amended agreement with the IESO, the economic benefits are:

  • An estimated 22,000 jobs, directly and indirectly, and $4 billion in annual economic benefit in Ontario through direct and indirect spending on operational equipment, supplies, materials and labour income.
  • An additional 3,000-5,000 direct and indirect jobs annually, contributing between $900 million and $1.2 billion in direct and indirect labour income annually, from the MCR Project (2020-36). In addition, between $700 million and $1 billion in direct and indirect annual economic benefit will be realized through the purchasing of equipment, supplies and materials.

Over 90 per cent of Bruce Power’s spend takes place in Ontario and the company’s supply chain supports hundreds of businesses throughout the province. This Life-Extension Program will also create significant, long-term employment for Ontario’s Building and Construction Trades.

The Bruce site is home to a number of building and construction trades including Boilermakers, Carpenters, Electricians, Insulators, Ironworkers and Rodmen, Labourers, Millwrights, Operating Engineers, Painters, Pipefitters/Plumbers, Sheet Metal and Roofers, and Teamsters. Over the last 14 years, Bruce Power has developed a strong working relationship with these trades, including the Provincial Building and Construction Trades Council of Ontario, with millions of hours of tradesperson work being carried out on site.

In September 2015, Bruce Power and the Building Trades signed a collaboration agreement signaling a shared commitment to the ongoing role of Bruce Power nuclear in the province and recognizing the strategic importance of the company to thousands of tradespeople.

The Collaboration Agreement focuses on the following areas:

  • Continuing to deliver strong safety performance through the shared value of ‘Safety First.’
  • Ensuring the necessary availability of skilled trades in the short-, medium- and long term by promoting recruitment, training and apprenticeships.
  • Working together to ensure the successful execution of projects on the site.
  • Increasing the diversity within the trades with a particular focus on Aboriginal people, women and visible minorities.
  • Creating opportunities for former military service members to find careers within the skilled trades.
  • Ensuring nuclear power continues to play an important role as part of a reliable, clean, affordable and balanced supply mix in the province.

STAYING OFF COAL & MAINTAINING FLEXIBILITY

As outlined in a joint report between Bruce Power and the Asthma Society, when Bruce A’s four nuclear units were shut down in the 1990s by the former Ontario Hydro, coal-fired generation rose from 12 per cent in 1995 to 29 per cent of the province’s energy supply mix in 2000. Since 2001, Bruce Power has returned the Bruce Power site to its full, 6,300 MW potential, and the additional generation from the site has accounted for 70 per cent of the energy needed to phase out the use of coal as outlined in the figure below, which was accomplished in 2014.

site output vs coal output(click to enlarge)

The phase out of coal required a modernization of Ontario’s electricity system on a number of fronts, especially in the area of flexibility. Traditionally, Ontario’s coal fleet provided the market with a significant amount of flexibility to meet changing demands, and with this output exiting the market, Bruce Power developed a dynamic capability from its units to ensure the system had this flexibility. This capability is provided by Bruce Power on the non-nuclear side of its facility, and, combined with securing 6,400 MW for the long term, will be a key enabler to staying off coal and other fossil generation.

Bruce Power will provide approximately one-third of its output (2,400 MW) as flexible generation, allowing the province to balance system needs in a post-coal market on a permanent basis. This is a feature that only the Bruce Power units can provide, and has been used by the IESO frequently since 2009.

FEDERAL REGULATION

The Canadian Nuclear Safety Commission (CNSC) regulates the use of nuclear energy and materials to protect health, safety, security and the environment, and to implement Canada’s international commitments on the peaceful use of nuclear energy, while disseminating objective scientific, technical and regulatory information to the public. The CNSC was established in 2000 under the Nuclear Safety and Control Act and reports to Parliament through the Minister of Natural Resources. It was created to replace the former Atomic Energy Control Board (AECB), which was founded in 1946.

As has been the case since 2001, the company will continue to assume responsibility for operating the Bruce Power site. As a CNSC licensee, Bruce Power will be responsible for meeting all regulatory requirements and gaining the necessary approvals to implement the investment program. The Asset Management timetable is consistent with Bruce Power’s current site licence, which runs to 2020, and assumes there will be no Major Component Replacement within this period. The CNSC licencing process is an open, transparent process that provides the opportunity for public, community and Idigenous engagement, and, consistent with past practice, Bruce Power will start the external engagement as part of this process in 2016.

PARTNERSHIP STRUCTURE

Formed in 2001, Bruce Power is comprised of all-Canadian investors including the Ontario Municipal Employees Retirement System (OMERS), TransCanada Corporation (TransCanada), the Power Workers’ Union and The Society of Energy Professionals. About 90 per cent of Bruce Power employees are also investors in the business. Currently, Bruce Power has two different partnership structures – Bruce A LP (Bruce A) and Bruce Power LP (Bruce B). As a result of this transaction, Bruce Power will move to a single partnership structure through Bruce Power L.P.

TransCanada has also announced today that they intend to exercise their option to acquire an additional interest in Bruce Power for $236 million from OMERS. TransCanada and OMERS will each hold a 48.5 per cent interest in Bruce Power, with the remainder held by the Power Workers Union, the Society of Energy Professionals and a Bruce Power Employee Trust.

TRANSPARENCY & ACCOUNTABILITY

The Bruce Power Refurbishment Implementation Agreement has been available to the public since it was first signed in 2005 and the company and the province continue to support this open and transparent approach.

The agreement, along with other background materials, has been made available on the company’s website. In addition, the agreement also provides the IESO transparency to investment activities on the Bruce Power site throughout the life of the agreement and also ongoing reporting requirements.

As outlined, a series of off-ramps have been built into the agreement relating to projected MCR costs, and, by extension, past refurbishment performance, a change in market conditions not requiring the site output, or to deal with an economic impairment.

The agreement also provides the IESO the ability to have access to Bruce Power’s capital planning elements including cost performance, and will provide for IESO oversight to be present at the Bruce Power site as this process progresses.

CONSISTENCY WITH THE 2013 LONG-TERM ENERGY PLAN (LTEP)

An important consideration related to the amendments made to the BPRIA was to ensure consistency with the 2013 LTEP. This has been achieved in the following key areas as outlined in the table below.

LTEP commitments(click to enlarge)