Prime Minister Stephen Harper said the federal government will pay only what it is contractually obliged to, after Atomic Energy of Canada Ltd. admitted the Point Lepreau nuclear plant refurbishment project is now 16 months late. ((CBC))

The federal government will only pay what is required under contract to defray costs associated with the 16-month delay of the Point Lepreau refurbishment project, Prime Minister Stephen Harper said on Monday.

Atomic Energy of Canada Ltd. was supposed to turn the reactor back over to NB Power in July 2009, giving the province's power utility until Oct. 1 to finish the project and begin generating electricity again.

Now AECL is scheduled to finish its work on Oct. 15, 2010, and NB Power will conclude its work and have Atlantic Canada's only nuclear reactor back operating by February 2011.

The delay will add hundreds of millions of dollars in extra fuel costs to make up the power the nuclear plant will not produce while it's offline.

New Brunswick Energy Minister Jack Keir said AECL is taking the blame for the setback, so the provincial government feels the federal Crown corporation should pay the entire bill for the delay.

Harper seemed to rebuff that request when speaking at the New Brunswick Southern Railway in Saint John on Monday.

"I understand the delay is costing a lot of money [to] New Brunswick," Harper said. "I can assure the delay is costing a lot of money to us as well, to the federal government. It is not in anybody's interest. We encourage Atomic Energy, they've met with the premier, encourage them to work to complete this project as soon as possible.

"The contract we have imposes significant obligations on the federal government, and we will be respecting those contractual obligations."

Premier Shawn Graham and Keir met with Harper and Finance Minister Jim Flaherty for about 30 minutes on Monday afternoon.

"The province presented its case to the federal government and the prime minister agreed to investigate the matter and respond to the premier," the premier's office said in a statement.

Dale Coffin, a spokesman for Atomic Energy of Canada Ltd., said now that the company is through the most technically challenging part of the refurbishment project, it should be able to stick to the new goal of turning the project over to NB Power in October 2010.

"There's a lot more training and preparation going in," Coffin said.

"We are benefiting from our experience to date. We're applying all of that to give us this new level of confidence."

Fuel costs $1 million a day

The former Progressive Conservative government signed the refurbishment contract with AECL in July 2005. It imposed penalties if the project ran past its scheduled deadline.

NB Power also purchased insurance in case the project did not meet its intended startup date.

The contracts, as they are now structured, would mean NB Power would still have to cover a large amount of the replacement fuel costs. It is estimated that it will cost roughly $1 million a day to purchase replacement fuel when the reactor is down.

David Hay, the president and chief executive officer of NB Power, said in January that NB Power would have to spend an extra $70 million to $90 million when the project delay was estimated to be three to four months.