CONTENTS
Wednesday 8 October 1997
Ontario Hydro
Mr Carl Andognini, chief nuclear officer
SELECT COMMITTEE ON ONTARIO HYDRO NUCLEAR AFFAIRS
Chair / Président
Mr Derwyn Shea (High Park-Swansea PC)
Vice-Chair / Vice-Président
Mr Monte Kwinter (Wilson Heights L)
Mr Sean Conway (Renfrew North / -Nord L)
Mr Doug Galt (Northumberland PC)
Mrs Barbara Fisher (Bruce PC)
Mrs Helen Johns (Huron PC)
Mr Monte Kwinter (Wilson Heights L)
Mr Floyd Laughren (Nickel Belt ND)
Mr John R. O'Toole (Durham East / -Est PC)
Mr Derwyn Shea (High Park-Swansea PC)
Also taking part / Autres participants et participantes
Ms Marilyn Churley (Riverdale ND)
Clerk / Greffière
Ms Donna Bryce
Staff / Personnel
Mr Lewis Yeager, research officer, Legislative Research Service
Ms Anne Marzalik, research officer, Legislative Research Service
Mr Richard Campbell, consultant
Mr Robert Power, legal counsel
The committee met at 1532 in room 151.
The Chair (Mr Shea): The committee will be in order. There are two pieces of housekeeping business for the committee. If we disappear at about 5 o'clock, that is, the clerk and I, we will be attending upon the Board of Internal Economy to present the budget for the select committee. Mr Kwinter will assume the Chair. If we don't hear from him, that is, if there is white smoke instead of black smoke, then we will continue in the chair and continue doing what we're doing.
Mr Sean G. Conway (Renfrew North): There are reports that people sometimes never come back from the Board of Internal Economy.
The Chair: I understand they're still walking the halls up there, Mr Conway, still trying to seek direction.
At 5:45 I'll ask us to begin to wind down our questioning so we are able to take a moment as a committee to deal with the results of the subcommittee's deliberations over the noonhour. My understanding is that there will be a vote in the House at 6 o'clock, so wherever we are in the questioning I will gavel us down and we will move, as soon as the bells are ringing, to go to the votes.
ONTARIO HYDRO
The Chair: We begin this afternoon's agenda. We have before us as our chief witness of the day Mr Carl Andognini, the chief nuclear officer for Ontario Hydro. Welcome. We appreciate your attending upon the committee. I know you probably have opening remarks you would like to make, so we're in your hands.
Mr Carl Andognini: Thank you very much. Good afternoon, ladies and gentlemen. I appreciate the opportunity to be here before this committee. I might deviate my remarks from my written text, but I don't think they'll change appreciably.
I would like to start by saying, first and foremost, that Ontario Hydro nuclear reactors are safe for continued operation. However, improvement in performance is mandatory to happen immediately.
I'd like to really start back when Dr Kupcis called me. I was living in Scottsdale, Arizona, and it was December in Toronto, so you could imagine how I felt about leaving Scottsdale. I came up and talked to Dr Kupcis. We came to an agreement. We agreed on what his expectations were, agreed that I could bring a team with me to allow me to move forward with a program. The mandate I got from Dr Kupcis was that he wanted a real, frank and open assessment of the nuclear facilities at Ontario Hydro, he wanted a program of return to world-class service put together and he wanted an implementation program for that program. He also indicated that he wanted us to train our replacements to ensure continued performance after we left.
We got together and developed a methodology, based on a proven methodology used mainly in the United States, that consisted of two phases. Phase 1 was accumulation and a compilation of all the data that existed currently about Ontario Hydro Nuclear. We took previous plans, we took correspondence from the AECB, we took peer reviews, we took all the reports we could put our hands on and compiled that in a preliminary report.
Phase 2 of the assessment was to go out into the field and actually do verification and validation of the conditions we found in the accumulation of the data in phase 1. We found all the problems that had been identified plus a few that had not been identified in the collection of the data we took.
We reached the conclusion, after many hours, that these sites were operating at minimally acceptable levels, safe to continue operation, but required immediate improvement in performance. The main problem we identified is that in the late 1980s and early 1990s Ontario Hydro had a very strong, competent and capable engineering and construction organization that was building nuclear plants, but the need for electricity declined; competent people left, some with very lucrative packages offered by Ontario Hydro, and some very key, important personnel left.
In 1993 another major blow hit Ontario Hydro Nuclear when they did a decentralization program and put the three sites in competition with each other. That caused duplication, triplication and quadruplication of effort and the misuse of resources.
While we reviewed all these conditions we were concerned. As we did verifications in the field, we identified problems; in many cases, corrective action was taken immediately. But we deliberated for many hours on what the final results should be and came to a unanimous conclusion that the plants were safe to continue operation, but at a minimally acceptable level which was not acceptable for the long term.
We did provide these result and ongoing reports during the two-phased assessment to the board of directors and to the AECB. We've come to the conclusion that there's a highly educated workforce here. All the people I have encountered so far want to do a good job. The Candu reactor of Canada is a robust design that's safe and efficient and has many advantages over the light-water reactors used in the United States. Two primary factors they have: One is the ability to do online refuelling, which should offer them an opportunity to have higher capacity factors; and the second is to utilize natural uranium instead of enriched uranium, which is of lower cost.
If operated and maintained properly, they can and will be very competitive in a marketplace for the future. We have a very difficult task ahead of us. The problems we have identified are not unique to Ontario Hydro. I would say almost all the problems we have identified have been found in the United States at one time or another. I can give you an example of a utility in Connecticut, Northeast Utilities, that was shut down in February 1996 for loss of configuration management and still has not started up. They were shut down by the regulator, given a prescriptive course of action to take, which caused much confusion, little planning and an excess amount of resources. They still don't have a clear plan to start that unit up.
Therefore, I think Ontario ought to be pleased, maybe not with the timeliness, but with the type of assessment that was undertaken by Ontario Hydro.
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It is without a doubt the only recovery program I know of that was not regulator-mandated. Therefore, it is a program based on a proven methodology that gathers the facts, does an integration of the results to develop an integrated, consistent program. As you're probably aware, the program recommended to the board of directors that we lay up the Pickering A and the Bruce A units and shut the heavy water facility down. How did we come to that plan? There is an option study -- I'm quite sure that paper has been given to you -- where we looked at six cases in much detail to review what should be done and how it should be done. I think that document is self-explanatory, but if you have questions on it, I'll be happy to answer them later.
In my conclusion, I'd like to refer to a problem that maybe I created, and if I've created it I'm sorry, but it's the problem of the five-year license. I submitted an application to the AECB prior to the conclusion of the IIPA report for a relicensing of the Pickering station. I very carefully did not include a duration for the license because I didn't want to pre-empt the AECB. Contingently, they may have wanted to extend the license for a month or two or issue a short-term license, so I left it at their judgement.
I received a letter back from them indicating that they had received my application for a relicense of the Pickering A units but they indicated that I remained silent on the duration of the license. I think you have a copy of a letter I sent back in response to that, where I went through all the reasoning why I thought Pickering was safe to continue operation and to indicate to them that I didn't believe, and still don't believe, that the duration of a license has anything to do with the ability of the regulator to control the licensee. What it does do, however, is take away valuable resources, people and money from a troubled utility to prepare in depth for these relicensing applications. Why did I ask for five years? Because in many countries including the United States, reactors are licensed for five, 10, 15, 20 or even 40 years, and it doesn't reduce the ability of the regulator to take whatever corrective action it needs to take to ensure safety.
In conclusion I'd like to say that these reactors are safe to operate. We have a program together. I believe we have the competent resources to do it, to return the 12 units to world-class operation, to show the province of Ontario that we can improve and sustain the performance and allow the return of the Pickering A and the Pickering B units back to service.
The Chair: Thank you, Mr Andognini. As is our tradition, we will rotate by caucus. Today we will begin the questioning with the opposition party.
Mr Conway: Thank you, Mr Andognini. I particularly appreciate your last remarks around what has now become quite a famous letter in these proceedings, and we will be returning to that a little bit later this afternoon.
I want to focus my first series of questions on developments from your arrival in December from the sunny south of Scottsdale, Arizona, to wintertime in Ontario, which I think you said was the time you arrived, in December 1996.
Mr Andognini: That was when Dr Kupcis contacted me. It was about January 17 or 18 that I arrived.
Mr Conway: You arrived in January. You had a responsibility to, as you indicated -- you became the chief nuclear operator at that time?
Mr Andognini: Yes, sir.
Mr Conway: And your mandate was essentially, among other things, to give that brutally honest assessment of what had gone wrong and to prepare a recovery plan. Very specifically, when did you precisely give your final report on the assessment and the related recommendations for recovery? When did you give that final report on assessment and the NAOP, or the recovery plan, to the Hydro board?
Mr Andognini: On August 12.
Mr Conway: On August 12, 1997.
Mr Andognini: Yes, sir.
Mr Conway: The board met on August 12, and 24 hours later a major announcement was made by Mr Farlinger to the province and the country about future directions for Ontario Hydro. Correct?
Mr Andognini: Yes, sir.
Mr Conway: You gave the final assessment and recovery plan reports to the board on August 12, 1997. Can you tell the committee, prior to the board -- well, let me put it this way: Did you give to the board before their meeting on August 12, 1997, options to the recovery plan?
Mr Andognini: No, sir.
Mr Conway: So the board received the so-called recovery plan on August 12, on that date when the board was scheduled for a meeting.
Mr Andognini: Yes, and at that time we did discuss the options we reviewed.
Mr Conway: But the board did not have presented to it, at any time before that meeting, any kind of detailed options plan.
Mr Andognini: No, sir.
Mr Conway: Did the board request, or did you supply, any second opinion around the policy options contained in the so-called recovery plan which you had proposed?
Mr Andognini: I'm not sure what you mean by policy.
Mr Conway: Well, the question is twofold. Your recovery plan proposed an expenditure of between $5 and $8 billion dollars. Correct?
Mr Andognini: No, sir.
Mr Conway: It did not?
Mr Andognini: Not my proposal. My proposal required an expenditure of somewhere around $1.6 billion. The remaining portion of what you're talking about is the cost for replacement power.
Mr Conway: That's correct. My question then is that the total package, as the chairman himself indicated on the 13th and confirmed in testimony here on Monday, was going to cost, all dollars in, somewhere between $5 billion and $8 billion.
Mr Andognini: That's the number that was --
Mr Conway: What I want to know, because this is really important, Mr Andognini -- that's a big amount of money, and this Legislature, on behalf of the government, guarantees those dollars. Was there a second opinion sought by the board before the board made that critical decision on August 12, to the best of your information, a second opinion as to the plan you were proposing and the related costs of your plan?
Mr Andognini: Are you asking, did they receive a second opinion outside of Ontario Hydro?
Mr Conway: A second opinion, yes, outside of Ontario Hydro.
Mr Andognini: Not to my knowledge.
Mr Conway: You see, I think of a medical analogy. You have come as a doctor, as an outside specialist, and you have as that doctor given a brutally frank assessment of the ills confronting this patient, and the recovery plan you have recommended involves some very significant costs and implications for people like Mrs Fisher's community up in the Bruce. I think of the medical analogy. Did anybody ask for a second opinion, to the best of your knowledge? The answer is no.
Mr Andognini: Not by the board of directors. We had external experts participating in this program which consisted of about 75 people from Canada, from the United States and from internal to Ontario Hydro.
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Mr Conway: But to the best of your knowledge, there was no second opinion sought by the board to assess the policy aspects and the associated costs of the recovery plan that you gave to the board on August 12.
Mr Andognini: To the best of my knowledge, no sir.
