Ontario Hydro Meltdown

Ontario Hydro Meltdown

Carl Andognini gives his diamond pinky ring a fiddle and offers a thin smile. A very thin smile. He has just come from yet another meeting with a crowd of ONTARIO HYDRO staffers in the mega-corporation's mirrored headquarters in downtown Toronto. He has had 40 such meetings "around the system," as he says, since landing a bombshell report in the lap of the utility's board of directors last week. The report, written by a six-member SWAT team of U.S. nuclear experts handpicked by Andognini, himself a nuclear engineer, is a corporate colonic that damns the utility's nuclear operation as a problem-plagued, mismanaged horror. As a remedy, seven of Ontario Hydro's 19 CANDU reactors, the jewel in the crown of the ever-hopeful Atomic Energy of Canada Ltd. (AECL), will be shut down while Hydro resources will be concentrated on re-engineering the remaining troubled 12. Assets will be written down, energy purchased elsewhere, and funds that should have gone to pay down the corporation's $32-billion debt will be redirected into the "recovery" of the 12 reactors. Total tab: as much as $8 billion. The economic and human consequences, says Hydro chairman Bill Farlinger, are enormous.

The job of leading what will be a wrenching turnaround falls to Andognini, the chief nuclear officer brought in from the United States last January to assess the woes of North America's largest electric utility. Andognini is not expecting all of Hydro to fall enthusiastically in line. "We're going to find those people and get them out of here," he says cleanly of those who fail to jump on the bandwagon. "I've encouraged them, and I encouraged them today, to find employment elsewhere because the employment I find for them they may not like." Take management. "There's people in management that shouldn't be in management and they don't want to be in management, but it's the only way they can get more money."

"Those people," are, according to the report, the chief reason for the dreadful state of Ontario's nuclear plants. The 64-page assessment documents operations that are "minimally acceptable," which is the same as saying substantially below nuclear-industry standards. In scrutinizing the reactors - A and B stations with four reactors each at Pickering, 40 km east of Toronto, another four reactors further east at Darlington and seven reactors at Bruce A and B stations, 256 km northwest of Toronto on Lake Huron - the authors cite excessive human error, degraded equipment, and reactor control room employees who receive just half the training hours of their U.S. counterparts. There are workers too terrified to send bad news up the ladder, and senior managers who do not know what subordinates are doing. Deficiencies, say the authors, exist in virtually all performance areas. The problems are well-known, are long-standing and have gone unaddressed. Within the next 12 months, all four units at Pickering A and the three units in the Bruce A facility will be shut down, though the utility will not say if they will be shuttered forever. The heavy-water plant at Bruce, however, will be closed permanently, given that sufficient supplies exist for the CANDU program.

The specifics in the report itself and in the volumes of supporting material are shocking. "The status of radiation protection is less than adequate to prevent the spread of contamination and to control radioactive materials," it says. "Uncontrolled contaminated material has been discovered at the Bruce A north warehouse." Inspections at the Bruce station are being delayed, "such as those for the shutdown cooling heat exchangers that are nearing the 'danger zone' age." On Darlington: "There are no processes in place to ensure long-term, safe operation of the station." On Pickering: oil leaks, water leaks and broken gauges. Ad hoc design modifications to all units left engineers without accurate blueprints to ensure their safe operation. "The air system in one of the facilities didn't meet seismic criteria," said Andognini in an interview last week. Which facility? "I'd rather not say which one." Why not? "I don't think it's important."

And on it goes. Upon receiving the report last week, Ontario Hydro CEO Allan Kupcis, a Hydro lifer who had been in the top executive's chair for just 2 1/2 years and whose idea it was to get Andognini onboard, resigned. Farlinger declines to say whether he asked for Kupcis's resignation. "We had a lot of discussions with Dr. Kupcis," he says obliquely. And he refuses to put a number on the payout to the CEO who was paid $564,000 last year. The cost of the analysis of what went wrong on Kupcis's watch and those of his predecessors has already run into millions of dollars. Outsiders are questioning whether the board has given enough thought to the billions it now intends to spend. "We need to be damn sure that the recommendations are appropriate," says Arthur Dickinson, executive director of the Association of Major Power Consumers. Dickinson is not anti-nuclear. But he questions whether a board can adopt such serious, and expensive, recommendations after such short consideration. David McFadden, chairman of the Stakeholders Alliance for Electricity Competition and Consumer Choice, says his group hopes the $8-billion plan is headed for very careful Ontario government review - to ensure that, as he puts it, "good money is not being spent after bad." McFadden gives top marks to Farlinger and Kupcis for exposing the too-secretive, monopolistic Crown corporation, but he says he can't see how addressing the nuclear problem in isolation makes any sense at all, given current efforts to open the entire industry to competition. As for the greens, they want out. "I want to tick off that box that says, 'Not with my money you don't,' " says Norm Rubin, director of nuclear research for Energy Probe in Toronto.

