NB Power tried to buy insurance for Point Lepreau delays
Utility was prepared to pay $6M to protect against AECL problems
NB Power sought to purchase what it called "Delay in Start-Up Insurance" prior to beginning the Point Lepreau nuclear refurbishment new documents show, further evidence it had no expectation of a federal bailout if the job went sour.
The insurance is proposed in a final contract authorizing the refurbishment and signed between Atomic Energy of Canada Ltd. (AECL) and NB Power in July 2005.
The contract was released publicly for the first time this week as part of upcoming hearings into the refurbishment at the Energy and Utilities Board.
The contract details how NB Power was prepared to pay $6 million to insure itself against a series of AECL refurbishment foul ups, many of which eventually occurred, including, "delays in start-up attributable to; ... errors, omissions or fault in design ... defective material or equipment or faulty workmanship."
The contract requires AECL to help NB Power find an insurer, but not to cover the cost of delays or even help pay the premiums.
"The Contractor [AECL] and the Owner [NB Power] shall work co-operatively and use their best efforts to procure such insurance on the most favourable terms to the Owner," says the contract.
It's unclear if insurance was ever purchased, although the policy the two partners were hunting for was inadequate in any event, envisioning a worse-case scenario of a three-month refurbishment delay.
The policy was to pay NB Power $700,000 a day in damages for a delay in Point Lepreau's restart that exceeded 30 days, but was to max out after 88 days at $40 million.
On Thursday, the refurbishment was 1,142 days behind schedule and more than $1 billion over budget, 25 times worse than the insurance policy would have covered.
The contract suggests neither NB Power nor AECL had any notion of the mess they were embarking on with the refurbishment and includes a letter from then AECL president Robert Van Adel congratulating then NB Power President David Hay on being the first utility to use AECL's "fast retube technology."
"The success of this project will in large part carry the future reputation of AECL and the industry," Van Adel wrote.
"We will deliver this project on time and on budget."
That didn't happen and revelations that NB Power agreed to buy its own insurance to cover problems that might be caused by AECL is bad news for the provincial government, which has been asking the federal government to pay for Point Lepreau delays.
Nothing was negotiated to obligate Ottawa to pay and in 2009 Prime Minister Stephen Harper said it was the federal government's intention to give New Brunswick only what the Point Lepreau contracts specify.
"We will be respecting those contractual obligations," said Harper during a tour of Saint John, a line repeated again this week by federal Finance Minister Jim Flaherty in Fredericton.
"There is a contract, as you know," said Flaherty when asked if Ottawa might compensate New Brunswick for Point Lepreau’s problems.
The main reason for the delay was the installation of the reactor’s calandria tubes.