Mr Conway: To the best of your knowledge, Mr Andognini, were you aware of or involved in any dialogue, any discussions with officials at the Ontario Ministry of Energy, the Ontario Ministry of Finance, the Cabinet Office, the Premier's office, about the costs and the consequences of your recovery plan that was presented to the board on August 12?
Mr Andognini: Prior to the board?
Mr Conway: Prior to the board.
Mr Andognini: Was I personally involved?
Mr Conway: Were you involved or were you aware of any discussions about your recovery plan? Were you aware of or involved with any discussions between your team and its specific recovery proposal that involved senior officials or other officials in any of or all of the Ontario Ministry of Energy, the Ontario Ministry of Finance, the Premier's office or the Cabinet Office?
Mr Andognini: Not to the best of my knowledge. I know that we did review it with the AECB.
Mr Conway: Now, you mentioned, and I think it's very helpful, the experience of American utilities. A number of American utilities that operate nuclear plants are going through similar reviews. You mentioned the Connecticut example. Typically these American utilities, how many nuclear power plants do they operate?
Mr Andognini: Probably I can put it best this way: In my opinion and from the best knowledge that I have, Ontario Hydro is the largest nuclear power plant operator in the world. In the United States, excepting Commonwealth Edison, which has 12 nuclear plants, the Pickering station alone is larger than any other nuclear utility in the United States.
Mr Conway: That's very helpful. That's my understanding as well. I raise that question, Mr Andognini, because your recovery plan deals with a utility that has far and away the largest nuclear capacity. So you're attempting something here that is, quite frankly, unprecedented on this continent. Would that be a fair assessment?
Mr Andognini: Yes, sir.
Mr Floyd Laughren (Nickel Belt): Mr Andognini, welcome to the committee. I want to know who you are a little bit, because I don't at this point. It's my information that you were involved in the nuclear industry in the States and I wonder if you could tell me a little bit about the role you played at Boston Edison and at Arizona Public Service and at Sacramento public utility. We could start with Boston Edison and what your experience was there.
Mr Andognini: Prior to Boston Edison I was working for a nuclear utility also. I was contacted by Boston Edison in 1975 to see if I would be willing to come to the Pilgrim station, which was a troubled plant. It's a boiling water reactor. In 1975 it had the worse record of any boiling water reactor in the world. By 1978 we had put a program in place that turned the operation of that facility around to be the second-best boiling water reactor in the United States.
I was contacted by a headhunter in 1980 to go to Arizona Public Service --
Mr Laughren: Sir, do you mind if I stop you there.
Mr Andognini: Sure.
Mr Laughren: What kind of efficiency record was there at Boston Edison? Is there a percentage you use? There is here, isn't there? Is there a certain percentage of capacity that it functions at?
Mr Andognini: Sir, I can't remember those. It was not only poor in performance from the capacity factor, it was poor in maintenance and in its ability to handle the problems associated with nuclear.
Mr Laughren: And then you went to Arizona.
Mr Andognini: Yes, sir.
Mr Laughren: And you ran -- was it the Palo Verde?
Mr Andognini: I had responsibility for all generation, fossil, hydro and the startup of the Palo Verde nuclear plants plus all transmission.
Mr Laughren: And then you went from there to Sacramento?
Mr Andognini: I was contacted by Sacramento, a municipal utility that had a pressurized water reactor that had been shut down for 26 months by the Nuclear Regulatory Commission. They were in trouble. We went there. I put a team together again. We built the development plan, we implemented the plan. We were one month over schedule and substantially below budget. I left in December 1988 and in June 1989 the county of Sacramento had a vote to shut the nuclear plant down.
Mr Laughren: They voted to shut it down? Why did they do that?
Mr Andognini: For the life of me, sir, I can't understand, because they had just spent a tremendous amount of money. It was, without a doubt, one of the better mechanically and operationally oriented plants when we got done with our program. It was running well, it started well. I don't know. I think it was just political, anti-nuclear movement.
Mr Laughren: In the whole county. It was a county vote, not a state vote.
Mr Andognini: It was a county vote, sir.
Mr Laughren: When you were recruited, Mr Kupcis I guess directly recruited you.
Mr Andognini: Yes, sir.
Mr Laughren: You said that you wanted to bring a team with you. How many people came up with you?
Mr Andognini: Six.
Mr Laughren: Six. Did it stay at six during your analysis of Hydro's problems? Sorry, were you made the chief of the nuclear division right away?
Mr Andognini: Yes, sir.
Mr Laughren: And did the six stay with you?
Mr Andognini: And they're still here, sir.
Mr Laughren: Right. Did you recruit other people from abroad, from south of the border or elsewhere?
Mr Andognini: Yes, and I had to be very careful how I did it because I got accused by many people of being an American spy up here to shut the Candu reactor option down.
We wanted to and we did build a Canadian program for the Canadian reactors and we utilized as much Canadian talent as we had. We have limited resources with nuclear experience here and I did call on and have some additional staff here from the United States. We are looking for additional staff. We need additional staff badly, but we can't use untrained personnel. It's very difficult to get those. We're looking at the United Kingdom now for people who might be available from the British program.
Mr Laughren: How much would you estimate the IIPA analysis cost Ontario Hydro?
Mr Andognini: Approximately $4 million.
Mr Laughren: For the analysis.
Mr Andognini: Yes, sir.
Mr Laughren: That included the cost of your team --
Mr Andognini: Yes, sir.
Mr Laughren: -- as well as other people coming in and so forth. Did you know very much about Ontario Hydro when you were recruited or was it a steep learning curve when you got here?
Mr Andognini: I knew something about Ontario Hydro because if you're in the nuclear business, you know pretty much, at least in North America, what's going on in the nuclear business. I knew that they had some trouble at Ontario Hydro. I didn't understand and realize the magnitude of it until we had completed the IIPA, and I had no experience with the Candu reactor.
Mr Laughren: Did you have any trouble getting information when you moved into your position at Ontario Hydro?
Mr Andognini: Absolutely none at all.
Mr Laughren: And you had a good working relationship with the AECB as things went along?
Mr Andognini: Well, you need to understand that Ontario Hydro had lost the trust and respect of the AECB. For many years they had been sending letters and giving indications of poor and unacceptable performance. When we got here, one of the first things we did was to look at the commitments that were made to the regulator. They got volumes of books that were that big of commitments that were made. We did an analysis of that data and found that the utility was responding on time about 40% of the time and that they had some commitments that were seven years old. So it's no wonder that the utility lost the respect and trust of the regulator. We're working very diligently to regain that. It's not going to be an easy battle, but we're willing to undertake it.
Mr Laughren: As a matter of fact it's interesting you acknowledge that, because Dr Bishop from the AECB, who I'm sure you know by now, made the point yesterday that Ontario Hydro was very good at developing proposals and promises but very bad at delivering on them. I think basically you're saying the same thing as Dr Bishop did.
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Mr Andognini: When we developed the first phase of the IIPA, we looked at all of those recovery plans that had been generated from probably 1993 on through, and yes, there has been failure on the utility's part to perform.
Mr Laughren: Were you given basically blanket authority when you took on the position of head of the nuclear division?
Mr Andognini: No, I don't know anybody that's given blanket authority. I had excellent working relations with Dr Kupcis.
Mr Laughren: That's who you reported to?
Mr Andognini: Yes, sir. I kept him totally informed of everything that I was doing.
Mr Laughren: It must have taken some time for you to get brought up to speed on all of the problems. Did that occur before you actually got into the IIPA?
Mr Andognini: It's been a constant learning curve, sir, and I'm still learning and I'm still finding problems.
Mr Laughren: Did the chair of Ontario Hydro -- who was not Dr Kupcis, right?
Mr Andognini: Right.
Mr Laughren: It was Dr Kupcis who recruited you. Was he part of conveying to you the severity of the problems at Hydro?
Mr Andognini: No, sir.
Mr Laughren: It was Dr Kupcis.
Mr Andognini: I did not meet the chairman of the board or any members of the board until after I came here.
Mr Laughren: When you first came -- and this is a subjective question, I appreciate -- was there an aura of defensiveness at Hydro about you coming here and the task to which you had been assigned?
Mr Andognini: At some levels of the organization within nuclear it was natural to have some defensiveness about us and what we were all about and the uncertainties that lie ahead, certainly.
Mr Laughren: Was that in the lower, middle or higher echelons of the nuclear division.
Mr Andognini: I think there was some at all levels, sir.
Mr Doug Galt (Northumberland): Welcome, Mr Andognini. I'd like to explore some of the human resources. I have questions in that general area. I'm intrigued as I read through your report, you're talking a lot about a lack of authoritarian management. As I read the report and look at it, I would suggest too much authoritarian management has been going on, as I look at some of the comments that are made in there. Certainly over the last three decades we've talked a lot about participative management in the work place. Let me give you one example that you use in there, that bad news is not being passed up through the system. To me, that is a hallmark of an authoritarian management system. Can you explain to me why you think it should be more authoritarian than it presently is?
Mr Andognini: I don't agree that it should be more authoritarian. I think there should be more accountability in the people. One of the things we're doing that's very lacking in the organization is developing a management system developed by Dr Elliott Jaques, who is originally from Toronto. It's called requisite organization. This defines the responsibilities, the authorities, the accountabilities and the skills required for every job in nuclear, starting with mine to the lowest level. What I have found is a lack of accountability and a lack of managerial skills.
Mr Galt: Okay, I have no problem with the accountability; I think that's just excellent. But throughout the report it's mentioned repetitively, "lack of authoritarian management." That one was bothering me and you've kind of helped to explain it there, because that was not what the report was saying as I read the details in it.
Mr Andognini: Okay.
Mr Galt: Now, we're talking human resources. You're in charge of this. What are your credentials to do something about the human resources aspect of this problem?
Mr Andognini: Am I allowed to?
Mr Galt: What are your credentials? What do you have as a background? What's your experience in human resources?
Mr Andognini: I recruited a team for Boston Edison and made a turnaround team there. I recruited a team in Sacramento for a turnaround at the Sacramento municipal utility. I'm going to have to depend heavily on people with human resources skills within Ontario Hydro. Ontario Hydro just recently hired a senior vice-president of human resources who has extensive experience and is going to be very helpful for us to get the skills.
One of the major things we're doing is, after the 1993 decentralization many of the support services were put on a fee-for-service basis. Training was one of them. Training then went from a reasonably good program to almost a non-existent program. So we're going to increase substantially the training program, which is the backbone of any industry, and we're going to put in a program to allow individuals to get retrained on a periodic basis.
Fortunately, in Canada you have a very extensive program for licensed operators. It takes about four years. They're extremely competent, they're very capable, and you have other skills in Ontario Hydro that are very capable but are deep in desire for leadership.
Mr Galt: Just to continue on the questioning of Mr Laughren, I've had a lot of people come to me about the numbers of American license plates in the employee parking lot. They're saying there are large numbers. How many Americans have you hired, working under your hand?
Mr Andognini: There could have been that, sir, when we were implementing the second phase of the IIPA, because we had about 80 people here --
Mr Galt: At that time?
Mr Andognini: At that time there were many of them, Americans here. Now there's six --
Mr Galt: Just to clarify, at one point there were 80, during the second phase?
Mr Andognini: Not all Americans, but a substantial number of Americans.
Mr Galt: Thank you. Just moving along on the same, human resources, you mention in there about the problem with collective agreements and you're even suggesting that we should legislate that Ontario power workers couldn't go on strike, similar to police and firefighters. Could you expand on that opinion?
Mr Andognini: I believe that electricity is a necessity of life and I believe that people should be compelled to fulfil the requirements for the province of Ontario. I think one of the necessities of life, such as hospitals and firefighters, is electricity.
