NB Power says it was unable to renegotiate an agreement with Atomic Energy of Canada Ltd. eight years ago to guarantee the performance of the Point Lepreau Nuclear Generating Station following its refurbishment, so the utility proceeded without one.
"The Plant Performance Agreement was cancelled," NB Power said in filings with the Energy and Utilities Board on Wednesday.
"NB Power and AECL were unable to reach agreement on terms more favourable to NB Power."
The EUB is attempting to assess how long Point Lepreau is likely to run following its refurbishment so it can set out a repayment schedule for the reactor's $2.4-billion construction cost.
NB Power says it expects the plant to operate trouble free for 27 years and wants to finance its debt over that period, but the EUB wanted to see financial guarantees NB Power put in place to protect itself against an early break down.
In an official written response NB Power says there are no guarantees — at least from AECL.
NB Power long considered a performance guarantee on Point Lepreau to be a critical protection for itself if refurbishment proceeded, so critical it signed a deal widely viewed as lop sided to get one.
Originally, the utility agreed to pay AECL bonuses if Point Lepreau operated at more than 80 per cent capacity for the first 15 years after refurbishment and at more than 75 per cent capacity for the following 10 years in exchange for AECL agreeing to pay penalties if those targets were not reached.
But that deal was heavily criticized by British Energy expert and New Brunswick government consultant Robin Jeffrey in 2004, who noted that Point Lepreau would be a money loser if it operated at those levels and wondered why NB Power would agree to pay bonuses for such poor performance.
"It is inappropriate that bonus payments to AECL should begin at a capacity factor of 80 per cent particularly as NB Power considers the economic case for the refurbishment investment should be based on a 25-year future performance level of 89 per cent," Jeffrey wrote in assessing the arrangement.
Jeffrey said the deal NB Power made to protect itself against Point Lepreau not working well after refurbishment was so "biased" in favour of AECL it should be renegotiated with better terms or scrapped.
NB Power said it would renegotiate but on Wednesday acknowledged AECL would not budge and the project proceeded with no guarantees on its post refurbishment performance at all.
"The recommendation from Robin Jeffrey, on behalf of the Province of New Brunswick in 2004, was that the agreement be cancelled if NB Power could not negotiate more favourable terms for NB Power," said the utility in its filing.
'NB Power has multiple warranties'
However, Brent Staeben, a utility spokesperson, said the lack of a performance agreement with AECL, once considered critical, is not a concern.
"NB Power has multiple warranties and multiple insurance policies in place, including insurance to cover business interruption and material damage, said Staeben in an email to CBC News.
"These risk management strategies are designed to protect against the same risks that the plant performance agreement was designed to protect against."
Point Lepreau, Atlantic Canada's only nuclear reactor, has been out of service since March 2008.
The refurbishment project is about three years behind schedule and $1 billion over budget.
The New Brunswick government is attempting to get the federal government to cover the cost overruns.
NB Power said this week the reactor started producing electricity for homes and businesses for the first time in more than four years.
The final stages of commissioning the plant will include increasing and decreasing reactor power, and disconnecting and reconnecting the reactor to the grid.
The Canadian Nuclear Safety Commission will continue to provide onsite inspections and technical reviews of the remaining tests and commissioning activities, officials said.