Farlinger - whose priority after replacing Maurice Strong as Ontario Hydro chairman was to push the utility towards privatization - does not hope to make converts of nuclear skeptics. "I think Ontario Hydro is seen as a bad company. And it has been a bad company," he says. "Are we wasting money trying to fix nuclear? I don't believe we are." According to Farlinger, the Hydro board, a hefty group of 18 men and women, finally awoke to the fact that the monster utility was in real trouble in April last year when Pickering discovered a flaw in its emergency safety system. All eight reactors were shut down. "I think everyone on the board knew we had real problems then," he says.

This seems curious. Ontario's CANDUs, the natural-uranium fuelled, heavy-water moderated technological pride of AECL, have for years been plagued by cracked pipes, misaligned tubes and heavy-water leaks. And that's just the information that has made its way into the public domain. "The board was not well enough informed; senior management was not well enough informed," says Farlinger of the clearly dysfunctional corporate relationship. Did the board and, for that matter, senior management, need a seismic event - that is, the Pickering flaw - to get them to focus on the problems that lay under their very noses? Says Farlinger: "It looks like it." Does the board bear any responsibility? "Boards don't run companies."

In an interview with Maclean's earlier this year, then-CEO Kupcis said that Ontario Hydro had become "totally unhappy" about the way the nuclear program was being managed by early 1995. "There had been building evidence of a deterioration in safety." Kupcis labelled it complacency. "It comes down to leadership - management had lost its focus on safety and efficiency and allowed a deterioration of standards to occur."

Starting in June, 1996, the board received monthly direct reports on Pickering from Ken Talbot, who had been parachuted into the utility's oldest nuclear facility from Bruce A. Andognini took over the board reports when he arrived in January. The experience was, says Farlinger, "an ongoing saga of how many problems we had and how inefficient we were." Last December, the Atomic Energy Control Board renewed Pickering's operating licence for an unprecedented six months, instead of the standard two years, citing the need for safety-related improvements. In June, AECB granted Pickering just a nine-month renewal, saying that while progress had been made, more was required.

Robert Potvin, public affairs supervisor with the AECB, says the control board was raising "yellow flags" and expressed "some fairly serious concerns that we had over the medium- to long-range safety." The safe operation of the reactors in the short term, he maintains, was not in question. That is hard to square with the Hydro report. Andognini insists that none of the reactors ever reached an unsafe state. It's just, he says, that there were unacceptable erosions of the margin of safety.

Last week, Andognini replaced Pickering boss Talbot with Gene Preston, a member of his American team. In two years, Pickering has seen a 70-per-cent turnover of management ranks. Talbot was surprised to see that turnover ultimately include himself. "The report," he says, "was very, very critical, invasive and brutal. But that's what we needed."

Farlinger said at a news conference last week that the problems in nuclear had been building for a decade, and that the divisional culture, which he likened to "some sort of special nuclear cult," was the nut of the problem. But he remained steadfast that the people at the top did not have a clue. That drew frustrated objections from Pickering regional councillor Maurice Brenner. "We've been telling you that for a number of years," he said of the management problem. "Over and over again, sir."

In a later interview, Farlinger, a former accountant, said that when he arrived at Ontario Hydro in November, 1995, "I kept hearing, 'The nuclear company does this. The nuclear company does that.' I often said, 'You people talk about this as if it's a different company.' " The nuclear division, says Farlinger, felt it should not be penetrated by the rest of the corporation. "The issue of culture," says Andognini, "is that nuclear tries to keep everything confined within it. [They] won't tell anybody anything. That's not just the Canadian culture, it's the nuclear culture."