Mr Galt: You caught me off guard when you were making your presentation about competition starting in 1993 between the three different sites. We read a lot in the Macdonald report about competition and I, for the life of me, cannot recall, and I may be wrong, anything in there about there being competition within Ontario Hydro at present. Could you expand on what's been going on, competition between these three sites? You were talking about triplication between the three sites and you just caught me totally off guard on that one.
Mr Andognini: I'd be very happy to, sir. When we first came here, we had to take radiation training, which I assumed would be a standard program throughout the entire Ontario Hydro nuclear facilities. It is not. The implementation of the program is inconsistent from site to site. In 1993, when they decentralized, they moved most of the functions from corporate, so there was no corporate overview, and each site was doing independently what it wanted to do.
They're all Candu reactors. I'll agree that there are different models of Candu reactors, but some of the changes that were being made were being made at the three sites, three different ways, by three different engineering facilities, by three different implementation facilities and costing a tremendous amount of money, when they all could have been done one way.
Mr Galt: So were they truly competing?
Mr Andognini: Well, they were competing for resources.
Mr Galt: Competing for resources but not for putting power out on the lines.
Mr Andognini: They had their own goals and their own objectives for their plant that weren't integrated into a nuclear program.
Mr Galt: It almost sounds like a counterproductive type of competition, from what you're telling me?
Mr Andognini: In my opinion, very much so.
Mr Galt: Could we discuss for a few minutes about the safety? The people of Ontario, following your report coming out, are very concerned about the safety of these plants and what's going to happen. How safe are these plants? Are the people in Pickering, Bruce or Darlington in jeopardy?
Mr Andognini: Not at all, sir. In my opinion, the design is a very robust, safe design. It is designed to have two separate, independent shutdown systems that don't require operator action for 15 minutes. In the United States the design is different. It depends on operator action after an abnormality, where here it does not. You have a very safe design system. You have highly trained operators.
You have a decline in performance. There is no single indicator that you can look at, like a car being detected by the police with radar. You have many, many performance indicators to look at. When you look at them in a cohesive manner, you're getting a decline in performance; since 1994, clearly. You were at a 74% capacity factor; this year you will be lucky if you hit 60%.
Mr Galt: We were seeing figures back into the 80s earlier.
Mr Andognini: Sure they were. The decline in performance, will, if not corrected, challenge the safety system. There's no doubt about it. So it is imperative that we turn the performance indicators around to ensure that doesn't happen.
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Mr Andognini: Sure they were. The decline in performance will, if not corrected, challenge the safety system. There's no doubt about it. So it is imperative that we turn the performance indicators around to ensure that doesn't happen.
Mr Galt: In spite of your minimal acceptable rating, you can assure the people of Ontario that there's not going to be any kind minimal or maximum disaster occur in those locations?
Mr Andognini: No one can ever guarantee anything 100%, sir. To the best of our ability, to the best of the team's ability, to the best of the consultants we've got together, and it has been confirmed by the AECB independently, the units of Ontario Hydro are safe at this time to continue operation.
Mr Galt: How quickly do you think this can be turned around?
Mr Andognini: To start to turn around? We haven't reached the bottom yet, sir. We're still identifying problems. The program that we gave the board of directors has to be a living document, it has to change to include things that we identify, but I anticipate that by mid-year next year you'll see a turnaround and an increase in performance. There are many, many ways we have already made substantial changes to enhance performance.
Mr Galt: You talked about phase 1 and phase 2. I also understand you are coming in with monthly reports to the board?
Mr Andognini: The evaluation was based on two phases. It was an integrated process that developed one report for the board.
Mr Galt: But you were giving them an ongoing report on a monthly basis, keeping them abreast?
Mr Andognini: We reviewed the program that we were going to utilize with both the AECB and the board. As a matter of fact, at every monthly board meeting I gave periodic updates on the nuclear option. In May, I think it was May 17, there was a telephone board meeting and at the request of the chairman I gave them an assessment of what we had found in phase 1 and at that point we were starting validation in the second phase and what we had found there.
Mr Galt: While you were giving these reports, you were developing this nuclear asset optimization plan; in other words, a recovery plan?
Mr Andognini: We didn't develop that until after we had completed the assessment, gone through all the evaluations, determined whether indeed these reactors were safe to continue operation. We did a basis for continued operation and then got together as a team to develop the program from the data we obtained.
Mr Galt: Both of these reports were presented to the board at the same time, on August 12? Is that my understanding?
Mr Andognini: When you say "both reports," I'm not sure what you mean.
Mr Galt: Your IIPA report and the recovery plan.
Mr Andognini: Yes, sir.
The Chair: Mr Andognini, just a response back to a question. You confirmed the date of that telephone board meeting.
Mr Andognini: I believe, to the best of my knowledge, it was May 17.
The Chair: Of this year?
Mr Andognini: Of this year, yes.
The Chair: Of 1997.
Mr Monte Kwinter (Wilson Heights): Mr Andognini, I want to follow up on my colleague Mr Conway's --
Mr Andognini: Sir, could you do me a favour and speak louder because I've been in power plants for many years and I can't hear very well.
Mr Kwinter: Okay. I'll be happy to. I want to follow up on my colleague Mr Conway's questioning about the timing of your report and the recovery plan. It is my understanding from Mr Farlinger when he was here that members of the board received the IIPA a week before in their regular board minutes. I guess they got a week to review it before they came to the board meeting, so they had a chance to see your report, but didn't see the recovery plan report until they got to the meeting and that was presented to them. Is that a fair evaluation of what happened?
Mr Andognini: To the best of my knowledge, a preliminary package was sent to the board, I think two weeks before the board meeting. It did not include all of the data and it did not include the options that were reviewed and it didn't include the recommendations. That's to the best of my knowledge.
Mr Kwinter: That's fine. The reason I wanted to clarify that is that almost immediately after the government announced that they were going to strike this committee, the chairman and I, and I don't remember who else, were invited to a board of trade breakfast to hear Mr Robin Jeffrey, the head of British Energy. I sat at a table with the chairman and in a conversation I was critical of the fact that the terms of reference that had been set out were that we were to come up with an interim plan by October 3, which is 17 calendar days after the committee was struck -- not until it was approved, until it was announced. He indicated to me, and I'm paraphrasing, that that was no problem, "When you hear the results, you'll be able to make the decision very quickly."
I was critical of the fact that the day the report became public at that August 12 board meeting, the board also approved the recommendations for the recovery plan. I said, "How could you possibly do that that quickly?" He said: "Very easily. You'll have the same opportunity. You read the report and you look at it and you see they've made this decision and you say that's the decision."
I want to go back to the minutes of that particular board meeting and I want to quote. Once the presentation was made, "Mr Bullock," who is a recent appointee to the board, "expressed the opinion that while the safe operation of Hydro nuclear facilities is of the highest priority, he is concerned that the board has not had sufficient information and opportunity to exercise the due diligence required for approving the NAOS decisions which will have very wide-ranging impacts."
Not only his concern, but Ms Clitheroe, who was here with the chairman and who is the chief financial officer of Ontario Hydro, "supported Mr Bullock's proposal. In particular, he suggested that financial impacts surrounding the program be further reviewed and challenged by the board." Notwithstanding that, the board approved it.
The other concern that I have is that in your plan, which is the basis for recommendation, you talk about the options. There are six options. You narrow it down to number 5, and possibly number 6, but in each one of them you say, "The implication of costs associated with the decommissioning and write-off of the Bruce A units are not included in these costs," and you say, "These costs are substantial."
You're saying $1.7 billion for the actual work, plus another maybe $5 billion or $6 billion for energy replacement, but what would be a substantial cost?
Mr Andognini: We have the best consultant I know of in the world currently evaluating decommissioning cost for Ontario Hydro. His name is LaGuardia. He's done probably all of the decommissioning studies in the United States. I'm not able, because I don't have the best data available, to give you what the decommissioning cost will be for the Ontario Hydro reactors. When that report is made available, we'll be glad to share it with you.
Mr Kwinter: I've sat on several public boards. It would seem to me that any decision that was taken by a responsible board acting in a reasonable man approach would say, "Before I make a decision, how much is this going to cost and who has validated these costs?" as opposed to later on in the discussion, and here we have Mr Bill Farlinger who used to be the head of Ernst and Young, a chartered accountant, considered by many in his profession at the top of his profession, recommending: "Don't worry about the costs. We'll worry about that later. Let's approve this thing."
I can tell you that if he was sitting on a board and he had responsibility for financial advice, he would not give that advice. If he did, he would probably drummed out of the chartered accountants' association. What I'm trying to come to grips with -- and I have no way of evaluating your six options other than by looking at the numbers. I am not a nuclear expert of any kind and I have no way of doing that, but I do have the ability to look at these numbers and say, "Are they really the numbers?" If they're not -- and there's another quote in your report that struck me, and that is, "No nuclear electric utility has accomplished a turnaround on this time frame involving more than two units and most efforts involve substantial non-generating periods."
So we have another imponderable. You're saying: "It's never been done on this scale. It has never ever been done, but we think that this is what could happen." Now the history of Ontario Hydro has been, and we've heard it from Dr Bishop and we've seen it over a period of years, is that they keep coming up with these grandiose plans and they never, ever materialize.
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Dr Bishop said they do not have the ability to implement these plans. You yourself have said that you saw all these volumes of material, 40% of which have been complied with. Others which go back years have never even been addressed. So my concern, and I would think the concern of anybody who's interested in this issue, is that we have a plan that's approved by the board at one meeting, first time they've seen it, no defined financial numbers, parameters, other than "Trust us. It's in this range but we'll let you know as we go along," and they make this decision. I think there's a real crisis of responsibility when that happens.
Secondly, you in your report and the AECB in their letters over the years have indicated that we have a utility that does not seem to have the ability, regardless of whose responsibility that is, to deliver what they say they're going to deliver. Yet you're asking the people of Ontario to pick up a burden that could be, whatever the number -- it ranges from $1.7 billion just for the hardware kind of adjustments, plus the energy replacement, and it keeps going up from there -- but you've said you're still learning the problems. You don't even know what all the problems are and yet you've gotten approval, sort of a carte blanche, or you want to get the approval, to go ahead and do it. I know that it's been a long kind of thing, but if you could respond, I'd appreciate it.
The Chair: Actually it took up all your time, so I will have to move along to Ms Churley.
Mr Andognini: I've marked him down and I'll return to him later.
Ms Marilyn Churley (Riverdale): Mr Laughren is going to begin. He's got five minutes.
Mr Laughren: Mr Andognini, I was fascinated, like my colleagues to my right, at the speed at which the recovery plan was accepted by the board. As a layperson in the field of electricity generation, it looked to me as though this was not a thoughtful plan for recovery, it was only a nuclear plan for recovery. I wondered how you could possibly come to that conclusion when you had not seen the white paper that the government was developing in order to bring Hydro into the next century, in terms of competition, policy and so forth. I'm wondering how you could do that. Weren't you worried about starting this process and having the government say: "Oh, hold the phone. That's not the direction we're going. We've got other plans for Ontario Hydro and for the general mix of power generation in the province"?
Mr Andognini: First of all, to follow up on your question and the concern of the previous gentleman, the board did approve, fundamentally, the program. We were mandated to come back to the next board with sufficient data to respond to the question that was raised by the director, Bullock. We've had subsequent meetings since then. When we undertook this, we were chartered to look at these facilities and come up with a recommendation. When we decided that these recommendations were going to have a major impact on the utility, we brought in the financial people of Ontario Hydro and the generation people from Ontario Hydro, covered the options available with them, reviewed the costs associated with it and went through an analysis of what was in the best interests of the province of Ontario to return these units to world-class performance.
