Intervention orale par. Oral intervention from. Huron Grey Bruce Citizens Committee on Nuclear Waste

Transcription

1 Deep Geologic Repository Joint Review Panel Commission d examen conjoint du projet de stockage dans des couches géologiques profondes PMD 13-P1.159 File / dossier : Date: Edocs: Oral intervention from Huron Grey Bruce Citizens Committee on Nuclear Waste Intervention orale par Huron Grey Bruce Citizens Committee on Nuclear Waste In the Matter of À l égard de Ontario Power Generation Inc. Ontario Power Generation Inc. Proposed Environmental Impact Statement for OPG s Deep Geological Repository (DGR) Project for Low and Intermediate Level Waste Étude proposée pour l énoncé des incidences environnementales pour l Installation de stockage de déchets radioactifs à faible et moyenne activité dans des couches géologiques profondes Joint Review Panel Commission d examen conjoint September 16 to October 12, septembre au 12 octobre 2013

2 FINANCIAL ANALYSIS DEEP GEOLOGIC REPOSITORY PROPOSAL AT BRUCE NUCLEAR SITE PREPARED FOR HURON-GREY-BRUCE CITIZENS COMMITTEE ON NUCLEAR WASTE Stephen Thompson <personal information removed> August 4,2013 DGR Joint Review Panel Hearing - Written Submission in Support of an Oral Intervention 1

3 7C. SiiZplu?" q!'"mps"" <personal information removed> A r11 'inl),.. ) I., August 4, 2013 This report was prepared for the Huron-Grey-Bruce Citizens Committee on Nuclear Waste who asked me to review the material on file, and prepare a report analyzing the financial aspects of the proposed undertaking. There is a lot of material on file, and as a consequence, if I overlooked something of material relevance, it was an oversight, and definitely not done on purpose. I did, however, review the material extensively, and have made what I believe to be professionally-responsible comments, and recommendations, as can be seen in the body of my report:. Sincerely, <original signed by> Stephen Thompson, BSc, MBA 2

4 OVERVIEW: By way of comparison to the amount of information provided on other matters, the financial information provided by the Environmental Assessment, and related documents, is somewhat sparse. We know, from item Construction Capital Costs, on page 4-44 of the Environmental Impact Statement (EIS) that the estimated construction capital cost is $1 billion as of the time of the writing of the EIS document. We also know, from table on page 3-17 of the EIS document, that lesser alternatives do cost somewhat less, but not all that much less. This table shows, in 2002 dollars, that while the preferred option costs $927 million for construction and lifetime operating costs, surface concrete vaults cost $923 million, enhanced processing and storage costs $776 million, while the status quo option costs $648 million. In addition, we are told, from item 6.2 on page 45 of the Preliminary Decommissioning Plan, that the cost of the decommissioning program, when converted to 2013 present value dollars is $95 million, assuming a decommissioning period from 2055 to 2062, while the 2010 constant dollar amount of that cost is shown in figure 6.1 of the Preliminary Decommissioning Plan, to be approximately $322 million.. 3

5 CAPITAL CONSTRUCTION COSTS: The estimated $1 billion capital cost of the undertaking is not questioned, nor are the estimates of the costs of the alternatives, including the option of staying with the status quo of temporary storage. It is difficult to do any sort of cost/benefit analysis partly because this proposal is, by first principles, more of a cost-control project than a revenue-generating project. Some sense of perspective might be provided by comparing the capital costs of the project to the revenues generated by the sale of electricity from Ontario's various nuclear generating stations, but no information was provided by Ontario Power Generation (OPG) in this regard. Even if this information was available, the argument could be made that at least part of the reason for this undertaking is to deal with product which has already been produced, and stored in temporary facilities for forty years, thereby rendering any sort of costlbenefit analysis moot. 4

6 OPERATING COSTS: Any analysis of operating costs is also somewhat moot because these costs would be incurred in any event, including if the do-nothing, or status-quo, option was followed. Therefore, since, to a great extent, there would be negligible increases, or decreases, in annual operating costs, especially in relation to the initial capital outlay, they aren't overly-relevant in this exercise. 5

