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Bruce Power and its shareholders fear the province’s schedule, which would require the company to take units off-line before the end of their commercial life.Norm Betts/Bloomberg

Bruce Power and the Ontario government are mired in negotiations for a $15-billion deal to refurbish six nuclear reactors, delaying the planned project past a self-imposed deadline and posing new questions about the province's future energy mix.

The Liberal government insists it remains committed to refurbishing Ontario's aging nuclear fleet. However, both sides have signalled they are concerned about potential cost over-runs, and Bruce and its shareholders worry about the province's schedule, which would require the company to take units off-line before the end of their commercial life.

The company – which operates eight reactors on the shore of Lake Huron – is majority owned by TransCanada Corp. and the Ontario Municipal Employees Retirement System. It completed hearings this week to extend its operating licence for five years, but it had hoped to be going full-speed ahead with its refurbishment plans.

With electricity demand falling in the province and Quebec eager to supply power to its neighbour, critics argue Ontario has better options than to commit huge amounts of capital to a 25-year source of nuclear power, particularly given concerns around safety and radioactive waste.

Provincially owned Ontario Power Generation (OPG) is working on its own $10-billion plan to retool four reactors at Darlington as the province's long-term plan envisions nuclear contributing 50 per cent of Ontario's power for the foreseeable future.

Bruce and the Independent Electricity System Operator (IESO) – which is negotiating on behalf of the province – remain tight-lipped about negotiations to refurbish six of the eight reactors. The first two reactors were retooled under a 2005 contract, a project that incurred more than $1-billion in cost over-runs and was delayed well past its due date.

"We continue to work with the province to turn the policy and intention of Ontario's Long Term Energy Plan into action," James Scongack, Bruce's vice-president for corporate affairs, said in an e-mail, "and are committed to being a low-cost source of reliable and clean electricity for decades to come through continued investment in our site."

The two sides had hoped to wrap up negotiations by the end of 2014 and submit the refurbishment plan for approval from the Canadian Nuclear Safety Commission, according to a briefing note Greenpeace obtained under the Access to Information Act. The memo – prepared by the IESO's predecessor, Ontario Power Authority (OPA) – said the province had established a timeline under which Bruce and OPG would take units off-line sequentially in order to maintain secure supply and keep costs down.

"An agreement with Bruce Power would need to be executed in 2014 to meet the integrated refurbishment schedule," it said. The OPA added that if the two sides can't reach agreements and reactors are shut down starting in 2019, "more expensive gas-fired power and imports will be required." Bruce and OPG promote nuclear power as free of greenhouse gases at a time when Ontario is looking to reduce its emissions.

Premier Kathleen Wynne provided a negotiating mandate that would ensure Bruce and its suppliers cover all cost over-runs, and would adjust the minimum price that Bruce gets for power from two of its reactors. An Auditor-General report on the 2005 refurbishment contract concluded the province committed to higher prices than it should have, and the province is looking to drive a harder bargain in the current round, sources close to the talks said.

Ontario is in a better negotiating position than it was in 2005, Greenpeace nuclear analyst Shawn-Patrick Stensil said. But he questioned the need for nuclear given the declining demand in the province, coupled with lower costs for renewables and Quebec's willingness to sell surplus power.

In testimony at the licensing hearing, Bruce Power chief executive Duncan Hawthorne said the province was looking to impose a schedule that would be costly for the company because it would idle reactors before they needed to be refurbished.

Meanwhile, TransCanada is having to adjust its business plan to account for delays in the Bruce refurbishment as well as major pipeline projects such as Keystone XL and Energy East, said analyst Steven Paget of FirstEnergy Capital Corp. in Calgary. Still, he said TransCanada also wants to squeeze as much cash from the existing reactors as possible before having to invest in upgrading them.

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