Mr Laughren: I understand that, but did you meet with the Minister of Energy?
Mr Andognini: Sir, I did not.
Mr Laughren: Have you ever met with the Minister of Energy?
Mr Andognini: I met the Minister of Energy when I first got here, as an introduction, but I don't believe I have spoken with the minister. Yes, I did; excuse me. He did tour the Pickering station and I met him at the Pickering station.
Mr Laughren: I really am somewhat taken aback by the fact that you come up with only a nuclear solution. Maybe it is the right solution. I'm not prejudging because I don't know. But I find it somewhat breathtaking that you do this in a vacuum, in the absence of a white paper which says this is the direction the government of Ontario's going to be going in generation policy.
Mr Andognini: Sir, I wouldn't expect you would expect me to know the politics of Ontario coming here. I don't, and I don't claim to. What we did is what we were mandated to do. I know we did an excellent job. I'll stand behind the job that we did. I can't sit here and defend the board or say the board was right or wrong. I'm not capable of doing that.
Mr Laughren: No, but all I'm saying to you is that before you'd launch your corporation on to an expenditure plan of $5 billion, $6 billion, $7 billion or $8 billion, you'd need to know that this fit with what the direction of your political masters, theoretically at least, want the corporation to go. That's all I'm saying. I don't blame you, because you're there as the head of the nuclear division and that's what you want to do. That's your baby, the nuclear division. Why wouldn't you want to do that?
Mr Andognini: From the data that I have seen, and the reviews that were conducted by the people on alternative energy sources, it is inherently in the best interests for the province of Ontario to return these units to service, to get them up to a level at which they're capable of performing, and to return the other units to service, compared to the cost of alternative energy sources in Canada.
Ms Churley: Thank you for appearing before us today. I want to get back to some of the nitty-gritty, some of the technical stuff here. I recognize, as do my other colleagues, that we're not nuclear experts, but I think that there is -- the word's been used frequently around here -- a cult around this, and I think it is possible to break it down for people to understand to some extent what is going on. I'd like to break that silence, or start that, around that kind of cult around it, and hear how you got to some of your solutions which you recommended.
I want to ask some practical questions, like for instance, why did all the nuclear stations, regardless of how old they are, or when they were built, receive the same minimally acceptable rating? Do they all need the same upgrades? I'd like to know if you can actually present us with an itemized list. If you can't today, will you be able to present us with that, the big ticket items like the steam generator tubes, which are a lot of money? I would like to see the committee be able to understand exactly where this money is going. My question is around that: Why did they all receive the minimum acceptable standard? Can you provide an itemized list as to what the repairs are going to be? Are they going to be the same at the different plants?
It's my understanding that when Hydro initially announced the closure plan, and correct me if I'm wrong, you would first go to Darlington B -- no? -- and then you would move on to the A stations, and that plan has now changed. I'm not quite sure why that would happen, why you would start spending on the A.
I know that's a lot of questions and my time is probably up but I'd like to come back to it later.
Mr Andognini: I'd be happy to go in and I'll be very happy to answer them all for you. It's very difficult for me to remember which questions you asked.
Ms Churley: The itemized list, I believe.
Mr Andognini: If you could ask them one at a time, it would be a lot easier for me and I'd be better capable of giving you a complete answer.
Yes, I can provide you a list as to why they were individually evaluated. If you look at the chart, you'll find that some had improvements in some areas compared to others but they all were managed by the same type of management system and were allowed to get to a minimally acceptable level. I will provide you a list, if you so desire, of the major projects that need to be undertaken.
I would say very clearly that what we uncovered at Ontario Hydro was probably in the ballpark of 75% to 80% personnel-related, and the other, material condition of the plant.
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Ms Churley: Why is going to cost so much then? I don't understand.
Mr Andognini: I'll give you a fine example. Configuration management: It's very easily said, very difficult to be understood. Configuration management is what caused the NRC to shut down three reactors in Connecticut. Configuration management consists of the complete design basis, the complete as built of all its systems and all the drawings and all the piping and all the electrical and all the mechanical; it includes all the vendor manuals that are there, that are updated for the current modifications that were made. This is not complete at Ontario Hydro right now, and it's going to take a substantial amount of money to get that program in place.
Equipment qualifications is another. The ability of the components to sustain the condition of an accident such as the steaming room and things of that nature needs additional work. There are items that haven't been resolved yet. One of them is the polyvinyl chloride cabling in the Pickering unit. The steam generators, obviously, at the Bruce station A need some attention. We're working on those very carefully now on unit 3 and 4, doing eddy current testing. Those are some --
Ms Churley: Could I interrupt just a second? You're saying that you are still discovering problems which may add to the cost, that the cost we already have is a ballpark cost because you're still in the process of discovering physical problems in different plants.
Mr Andognini: Ma'am, you're absolutely right. The recommendation that we've made to the board clearly indicated that it did not include discovery work because we were incapable of determining what the cost impact would be for work we didn't know.
Ms Churley: The question about where you're beginning -- you were shaking your head about the report on which closure comes first in terms of the As and Bs, getting a success story first, before you move on.
Mr Andognini: First, I don't like to use the word "shutdown." We're laying the units up. We need a licence to lay the units up. In order to bring those units back, we've selected the Pickering units first because they have recently had retubing of the reactor tubes and their steam generators are in better condition. We do have to add some removal of the copper in the condensers, but that's all going to be done before the A units are restarted. But looking at them all collectively, the best material condition is at Pickering over Bruce. I'm sorry to say that to the Bruce people, because it has a major impact to the people in Bruce, more of an impact than it does at the Pickering station. But that's the reason they were selected. It wasn't just arbitrarily selected.
Mrs Barbara Fisher (Bruce): I'll try to be quick with my questions because I have a whole pile of them. I would like to break them into about three areas. One is the AECB and its relationship with Ontario Hydro; the second is the staffing issues; and the third is the Bruce site you were just talking about. Given that it does have eight of the 20 units, it is a significant part of this whole program.
We had Dr Bishop before us yesterday, and she talked about the relationship with Ontario Hydro. It has already been stated that although it's a very professional and business relationship, I would maybe sum it up by saying that there's dismay and distrust with Ontario Hydro, distrust only because of the fact that they continue to put repair programs and improvement programs together and always fail, if you will; I guess that's another way of saying they never reach the achievement levels of bringing any success to those. They're somewhat discouraged with past performance.
In your opening statement you referred to a recovery plan that is not regulated. That tweaked something with me.
Mr Andognini: A recovery plan that was not regulatory-mandated I believe is what I said.
Mrs Fisher: Thank you for clearing that up. Now I'll go on with the thought, given that you've planted the seed of a thought. Maybe Ontario Hydro, with its non-success of achieving improvement plans, should be regulated. Let me ask you this question: Do you think it would be a good idea that AECB should approve that recovery plan so that it does meet the requirements and we discontinue spending hundreds of millions of dollars on plans and activities that turn out to be nothing?
Mr Andognini: The answer to that is yes, and I believe that is currently being done. It's my understanding that the staff at the AECB in Ottawa is undertaking a review of that. Don't quote me on this, but it's my understanding that they're going to report back to the AECB board, I believe in November, on the results of that. We have been in constant communication with them. We have given them all the data they've asked for. They've been to the offices and seen all the support data we have, so they're currently evaluating it.
Mrs Fisher: I think that would be a different format, though, in that it would be something that would have to be approved before implemented, as opposed to approving the license after the implementation and hoping for success. There's a difference there of level of authority and mandate.
Mr Andognini: I shouldn't speak for the AECB and I can't speak with authority for them, but I think their concept is that it is the licensee's responsibility to ensure safe operation of those facilities.
Mrs Fisher: Yes, that's right.
Mr Andognini: I believe that's the philosophy and the basis on which the AECB works.
Mrs Fisher: But I just put a thought out here that maybe it's about time that instead of just being the one that oversees and makes sure, in fact they're a partner in the proposal as opposed to approving the plan before implementation -- of course not enacting the work; that would still be Ontario Hydro's work. Then there'd be somewhat of a shared onus for successful recovery as opposed to another attempt at recovery.
Mr Andognini: I don't believe it's a regulatory requirement to have that happen, but it is currently happening. It's my understanding that they will have that report before we intend to implement anything, before we lay up any of the units. We have not proceeded only with the implementation of the management systems required to put the performance indicators in place, and we're doing other things that don't require AECB involvement or approval. But the implementation of the plan has not started yet, and I believe we'll respond to all their questions prior to that.
Mrs Fisher: I'd like to move on to the staffing issue. We've had great discussions over the past days on staffing and the tradeoff of recovery options, if you will. Three issues on staffing that were brought out over the past number of presentations were adequate numbers, adequately or inadequately trained, and culture.
In 1993, which I know you're not responsible for, there was a significant downsizing announcement to Ontario Hydro staffing. I can again only refer to the Bruce site as an example, but it was predicted, and I think most of it came true, that 708 nuclear jobs were lost at that site. Would you agree today, since we're in the "What happened and why" atmosphere, that that might be part of the problem now? One of the major concerns in your whole recovery plan is inadequate staff. Would you agree that perhaps by laying off those trained nuclear workers, we find ourselves in this position today?
Mr Andognini: Absolutely. When the need for the plants reduced and they offered lucrative packages in the 1980s, it had a substantial impact on the program. Another substantial impact was the downsizing that was done in 1993. I would like to correct one thing you said. You said "people culture." The primary thing we're saying is resources and managerial skills.
Mrs Fisher: I said the culture of the workforce, not necessarily -- but anyway, we've had some discussions that there are trained nuclear workers available. I would like to hear from you whether you would agree that a nuclear worker in a non-Candu system can be trained to be a nuclear worker in a Candu system.
Mr Andognini: Yes, I believe that's true, but you've got to remember that you just can't throw resources at a problem and you just can't throw money at a problem. That's what's been happening for the past few years. You've got to manage both money and resources to get productive work out of it. The management systems that are required to do that don't fully exist at Ontario Hydro Nuclear today.
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Mrs Fisher: If we knew there was a pool of unemployed or those desirous of transfers, I guess starting with some of our past laid-off workers -- Hydro invested hundreds of millions of dollars in training those people. Those are people who had up to eight years' experience who were fearful of losing their job with no package so they took it, and then in the end found out they might have survived this issue anyway. We could start with those people, a buy-in-Canada plan to start with, and then where there was a shortfall, get them from the US or Britain or France or wherever, where we have in the past through the Candu system recruited people. Would you agree that if we could get more of those people on staff today, there might be an alternative solution to the length of the layups we're talking about? I'll leave it there, and then I'll talk about, why Bruce?
Mr Andognini: No, I don't believe that. First of all, we've got to turn the performance around, and as I indicated, you can't just throw money and people at it. We've got to put in management systems and we've got to train people to be managers, to hold the people they have working accountable for the tasks that have been assigned to them.
Bringing on more resources sometimes causes you a decrease in productivity when you don't have the management systems in place, so we have got to be very careful. Bringing people in from the States is not the best thing to do. I have already been accused, as I indicated, of bringing too many Americans in now. We have got to utilize as many Canadians as we humanly possibly can, and we're doing that. Yes, we are looking at people who have taken early retirement. We have brought some of those people back. There are many people who were dissatisfied with the decentralization in 1993. We have brought some of those people back.