And it's not a new story in the United States, where Andognini spent 30 years on nuclear, including the restart of the Rancho Seco Nuclear Power Plant in Clay Station, Calif., which has since been decommissioned. That was the late 1980s, after Forbes, the conservative business magazine, dubbed the U.S. nuclear power program "the largest managerial disaster in business history, a disaster on a monumental scale." The U.S. nuclear program was doomed, said Forbes, by financial miscalculations, inefficiencies and plain mismanagement of what may well be the most complicated, and relentlessly demanding, technology on earth. "The ineptitude had no pattern, and virtually anything could go wrong."

And it had, on March 28, 1979, when a reactor at Pennsylvania's Three Mile Island dangerously overheated, coming close to releasing huge amounts of radiation into the atmosphere. "The United States accomplished a great deal after Three Mile Island," says Talbot, who has been with Hydro for 27 years. "They improved their management processes, their systems." John Zwolinski, deputy director for reactor projects at the U.S. Nuclear Regulatory Commission, adds that of 25 or 30 problem nuclear plants that have had to "get well" over the past dozen years, almost all went through a radical management change. "Good teams can turn bad over 10 years if they're not self-checking and probing."

Nuclear observers, both pro and con, cite the "Millstone problem" as a prime example of a nuclear program gone bad. Millstone, three reactors run by Northeast Utilities in Waterford, Conn., had a people problem - workers who stopped raising safety concerns for fear of management retribution - and a problem with modifications being made in the field that did not match the engineering blueprint. A superficial study of Millstone raises disturbing echoes of Ontario Hydro. The Millstone licensee shut one of its units voluntarily late in 1995. The Nuclear Regulatory Commission mandated the shutdown of the other two units in the spring of last year. Andognini figures the people of Ontario "ought to be real happy" that Hydro moved to correct its problems when it did. "I am convinced, thoroughly convinced," says Andognini, "that had this not been done, and the recovery program put in place, that the province would have shut these units down because of increasing cost, or the AECB would have shut them down for declining performance."

Scott Denman, executive director of the Safe Energy Communication Council, a watchdog coalition in Washington that includes Greenpeace and the Sierra Club, says it is standard practice for industry players to blame human error. "What the industry tries to do in these cases is make the technology look as good as it can," he says. But the widespread deterioration and premature aging of reactors are problems that will likely worsen until the technology on this continent, at least, eventually dies, which it will do, given that it has been two decades since a new reactor has been commissioned in Canada or the United States.

That's not what AECL wants to hear. "The news coming out of Ontario Hydro certainly isn't welcome news for us," says Gary Kugler, AECL's vice-president of commercial operations. "It will be difficult to pinpoint a people problem and what is a hardware problem, but we are confident that we can do that." AECL has had a tough enough time selling its CANDUs abroad. Romania signed on for five in the late '70s, but then only finished one, and that with substantial intervention from AECL itself, which is still in negotiations to finish a second unit there. In the first week of September, AECL will submit a bid to sell a CANDU to Turkey, a market it has been trying to crack for years and for which the competition will be stiff. The sale of two 700-megawatt reactors to China last year, and previous sales to Korea remain the brightest spots in AECL's thin sales record. Ontario Hydro's ultimate acceptance that nuclear management has gone very wrong here at home raises concerns about operational oversight abroad. "When we sell reactors, we also sell a comprehensive training program," says Kugler. But that training program for Ontario Hydro did not extend beyond construction in the '70s, after which the utility gradually hired and developed its own engineers. "In the later projects, the '80s and '90s, the Darlington reactors," adds Kugler, "we had relatively little involvement."

Darlington was completed in 1992. Budgeted at $6 billion, massive cost overruns took the price ultimately to $14 billion, all guaranteed by the Ontario taxpayer. Would Darlington have even been built in a private-sector world? "I guess, intuitively, it would not have," says Farlinger. Damned by economics, Darlington emerges in one of the report's background studies as an operation that is far from world-class. "Control panels are not consistently monitored while fuelling is in progress," says the report. "A cap was cut off a drain line on the emergency coolant injection system without engineering and nuclear safety review." "One manager stated that if a performance plan goal was not achieved, the goal was lowered to make it achievable in the future."

Andognini has 2 1/2 years to fix this mess, within which time he has promised the board smooth-running nuclear operations that nudge a 90-per-cent capacity rate. The reactors on average currently run at just under 70 per cent.

This week, Hydro will hold what Farlinger calls a "beauty contest" for executive headhunters, each vying for the job of conducting the search for a new CEO. Farlinger makes it sound like a prize job, now that the corporation's dirty linen has been aired.

Maclean's August 25, 1997