Mrs Fisher: My concern is that we have brought back the management side of it. I don't see a lot of the tradespeople being rehired. I live on a street that has three of these people. I gave an example yesterday of one who is dealing cards in Casino Rama right now and would much prefer working for Hydro. My recommendation yesterday was that perhaps we accept the fact that there was a mistake made. The money is spent and done, yet there is a resource out there that I think would be very helpful, even if we didn't look at the A recoveries immediately but even some of the B recoveries we're talking about. I'll leave you with that. It's not a question.
Mr Andognini: No, and that's a fair question. Again, I have to say I just can't throw resources at it. We will be starting in the first of the year -- I already told the board in September that I can't wait for the board to give me approval to restart the facilities and then have the people available. I've got to start in January of next year to bring the resources in, to get them adequately trained. It takes four years to get a licensed operator in Canada. We can't wait four years to start; we've got to start now.
Mr Conway: Mr Andognini, I'm going to ask the staff to give you a paper called Ontario Hydro Nuclear: Basis for Recommendation Provided in the Nuclear Asset Optimization Plan. Are you familiar with this document?
Mr Andognini: Yes, sir.
Mr Conway: It bears the date of September 29, 1997. That date is fully six weeks after the Hydro board met on August 12 to approve the recovery plan. With this paper in mind, I want to review again some of the ground we chatted about earlier. You presented to the board on August 12 the full and final report of the assessment, the IIPA, and the recovery plan?
Mr Andognini: Yes, sir.
Mr Conway: This options paper was not part of that package, correct?
Mr Andognini: Sir, that's not true. It was verbally reviewed with the board, and that's one of the things the board told us in the September meeting at Thunder Bay. They wanted these options and considerations documented so they could have them to totally review them, to ensure that everything was in order.
Mr Conway: But it's important for me to be clear. I'm trying to imagine that I'm a board member. This is really important. I'm like Mr Laughren. You have obviously done thorough work here, and this is a very substantial report with very significant consequences, not just to the utility but to the province, its credit rating and an awful lot of people. So I'm a board member. I get the final report of the IIPA and the recovery plan on the day the board meets to make some decisions, apparently. That's correct, right?
Mr Andognini: That's correct.
Mr Conway: What I want to know is, have I at this point or at any point before that got options in some kind of clear and understandable context before me, against which I can assess your specific plan of action for recovery?
Mr Andognini: At the board meeting on August 12, sir, we gave the board a presentation that included slides that showed these options, so they had the options there, but they were not documented in a paper like this.
Mr Conway: And they would not have seen them in any real form before that either?
Mr Andognini: Like this?
Mr Conway: Yes.
Mr Andognini: No, sir.
Mr Conway: What I'm trying to grapple with here is the big picture. You have come in, you have done your work and you have now made this recommendation to a board of directors that we find out acts almost immediately. There is very little discussion of options; there is no independent assessment of what you're proposing. As Mr Laughren said, it may be the right course of action, but to the best of your knowledge, before the board made its decision on August 12, there was no independent assessment of your recovery plan, correct?
Mr Andognini: Yes, sir.
Mr Conway: And there was no independent financial analysis of the true costs?
Mr Andognini: Ernst and Young came in and did report to me, and I'm not sure who brought Ernst and Young in --
Mr Kwinter: I'll tell you who brought them in.
Mr Conway: We can imagine, but carry on.
Mr Andognini: I really don't know. Brought in for an independent review that was provided to the board at the September board meeting.
Mr Conway: After the decision had been taken and announced?
Mr Andognini: Yes, sir.
Mr Conway: What's stunning to me as a former cabinet minister is this is a major decision with multibillion-dollar consequences. It may be the right course of action. I, as a generalist, certainly can't say it is not, but having served in a cabinet, I do know that any proposal with these kinds of consequences would, in the normal course of events, have been put through a fairly elaborate process for independent assessment, attack, validation. Since the province guarantees the debt of Ontario Hydro, this is a decision which, because it ultimately commits the utility to X billions of unplanned expenditures, is going to be of critical importance to the Minister of Finance, among others.
So here I am now left with this situation, notwithstanding all the good work you did in a very short period of time. I've got a potentially $8-billion decision taken by the board of Ontario Hydro on the very day that the board has seen the final assessment report and the final construct of the recovery plan. There has been no second opinion. Nobody that you're aware of has talked to the Minister of Energy about the specifics of this. It's like the patient who knows he is not well, goes to a doctor and the doctor says: "Conway, I'm telling you you're in bad shape. We think you're recoverable, but your left arm and your right leg are going to have to be amputated." I'll tell you, the patient in those circumstances would normally seek a second opinion at the very least before he submitted to this kind of surgery, which in the end may be the only course to be taken. It's just -- Jim Rusk doesn't want me to use the word "breathtaking." I won't, but I tell you, as Mr Kwinter indicated, it would leave a lot of people associated with cabinets and boards of directors speechless.
I guess I want you to tell me, what kind of discussions did you have with Bill Farlinger over particularly May, June, July and August 1997 about the recovery plan and the kinds of impacts, financial and community, that it was clearly going to have as you developed it in your mind? What kind of conversations do you recall having with Mr Farlinger on that subject?
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Mr Andognini: Personally?
Mr Conway: Yes.
Mr Andognini: None that I can think of.
Mr Conway: None that you can think of? You see, I look at this decision, made on the 12th of August and announced with much fanfare on the 13th, and I ask myself, thinking about the ultimate responsibility for this, "Was this decision endorsing your recovery plan taken on the 19th floor or on the 19th hole?" Because you didn't talk to Mr Farlinger, the minister has stated repeatedly that he didn't have a very keen appreciation till very late in the day as to what was going to be proposed, and we've got Clitheroe and Bullock on record as saying they had some very real concerns about cost. How do we tell the people of Kincardine and Ontario that due diligence was taken by the corporation before this very significant recovery plan was approved and announced, with its consequences, in places like Kincardine and elsewhere?
Mr Andognini: Sir, I'm not challenging what you're saying. I'm not sure how you expect me to answer that.
Mr Conway: I'm just searching for who knew what and when. I repeat what Mr Laughren said, that you appear to have worked along at a pretty good pace, apparently, through the winter and spring. I just can't imagine that this kind of decision would be taken. To the best of your knowledge, nobody talked to the shareholder? You're not aware of anyone in your circle who talked to the Premier's office, the Cabinet Office, the Minister of Energy's office or the Minister of Finance's office about this multibillion-dollar recovery plan?
Mr Andognini: Am I personally aware that someone has had communications with those offices of the ministers about this plan and its details prior to the board meeting?
Mr Conway: Yes, that's correct.
Mr Andognini: Not to the best of my knowledge.
Mr Laughren: There are days when I'm glad I'm not still the Minister of Finance in Ontario; it's not every day. But I would change the doctor-patient analogy that my friend Mr Conway used, because it seemed to me that what we had here was the patient telling the doctor what had to be done. That, to me, is what bothers a lot of us. To coin a phrase that others have used before I've used it, the same people who got us here are now telling us they can get us out of here, in terms of the problems in the nuclear division. It's not a new problem. What I'd be interested in knowing is, what confidence should we have that this same nuclear division, namely you, that has come forward with the recovery plan, the same ones who got us there -- although you weren't there, I appreciate that. But the people you must rely on have been there for a long time, and you have to now rely on them to get you out of this pickle. I'm wondering where you get this confidence. It's an American trait, perhaps.
Mr Andognini: It's the confidence we have as a team based on experience. We have experience. We have seen failures. We have seen successes. We have seen what confusion has been caused by mandated recovery programs. We have put together a program that's integrated, and it's totally independent of anything that was ever done before. It's a complete assessment to the best of our ability in the time in which we completed it. Yes, we are still finding problems. We're identifying conditions. We're taking corrective action.
One of the things I believe -- and I hope you don't take this as being egotistical, because it's not meant that way -- is that I can't do anything about what happened in the past. I believe we can provide the leadership that's so necessary to put the managerial skills in place to turn this performance around. I believe you've got the ability, you've got the technical competence and you've got the desire in the workers to do it. They just haven't been led properly.
Mr Laughren: That assumes, of course, that the nuclear option is the one your political masters will deem to be appropriate.
Mr Andognini: That's not a choice I can make, sir. Whatever I am told to do, I'm here to do it to the best of my ability.
Mr Laughren: I understand that. It sounds to me like it's full speed ahead.
Mr Andognini: It certainly is not full speed ahead. We were given approval by the board of directors for the expenditures for 1997. It is mandatory on our part to take the nuclear optimization program, to put it into a business case and a budget to be presented to the board. What we are going to do is, not only present the 1998 business plan and budget, but for reference, the 1999 also. We're going to treat it like it's a business and run it like it's a business.
Ms Churley: I'm just going to come back to one of my earlier questions, because you're right, I asked so many questions. I think the most important question I asked was not answered. Perhaps I asked it in a confusing way, so I'm going to be very clear. I think this is very important.
When the recovery plan was announced, the approach adopted to reinvestment in the A units was to hold off investment until turnaround time of the B units and Darlington was proven. What I want to know is, is that still the approach: no reinvestment in the A units until the turnaround at the Bs and Darlington? That's the specific question I was trying to ask.
Mr Andognini: Let me repeat it, so I make sure I understand what you're saying: The program as currently outlined is to lay up the A and B units to show increased performance and sustained performance on the Darlington, the Bruce B and the Pickering B units, prior to the return of any units to service. Is that the question you asked me?
Ms Churley: My understanding is that the original recovery plan was to adopt the recommendation at that time, to hold off investment in the A units until the turnaround at the B units and Darlington was proven. I just want to know if that is still the plan or has that changed?
Mr Andognini: It has not changed.
Ms Churley: So that is the same. Okay, good. Coming back again to your ability to itemize what needs fixing, you are able to do that now, particularly at the A units before the restart, or you will be able to do that in the near future? You will be able to provide that for this committee? If you can't now, when could you do that?
Mr Andognini: Let me tell you what I can give you. I can give you the items that are necessary to put the management systems in place, the programs in place, the material condition changes that are required, the whole assessment program, which includes bringing the Pickering A units back to service but does not include any discovery work, and it also starts the return of the A units at Bruce without the work that's necessary, like steam generating replacement and the reactor vessel tubes. I can get that data for you. When would you like that data?
Ms Churley: As soon as you can make it available would be great. You're saying that it's ready to be made available now, or as soon as you get the --
Mr Andognini: No, it's ready now.
Ms Churley: Good, so as soon as you can make it available to the committee.
Mr John O'Toole (Durham East): I want to make a little start in a broader way. Mr Conway referred to this report, which I will be referring to.
Mr Andognini: I can't quite hear you, sir.
Mr O'Toole: Mr Conway referred to the basic recommendations provided in the nuclear asset optimization plan, that executive summary. I have a couple of questions in that area. But I want to start by saying that in your self-introduction -- your background is pretty much nuclear recovery -- you mentioned that one of the stations you worked at was other than nuclear, it was fossil or --
Mr Andognini: No, that was the Arizona Public Service Co, where I had what they called electric operations. At that time the nuclear units were not operating, they were in startup. So I had non-fossil and the startup of those nuclear units.
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Mr O'Toole: Much of this may be conjecture, opinion, your own professional attitude. Is nuclear generation the best option in the long run for Ontario, in a deregulated market, and are we competitive with our neighbours in that marketplace, in nuclear, fossil or hydro?
Mr Andognini: When you say "neighbours," I'm not sure who you mean.
Mr O'Toole: Quebec, Michigan, Manitoba.
Mr Andognini: I can't speak on anything about Quebec, except that I know Quebec has a lot of hydro and that obviously should be cheap power. I can't speak too much outside of Ontario. I can speak some to the United States.
As I indicated before, I have become a very strong supporter of the Candu reactor. It has advantages that other light-water reactors don't have. The Germans currently are operating Siemens-built pressurized-water reactors, which are similar to the Candu reactor but doesn't have online refuelling, with capacity factors of 90% to 91%. If they can do that with a pressurized-water reactor that requires a shutdown to refuel, with these systems properly maintained and properly operated, you ought to be able to compete with that very easily. Generating at 90% capacity factors with these units makes your cost very low.
Mr O'Toole: I think I've heard that a couple of times and you have said it as well previously, so I appreciate that.
I'm trying to pursue the deterioration that we heard about from a couple of presenters. From about 1985 right to the present there has been a steady decline in performance behaviour, productivity, from 85% to some 60%. Do you think there's any particular cause? It was characterized as a culture or cult situation. I'm not putting those words in your mouth, but could you explain in some other, less formal terms what that means? Does it mean that they've never got out of a design-and-build attitude, that the operate-and-maintain attitude hasn't really emerged? What is needed to turn around management?
Mr Andognini: I'd be very happy to try and answer that for you, sir. First of all, I never used the word "cult."
Mr O'Toole: It's been used.
Mr Andognini: It has been used and I prefer that it didn't relate to me, because I don't like the word "cult."
Mr O'Toole: Nor do I.
Mr Andognini: As I indicated before, when the need for electricity levelled off in Ontario, they offered very lucrative packages and lost some of their very competent people who had designed these facilities.
Mr O'Toole: Can I interrupt here for a second? That's sort of where I'm going. I think that the existing management structure -- it's my intuition, if you will, that when they had those packages they created a pretty serious situation of a shortage of resources themselves, the current management team -- or some of them are still there -- by allowing that to happen. Who came up with that brainwave?
Mr Andognini: Sir, I can't speak to that. I only know that it happened and that they lost good people, they lost competent people. As I indicated before, the downsizing in 1993 and continued reduction in budgets caused the nuclear performance to deteriorate.
Mr O'Toole: I have two more questions. I don't want to get too locked up here. Do you think much of the British privatization model, to become more, if you will, competitive without necessarily just being the bottom line? Looking at performance and recovery plans in a competitive model, is that kind of where you'd like to aim?
Mr Andognini: My aim is not whether to privatize or not. That's a decision that is not up to me. My direction is to turn the performance around, to bring these to world-class --
Mr O'Toole: Do you need that momentum to do it? What kind of synergy do you need to create in the workplace for that accountability you've talked about? You've mentioned it. You've characterized it as the most important part of the management system, the accountability of the system. I'm trying to get to if there's a $5-billion recovery plan or an $8-billion recovery plan, none of which has ever worked. We've heard that from 1985 they've never had one recovery plan work. They promised in 1985 at Bruce that in 10 years they'd have it fixed. That was 1995 and it still isn't fixed. Would you have any confidence in that kind of recovery? I'm like Mr Conway and everyone else; I wouldn't put five cents on it.
Mr Andognini: Certainly, sir, if there wasn't a problem, I wouldn't be here.
Mr O'Toole: What's the accountability? How are we going to get the accountability culture --
Mr Andognini: The accountability starts with me. I need to ensure that we start to treat people like we'd like to be treated ourselves. However, to do that, we have to hold people accountable. We have to train them, we have to mentor them, we have to coach them. We didn't get bad overnight, we ain't going to get good overnight. It's like a great big elephant. We can't swallow it all at once but we sure as hell can if we chew it one bite at a time. We're going to take it one bite at a time. We're going to turn the performance around. We're going to treat people the way we'd like to be treated ourselves. We're going to train the people, we're going to coach them, we're going to mentor them and we're going to manage them.
Mr O'Toole: With 19 reactors, would we be overcapacitized in nuclear?
Mr Andognini: I don't believe so, because if we had 19 or 20 reactors operating in the capacity factor between 85% and 90%, you could sell all the power you could generate south.
Mr O'Toole: So it would drive unit costs down the more you output?
Mr Andognini: In my opinion, yes, sir.
Mr O'Toole: So we're really suffering a short-term penalty by decommissioning seven -- and for the right reasons. You said you can't just put in money and people, you have to make the systems accountable. Are you going to set some kind of pricetag and some kind of achievable outcomes in a management-structured time frame that says, "I'll deliver these things by X and if I don't, see you later," right? Is that what we're going to do?
Mr Andognini: It's not as clear-cut as that.
Mr O'Toole: We're looking for that, though. We're looking for who is going to spend the $8 billion. I've looked in your report here and I said I was going to refer to it. We've picked the most expensive recovery plan. In your case, you used $1.7 billion for hardware. Your report, page 1 of the executive summary, case 5, which is the two A stations down, is $4,000,400,000. In that it says it doesn't include buying the other fuels necessary to create the power. The decommissioning costs aren't part of that? What is the cost to decommission Bruce -- $100 billion? I think it's just out of this world.
Mr Andognini: I can't tell you, sir. I told you, we're having that studied right now. I know what it costs in the United States to decommission a pressurized-water reactor. I have those numbers.
Mr O'Toole: Is it $5 billion, $10 billion, $150 billion?
Mr Andognini: It's $500 million.
Mr O'Toole: That's quite inexpensive. I've heard it's more like --
Mr Andognini: What did you say, sir?
Mr O'Toole: That seems rather inexpensive as one of the options.
Mr Conway: C.D. Howe has children.
Mr Andognini: That's the best estimate for a pressurized-water reactor currently being decommissioned.
Mr O'Toole: The other part of this is the whole decommissioning process, the long-term contamination, the storage issues. I have two of the reactors in my riding. Darlington and Pickering are both in Durham and I like to think of myself as living there for the rest of time. They still have to truck the waste to Bruce. They haven't even got a plan that I know of. How do they even get rid of the fuel? It's still in the swimming pools. I don't think they're too far along in the technology part of it.
Mr Andognini: I disagree with you, sir. The technology is available to handle radioactive waste. It's a political issue in Canada, similar to the United States.
Mr O'Toole: How do they handle it in the States?
Mr Andognini: They don't. It's not there yet.
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Mr Kwinter: Mr Andognini, in the first two days of our hearings, one of the items that kept coming up that people commented on was your letter of April 16, 1997, to the reactor regulator. I understand -- it's been explained to me by Mr Farlinger and I think Dr Kupcis said the same thing -- that you come from an environment where you virtually get an open-ended licence but the regulator can shut you down anytime or put you on some kind of restricted use based on their particular findings.
I don't really have a concern about the fact that you indicated it would be nice to have a 10-year licence but certainly you're asking for a five-year licence. When Dr Bishop was here, I asked her what the shortest licence you can get is, and she said six months. I asked what the longest is, and she said two years. When I asked what the reaction to your letter was, she said: "Who cares? They can ask for whatever they want. That's not what they're going to get."
A couple of things concern me. I didn't get the chance to ask her a question because we ran out of time, but I read between the lines and I had it corroborated by watching television this morning and what she said in a scrum outside. She said Pickering was put on a six-month licence, and when it came up for renewal it was like a put or buy. In other words, you can't get another six-month licence; if you get another six-month licence, they shut you down. You have to -- well, not necessarily a nine-month, but you have to get an improvement or they have no choice. They can't keep you going on a six-month licence, because that's the lowest category, sort of the red alert.
The reason I'm saying that is that it would seem to me that if you're really making progress, they'd say: "Okay, you're really doing great. We're going to put you on a one-year licence." That has happened before. Mr Lévesque said that when they applied for the two-year licence in 1989, I think it was, they got a one-year licence. The reason I'm saying all of this is that it's a prelude to this letter that you wrote. I don't want to dwell on the term of the licence, but where I have a concern is that here we have a situation where, as I say, Dr Bishop went out of this room and in a scrum said, "We came that close to shutting them down." It was very, very close.
At that time -- you've been there a couple of months, and you still say you're discovering problems -- you apply for this extension of your licence and you point out all the things that have been accomplished that would justify that extension. I have the letter and it goes through the whole thing, all these wonderful things that Ontario Hydro Nuclear has accomplished. The very next day, the board gets their interim report, in which you highlight all the deficiencies that in your letter to the reactor regulator you say are in hand, have been improved, that things are going on. How do you square that?
Mr Andognini: Let me try to answer that. I'd be happy to do that. When we do an assessment of this nature, we don't look for the good things. By nature it's designed to identify and bring forward the bad. There are good things occurring at Pickering station, but we don't look for that in that assessment. I didn't make a report to the board on April 17. The report you're talking about was a report from the team to the team captain that was not distributed to Dr Bishop, nor was it distributed anywhere. We did review the results with the AECB. We did provide an overview of that, plus some validation and verification, in the May 17 board meeting, but that report, sir, really was not valid for me to issue. It was just a compilation of the data that already existed. It would be like showing the end of the ballgame before you play it. We needed to go out and verify and validate what we found in the accumulation of the data before we could report it.
Mr Kwinter: I'm not terribly concerned about who you reported it to and everything else, but here was a report that you were aware of when you applied for that licence extension. Regardless of whether it was interim, whether it was raw data, you had material that indicated all these shortcomings, and at the same time you as the head of Ontario Nuclear are applying to the reactor regulator for a five-year extension. As I said, the five years is not the issue. You're applying for an extension and you're pointing out all these wonderful improvements that have been made, that things are looking great. Obviously, if you're asking for five years, you think things are pretty good.
Mr Andognini: I didn't say things were great. I said that we were confident that the facility was capable of safe continued operation. That's the strongest single point we made in that letter. It was carefully worded to identify that these units were safe to operate.
First of all, I don't think your statement is correct that they can't give you two six-month licences in a row. She came that near to shutting them down the first time -- that's what she said -- and that probably was a wise decision. She gave them a six-month licence. I asked Dr Bishop two weeks ago in her office, "Have you seen any improvement?" She said, "Well, I need to tell you, Carl, you have to show sustained performance, but we did give you from a six-month to a nine-month licence." To me that indicates that at least the AECB is also seeing some improvement at the Pickering station.
Mr Conway: Carl, if I can pick it up from there, you are the current chief nuclear operator for Ontario Hydro.
Mr Andognini: Yes, sir.
Mr Conway: That means that you're part of some kind of senior management team at Hydro, right?
Mr Andognini: Yes, sir.
Mr Conway: Mr Farlinger is currently the acting president, I believe.
Mr Andognini: Yes sir.
Mr Conway: Following on Mr Kwinter's questions, I'm trying to now understand how the management culture is working at Hydro. In the last six to eight weeks, let's say, since the departure of Dr Kupcis, how often would the senior managers meet with Mr Farlinger to talk about operational activities?
Mr Andognini: We meet weekly on Wednesdays for two hours, and whatever time is necessary for me to bring him up to date, I can have whatever time I need.
Mr Conway: So you are meeting then with Farlinger on a weekly basis and other senior managers to talk about various implementation strategies and other things.
Mr Andognini: Yes, sir.
Mr Conway: You mentioned in the previous round that to the best of your knowledge, some time before that board meeting on August 12 -- correct me if I'm wrong -- someone, probably the chairman but you weren't sure, had asked Ernst and Young to come in and do an independent -- just take us through that again. You mentioned that Ernst and Young --
Mr Andognini: I'm not sure of the date, but I think it was after the board had reviewed on August 12. Please don't hold me to this because I'm not 100% sure.
Mr Conway: To the best of your knowledge.
Mr Andognini: To the best of my knowledge, Ernst and Young was brought in to do a financial review after the August 12 board meeting.
Mr Conway: I want to just one more time mention that this options paper that bears the date September 29, 1997 -- I presume it was prepared in this form and given to the board some time on or about September 29, 1997?
Mr Andognini: Yes, sir. That report --
Mr Conway: That's all I need to know.
Mr Andognini: Just the documentation of it was requested at the September board meeting. We put it together and gave it to them about that date.
Mr Conway: I was interested in the previous exchange with perhaps Mr O'Toole; I can't remember who it was on the government side. You reacted quite viscerally to this cult business. I think I can understand that. In mid-August, an individual who was asked to comment about what had gone wrong at Ontario Hydro Nuclear was reported in the Toronto press as having offered the following commentary, and I quote now directly: "that the nuclear unit was operated over all those early years as some sort of special nuclear cult. I'm told this is not unusual in utilities elsewhere in the world." What would say about that kind of analysis?
Mr Andognini: I know there were problems with the management of the utilities in the United States, and I don't want you to think for a minute that there are not some problems at some utilities today. I don't believe there was a cult -- and I don't like that term -- but I do believe it was a program of heavy engineering involvement. I believe that also occurred in Canada.
I personally believe, and I've said this before, that we're overengineered and undermanaged. There are times when engineers got together in the United States -- and I'll have to tell you truthfully; I know, because I was one of them in the program -- where engineers thought they knew everything, that we knew how to do accounting, we knew how to do finance, we knew how to do everything. We learned very rapidly that we weren't so smart as we thought we were. I wouldn't consider it a cult. I would consider it overengineering.
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Mr Laughren: The MBA programs in the last few years in this country have been filled with engineers. Perhaps some of them came from Ontario Hydro. I don't know.
I want to pick up on the difference between your interim report of April l7, I think it was, and the final report, and the difference in the performance ratings in those two reports. That goes from April to August, and I can't remember the date at which you asked Dr Bishop if things were getting better.
Mr Andognini: I asked Dr Bishop approximately two weeks ago Friday, in her office.
Mr Laughren: I found it strange that between April and August the performance ratings in your report would go down for Ontario Hydro, in that short a period of time.
Mr Andognini: You have to remember, sir, that the first phase of that report looked at the data that were available; in April we had the summary report. By then, the second phase had already started and we had identified problems. We had taken corrective action on those problems that we thought were important to safety, and we continued to improve. The results of the August report -- the validation and verification of the data were done approximately a month before that. It took a month or maybe even more to take all the findings we had, review them thoroughly to ensure that we knew what we were talking about, and to agree on the safe approach, presenting the data to the board.
Mr Laughren: I want to be clear on this. Between April and August, did the performance ratings drop because you knew more?
Mr Andognini: I don't think the performance ratings dropped from April to August. What you saw was the result of an investigation that started in February and went through to probably -- gosh, I wish I could remember -- some time in June. We originally were supposed to have the data to the board at the July board meeting and we weren't ready, so the board allowed us to go August.
I don't believe there is any inconsistency in what we found. While this examination was going on, we were making changes -- we had provided directives, we had made some management changes, we had done some other things -- even while the assessment was going on. We weren't just standing still while the assessment was being conducted. If you want a list, we have a list of things that have been done since January, complete on everything we have done.
Mr Laughren: I'm not suggesting there were inconsistencies. What's puzzling me is that the performance ratings dropped between April and August. I was surprised at that. Between the interim report and the final report, the performance ratings were lower.
Mr Andognini: I don't believe we gave ratings in the April report.
Mr Laughren: Yes, you did. I don't think I have it here. Anyway, I will revisit that.
Mr Andognini: I may be wrong, sir.
Mr Laughren: Okay. I wanted to ask you questions about your comments in your final report about labour, workers in the system. You were quite critical -- and I don't know much about the collective bargaining agreement between the Power Workers' Union and Ontario Hydro.
Mr Conway: A likely story.
Mr Laughren: No, I don't. In a report that was heavily laced with technical material and opinions, there was suddenly this rather pejorative subjective policy analysis about labour relations. I'm somewhat puzzled by that, because it didn't seem to fit with the rest of the report. I am wondering if you've thought about that since the report and to what extent you still hold the view you expressed in your final report about the inability of the corporation -- these are my words, not yours -- to manage properly because of a restrictive kind of collective bargaining agreement.
Mr Andognini: All I can say is that we reviewed it, we talked to the management people, we had both union and society members on our team, we talked to union stewards. We did not talk to union officials or society officials prior to giving the report to the board, because I have done many, many assessments and have never discussed the results with anyone prior to discussing it with the people who requested the assessment.
I think there are some difficulties in the current labour agreements that would assist us, if we could get some concessions, to turn the reactors around in a more positive manner. I just don't want you to think that we don't have competent people in the union and the society, because we do, and they have a deep desire to do what is right. I'm not here to criticize union management either. But I can tell you, I don't think Ontario Hydro used the best judgement in some of the collective bargaining they accepted. That's based on my experience in the States.
Mr Laughren: Dr Kupcis, when he was here last night, implied -- I don't want to exaggerate anything that Dr Kupcis said, and my colleagues will correct me if I'm wrong. I don't think he appreciated very much what you had to say in your report about that. His view was more in keeping with what you said just now: that that's Ontario Hydro's fault, not the fault of the workers there. Ontario Hydro was part and party of those collective bargaining agreements, just as much as the union was, so it shouldn't be seen as --
Mr Andognini: I think that's exactly what I just said, sir, in a different way.
Mr Laughren: Yes, more than you said it in your report.
I'm going to back to the interim that my friend Mr Kwinter has just handed me, April 17.
Mr Andognini: I have it here in front of me.
Mr Laughren: You're faster than my research department is.
You can see what the grades are here.
Mr Andognini: Those are grades from overall evaluation of the team that did the collection and the review of the collection of the data, based on AECB reports, WANO results, which is the World Association of Nuclear Operators, from peer reviews. Just from the assessment of the data, this is the type of grade you would give just looking at the data.
These data are what was available to us when we got here. We asked for everything we wanted. We got cooperation, we got the data, we reviewed it, had it reviewed by several teams. The teams got together, and these are the grades they gave generally, based on those results. Those aren't particular to any one site.
Mr Laughren: As opposed to the final report.
Mr Andognini: Which is by site.
Mrs Helen Johns (Huron): Thank you, Mr Andognini. Your presentation today has been really informative.
The first question I'm going to ask probably won't have any bearing for you because you haven't been here for the last three days, but let me just ask. When you were hired by Dr Kupcis and you were given instructions on reviewing -- correct me if I'm wrong, but it was to review just the nuclear facilities and make recommendations -- were you ever told to consider making Hydro more readily available for privatization to be one of your mandates also?
Mr Andognini: Absolutely not.
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Mrs Johns: Okay.
We've been talking for the last two or three days about this interim report that's come out and those data you just talked about. Dr Kupcis yesterday seemed to be very unsure about this report. Can you tell me who got a copy of that report?
Mr Andognini: Me.
Mrs Johns: Just you?
Mr Andognini: That's right.
Mrs Johns: Not Mr Farlinger? Not Dr Kupcis?
Mr Andognini: No. When we reviewed this program and outlined this program, I asked the team to give me a preliminary report that I wasn't to give anyone because it was a preliminary report based on data review only. Dr Kupcis did not see it. The board did not see it. I don't believe anybody saw it. The reason it came out was through the freedom of information act.
Mrs Johns: That's interesting. Thank you.
When I talk to people about you, just trying to get a background in what experience you have --
Mr Andognini: Maybe I should leave now.
Mrs Johns: -- one of the things they say to me is, "All his experience is American." You must think you have some expertise to be working in Canada. With respect to technology, management and human resources, can you tell me what's comparable about it and what you find substantially different that may affect the IIPA report?
Mr Andognini: The Candu option is different, but it has some of the same characteristics that a pressurized-water reactor has, which is utilized in the United States. The regulatory environments are different between the two countries, the culture is different between the two countries, but I don't think that hampers anyone. There are great companies throughout the world that take Canadians and bring them to America to work. There are Canadian companies that bring Americans to Canada to work. I don't think that hampers the ability to put a managerial program in place and implement to achieve world-class performance.
Mrs Johns: When you wrote this famed letter about the five-year extension -- I know you don't want to second-guess the Atomic Energy Control Board, but at that time would you have said that Pickering A deserved to have an extension of their licence or should have they have been closed down?
Mr Andognini: Today?
Mrs Johns: No, at that particular point. When the Atomic Energy Control Board was reviewing that six-month licence that had just come up for renewal and moved it to nine, do you think the Atomic Energy Control Board made the right decision or at that point should they have closed down Pickering A?
Mr Andognini: When they reissued the licence for nine months?
Mrs Johns: Yes.
Mr Andognini: If I thought the reactor should have been shut down, I would have shut it down.
Mrs Johns: I'm interested in the recovery plan. I've moved into that process of it. If we were to go with exactly the system we have right now, stay with the status quo, what's your best guess about the power Hydro would have to buy next year to meet the peak demands?
Mr Andognini: If we did nothing in the nuclear program, all I can tell you is, if you look at the decline of performance and the increase in cost, you've got the curves going in the wrong direction. I honestly believe that if we were allowed to continue operation the way we are now, it would be just a matter of time before the province would shut it down because of increased cost or the regulator would have shut it down for lack of performance.
Mrs Johns: So when people are comparing this $5 billion to $8 billion versus the $1.6 billion that you recommended, some of that $5 billion to $8 billion, additional money for alternative fuel purchases, would have to be spent anyway because our system is declining or failing.
Mr Andognini: That's a good question. Let me answer that by saying that if we had 12 operating units operating at a capacity factor of 86%, we would have in essence not required the Pickering A or the Bruce A units for the generation we have today. I can't tell you how much replacement power. I didn't do those studies. They were done by someone else.
Mrs Johns: We got this little chart from our consultants up here that talks about what makes a good electric utility and what does not. It says that the winning utilities are the utilities that offer a lower price.
Mr Andognini: That offer a lower price?
Mrs Johns: Offer low prices, it says, so that they're able to compete in the market in the US. This is done by the International Energy Group. My question to you is, if you have a staff complement that's now running 19 reactors and you move that staff complement to run 12 reactors, in my little accounting mind that must mean that cost per unit of energy is going to go up.
Mr Andognini: Absolutely. Until you increase the capacity factors. When you start to increase the capacity factors and you turn the performance around and you bring those 12 units to 86%, you're going to be making more money than you're making today.
Mrs Johns: As long as you spread those people out over all 19 at some point?
Mr Andognini: No. You have to remember that at the heavy water facility, I have to have licensed operators there until the hydrogen sulphite has been removed. I'm going to lay the Pickering units up fuelled, which means I have to have operators there anyway. The reason I'm laying them up fuelled is that that will allow me that much more time to get them ready to be back on the line in a shorter time frame. The Bruce A units we're going to defuel, because when we bring the Bruce A units back, we're going to have to replace steam generators and we need the fuel out of the reactor to do it.
Mrs Johns: Can you answer this question for me so I can compare this? Between 1997 and 2000 what's the cost per kilowatt-hour -- I don't know what number you use -- cost per output unit that I could compare to, let's say, what we're generating in fossil fuel or what we're generating in the US or any of that stuff as a result of this plan?
Mr Andognini: I wish you'd asked that question of John Fox, because he has those data and I don't.
Mrs Johns: John wasn't really answering my questions.
Mr Andognini: I didn't do that analysis. I don't have it, but I --
Mrs Johns: Could you get back to me on that?
Mr Andognini: I can get it for you.
Mrs Johns: I've received a lot of information from people outside about nuclear competitiveness and whether we should be in nuclear. I've got a chart that talks about 700 nuclear plants being closed down in the States over the last period of time in moving forward. First of all, is that number accurate? Has there been --
Mr Andognini: Seven hundred?
Mrs Johns: Seven hundred being cancelled as they were in planning stages, or else being closed down.
Mr Andognini: I don't believe that's true. I would guess maybe you've got a decimal point wrong.
Mrs Johns: What would you say the number is?
Mr Andognini: I don't know. I'm getting help here, but I would have guessed 60 to 80, or maybe 100 -- I don't know -- that were cancelled or shut down.
Mrs Johns: My numbers could be wrong here. I get lots of stuff here and I'm not in any way understanding nuclear. Is that decrease as a result of any specific issue that relates to the nuclear vision or people's fear of nuclear or the world's changing view of where nuclear should be?
Mr Andognini: I don't personally believe it's due to safety of the reactors or any other thing, including disposal of the waste or decommissioning. I think it's purely a cost program.
Mrs Johns: So are you telling me that the cost per unit of nuclear is more expensive than it would be for, let's say, cogeneration or something like that?
Mr Andognini: I know that the studies were done in Canada that the cost of using the most efficient combined cycle you have today would be about 4.5 mills per kilowatt. We should be able to generate, I believe very easily, power for about 1.752 mills per kilowatt. The cost to return the Pickering units back will be about 2.5 mills per kilowatt. To bring the Bruce back I think it's about 3.5 mills per kilowatt, somewhere in that range. That assumes that the availability of gas is there and that the price of gas doesn't change.
Mrs Johns: Is that all capital costs in?
Mr Andognini: That's all-inclusive.
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Mrs Johns: Can you just explain one more thing? I'm probably running out of time. I'm reading your executive summary, and it says as one of your preconditions under table 1.0, "The conditions of assets at end of period is not the same for each case." What does that mean?
Mr Andognini: Look at a comparison to two cases, where you have the Pickering A unit and the Bruce A units permanently shut down. They no longer are an asset. Assume that we can and will turn the performance of these reactors around and bring the Pickering unit and the Bruce units back to performance; you've got a substantial asset instead of a liability.
The Chair: Mr Adognini, just a couple of questions to clarify my notes here for the benefit of the committee.
Mr Conway: It's called the Chair's prerogative.
The Chair: It is indeed, and I thank you for recognizing and supporting that, Mr Conway.
The meeting of August 12, just to clarify that, how long did that meeting last?
Mr Andognini: I can't remember specifically the start time, but from somewhere around 9 in the morning to 5 or 5:30 at night.
The Chair: As a figure you gave the committee in terms of decommissioning costs from your experience, and I recognize that this is from an experience that may not be in a Canadian context, you said something in the order of perhaps $500 million. Is that per unit? What does that $500 million relate to?
Mr Andognini: It's for a single pressurized-water reactor, an 800-megawatt unit.
The Chair: If you were to take that and now put it into the Canadian context, what might be your --
Mr Andognini: I don't know the cost associated with Canada, and I don't think it would be fair to take $500 million and multiply it by 20.
The Chair: By --
Mr Andognini: By 20, because there are 20 reactors. I think that is not a fair assessment.
The Chair: You have indicated in your comments that you have been involved in at least several instances of recovery plans. Can you explain to the committee the number of units involved in each of those recovery plans and what the cost was?
Mr Andognini: No, sir, I can't specifically recall the cost. At Pilgrim Station, it was a one-unit plant, a 700-megawatt boiling-water reactor; at Rancho Seco, it was a 800-megawatt unit, pressurized-water reactor. They were single sites.
The Chair: And you don't recall what the cost was for the recovery plan for that?
Mr Andognini: I wouldn't trust my memory on that, sir.
The Chair: All right. We have time for about one quick question from each caucus, if that's agreeable. The government caucus may want to confer and sort out who the designated hitters would be. I will move, first of all, to the opposition caucus.
Mr Kwinter: We talked about this cult. I know you don't like the word, and I don't either, but there is a culture. Mr Farlinger referred to it; he's the one who referred to it as a cult. He certainly referred to this culture, and certainly Dr Kupcis said the same thing. I want to get a reaction from you, because it seemed to me that throughout your report there was a feeling that because of this culture there was no questioning what these people were doing because they were the experts, and that not only would they not go outside to seek advice; they were perceived in the world to be the people you go to get advice, so why would they go and talk to someone else when they have this reputation? Is that a fair evaluation?
Mr Andognini: I believe that's probably what happened in Canada, because they were doing well, they were constructing plants, they were operating them well at the beginning. They were a world leader in nuclear, and I believe the other nations turned to Canada to look at that. I believe that is a true statement, sir.
Mr Laughren: I don't have a question. I just wish you lots of luck. I hope that when the white paper comes down which is going to guide energy direction in this province, you are able to look at it and express some views on it. We don't know at this point what's going to be in there. I have great difficulty deciding whether I like your recovery plan, because I feel that I'm viewing it in a vacuum. Anyway, good luck.
Mr Andognini: When that white paper comes out, if you'd like me to come back to tell you how I personally feel it fits in with the nuclear program, I'll be happy to do that.
Mr Laughren: Okay. Thank you.
Mrs Fisher: I would just like to say that I don't think, Mr Andognini, there is a single person in the province who disagrees that something needed to be done. I fully acknowledge the task you have before you and certainly respect your efforts. I'm hopeful that this will be the first successful recovery program.
My question comes with regard to the Bruce site, given the significance of the impact at that site. I fully appreciate that there's a $1-billion retube program already in Pickering. I understand the numbers and I understand, generally speaking, the mechanics of what is required on a recovery basis.
I have to convey my community's concern and their discontent, their strong resentment, if you will, that there was zero consultation done on your recovery plan with regard to the negative impact that will happen there. In fairness, Darlington and Pickering -- and I'm not pitting one community against another. I understand the requirement for staffing. But the beneficiary is not Bruce; quite the opposite. There is a strong resentment in the community that in the past, Ontario Hydro, when it was making very significant corporate decisions, would at least include the secondary economic impact review within their decision-making capacities, always taking into consideration the requirement for safe operation. You'll never have an argument from that community that way.
I would ask you, during the course of the next deliberations till whenever, if there was a proposal put forward for reconsideration of the pecking order of recovery, would you give consideration to relooking at that decision?
Mr Andognini: I'd give consideration to looking at anything because I am very concerned, and I met with the Bruce community impact team last week and expressed my concern. I'd be happy to look at anything that's cost-effective, but I, solely, cannot make that decision. I would have to take that recommendation to the board.
The Chair: On that point about the board, just a final question about that eight-hour meeting: You have been involved in at least several other agencies that have developed recovery plans, is that not true?
Mr Andognini: That is true, sir.
The Chair: Were you there while the recovery plans were being formulated, or did you come in after the plans were formulated?
Mr Andognini: While they were being formulated.
The Chair: And you were there when they were presented to their respective boards?
Mr Andognini: Yes, sir.
The Chair: In your experience, what was the period of time for consideration given by those boards?
Mr Andognini: At the Boston Edison situation, the recovery program was initiated. I believe the board -- I really don't want to get in trouble, but I think the board deliberated at two meetings that involved the program. At Rancho Seco, we had a number of meetings with the board on the budget, on the program, on the schedule. Every one of the meetings we had at Rancho Seco, since it was a community-owned facility, was a public meeting.
Mr Conway: Thank you, Mr Chair. That was very helpful.
The Chair: That is my purpose for being here, Mr Conway; it is indeed to help you, sir.
Mr Conway: That was very useful final testimony.
The Chair: I thank you, Mr Andognini, for being here. I'm conscious of your promise to Ms Fisher and to Ms Johns that you'd be pleased and prepared to come back if necessary, as we get through the white paper or whatever may be presented to this committee later. I appreciate your testimony today. You have been very helpful. We'd be pleased to excuse you now.
Before members of the committee leave, I want to please ask the audience to be in your seat for a moment. I have some business left. If you are going to leave, please go out very quietly. This deals with the week of the 20th and thereafter. I want to report to you that the subcommittee met at noonhour. It went through a series of witnesses that we thought would be appropriate to bring forward. Each caucus was asked to table with the subcommittee any other particular names and groups. We're talking about the umbrella groups right now; we're not talking about the site-specific. You see before you the recommendations. I will seek that the committee now will approve this as the basic envelope of witnesses and allow the Chair and the clerk to proceed with the mechanisms of developing the actual agenda for the week of the 20th.
I remind you that we return on Monday, October 20, at 2 pm. We assume it will be this room. But for the remainder of that week, we'll proceed here in this facility hearing the major witnesses. We will not be proceeding in quite the same way. In other words, we have been giving considerable attention up until now to specific witnesses. Unless the committee directs me otherwise, I would propose to shorten the time frame for each witness so we can collapse some of that activity and make sure we're proceeding through, because we have a very tight time frame to move into the following weeks both for other witnesses as well as for our site visits and to begin to really revisit and analyse the recovery plan. Some of the witnesses, of course, are part of that, because they will be the financial experts and so forth who will be brought in to help the committee in its deliberations. Are we fairly clear on that? I'd like you to look at this. Is the committee agreeable to this list?
Mr Galt: I have no problem with what's on the list, although I did understand items 1 and 2, because of the white paper coming in, would be put more towards the end of the grouping rather than at the beginning. Other than that, it's basically what we discussed.
The Chair: That's fine.
Mr Conway: I just want to reiterate that I feel, ever more so now after today's testimony, that I'm very keen to have the Ministry of Finance and the Ministry of Energy come over and talk to us about this recovery plan.
The Chair: About the costs of the recovery plan?
Mr Conway: Yes.
The Chair: I see. Well, I need guidance. I've got two points of view.
Mr Conway: I think we'll be able to work it out.
Mr Galt: I don't think he's disagreeing. It's just that we need them. I agree with that; it's just that if we can put them near the bottom, the white paper may be out and it may --
The Chair: It's a matter of timing, and I understand that. I'll try to exercise some due diligence in this regard at least.
Mr O'Toole: If I may interject, if we're looking at the cost recovery plan in its standalone quality, that's a separate issue, technically, than the white paper exercise. I really think you want to look at what the appropriate kinds of things are that would happen in the recovery plan and the same questions we were asking today. The white paper might constitute some different need to discuss that later on, but that's quite a different issue.
The Chair: That's one of the areas we had covered with the subcommittee and recognized there would be at least a couple of splits in that regard.
Mr Conway: The subcommittee has talked repeatedly about the fact that there will be a select number of people we will probably want to recall. From my view, finance and energy are two groups of people we might very well want to have here for two different presentations, one on the whole recovery plan and then on the white paper. I feel very strongly that I certainly want to hear from the Deputy Minister of Finance at the earliest opportunity on this testimony we heard today.
Mr Galt: Mr Chair, you're going to have to do some juggling, when people are available. Since we're not subpoenaing specific, you can juggle these around to where they flow in a reasonable sort of --
The Chair: We will try to accommodate the business of the committee and the wishes of the members to the best of our ability. I will be in your hands otherwise and/or making unilateral decisions, so we'll move in that regard.
Mr Conway: There are some things about Anglicans I've always admired. Their unilateralism, when it's needed, is one of those admirable qualities.
The Chair: I thank you so much, Mr Conway.
Mr Galt: Do you care for a vote on this, Mr Chair?
The Chair: Let's just have a vote on this. Are we agreed that this list we presented to you today is agreeable? Dr Galt has moved it, and it's seconded by Mr Conway. All in favour? Opposed? Carried.
Oh, white smoke. The Board of Internal Economy has approved the budget, so you will not have to return the coffee. We are indeed resolved.
Mr Conway: As we say in my church, habemus papam.
The Chair: Thank you. Yes, you do say that, don't you?
The committee will stand adjourned until October 20 or at the call of the Chair.
The committee adjourned at 1755.