7 DECOMMISSIONING COSTS: It seems reasonable to accept the OPG assumption that, if built, and made operational, this repository would be decommissioned sometime between 2055 and OPG provides two estimates of the cost of decommissioning - one is the net present val ue of those costs today, shown, in item 6.2 on page 45 of the Preliminary Decommissioning plan, to be $95 million, and the other is approximately $322 million expressed in 20 I0 constant dollars, as shown in table 6.1 on page 42 of the Preliminary Decommissioning Plan. Unfortunately, neither figure tells what the actual costs would be at the time of decommissioning. This lack of disclosure of what the actual decommissioning costs are estimated to be, is a significant omission. For example, without disclosing what discount (interest) rate OPG chose to calculate the $95 million net present value of decommissioning costs, it is impossible to tell what OPG estimates those actual costs will be. For example, a 3% discount rate on something with a net present value of $95 million would make it worth $309 million in 40 years, a 4% discount rate would make it worth about $457 million, and a 5% discount rate would make it worth $659 million*. This example shows that for a project with a 40 year time horizon, it is a critical omission for OPG to not have disclosed either what their estimated costs of decommissioning in forty years would actually be, or the discount rate chosen for their net-present-value calculation. In addition, expressing the decommissioning costs in constant dollars indicates what the decommissioning costs would be in forty years ifthere was no inflation during that time - that is an unreasonable assumption and once again, does not provide any indication of what the actual decommissioning costs might be. The biggest problem is that, by definition, if the inflation rate used to calculate the constant dollar figure is the same as the discount rate used to calculate net-present-value, the $322 million and the $95 million would be the same number - but they're not, and OPG hasn't explained why. The fact that these two numbers are markedly different would normally mean that OPG has chosen one figure to calculate the annual rate of inflation for the next 40 years, and another figure to calculate the discount rate for the next forty years, but has not revealed either figure, and it's critical that they do so. Therefore, it is critical for any proponent, as a basic principle of full-disclosure, to have written something like - "We believe it is going to cost something around X million dollars to decommission this project in 2054, and that amount, based on an annual inflation rate ofy, is $322 million dollars in constant 2010 dollars, and also, by using a discount rate of Z, the net-present-value of X is $95 million." * Financial Management in Agriculture, Hopkin, BarlY, & Baker, Interstate Printers and Publishers, 1973 (charts attached) 6

8 , J At present the Panel is being asked to make decisions based on discount rates, and imputed rates of inflation which OPG has used, but not disclosed, when preparing the documents currently being examined by this Panel, and that's not the basis on which sound decisions should be made. Therefore, it is up to this Hearing Panel to determine what the nominal (actual) costs are going to be to decommission this project at the end of its useful life, and then decide what combination of net-present-value and constant dollar methodologies should be used to determine what these expenses might actually be, when expressed in today's dollars. 7

9 ,, DECOMMISSIONING CONTINGENCY COSTS: OPG's cost calculations for decommissioning this project, both prior to use, and after its useful life, were calculated with a 30% contingency factor (Item 8.1 in Appendix B, and item on page 44, both in the Preliminary Decommissioning Plan) to cover unforeseen costs. While a 30% contingency factor seems quite appropriate for a never-used plant half a dozen years into the future, it would, all else being equal, seem inappropriate for a wellused plant years into the future. Given that, for example, during that length of time, new, and more-costly, decommissioning regulations could be implemented, it would appear to be appropriate to increase the contingency allowance for a project at the end of its useful life to 50%. This means that if the stated $95 million net present value was calculated with a 30% contingency factor, a 50% contingency factor would change the net present value of the stated decommissioning costs to just under $110 million - and that might change yet again, if/when the Hearing Panel determines the net present value of the decommissioning costs should be established at a higher figure. 8

10 J FINANCIAL GUARANTEES While OPG notes (item 8.3 in Appendix B of the Preliminary Decommissioning Plan) that a financial guarantee will be provided to the Canadian Nuclear Safety Commission in the form of a letter of credit to cover the cost of decommissioning the project if it is constructed and never used, no similar financial guarantee seems to be in place to cover any of the decommissioning costs of the project at the end of its useful life. It would seem quite reasonable, as a condition of approval, to require OPG to provide a similar guarantee and/or bond for decommissioning the plant in 40 years. When this Panel determines an appropriate, and realistic, net present value which recognizes both inflation and interest rates, OPG should, by definition, be equally welloffby paying the adjusted net-present-value into a trust fund now, as they would by paying the entire amount in 40 years. Therefore, if this Panel determines that, for example, $110 million is an accurate representation of the net present value ofthe decommissioning costs of this project in 2060, paying this amount, which amounts to slightly over 10% of the costs of initial construction, into a trust fund, or similar investment vehicle, as a condition of approval, would be a responsible, quite-appropriate, and financially-sound, decision. Having a proponent of a 40 year project pay a discounted sum of money up-front to cover decommissioning costs, also makes sense because, by virtue of the length of the project, the individuals, and even the companies themselves, are often not the same at the end of the project, as at the start. 9

11 ) CONCLUSIONS AND RECOMMENDATIONS: (l) OPG should provide documentation to show what they calculated the actual decommissioning costs to be at the end of the useful life of this undertaking, as well as provide the discount rate used to determine the net-present-value of decommissioning costs. (2) The Hearing Panel should evaluate the reasonableness, and appropriateness, of OPG's estimates of future expenditures on decommissioning, as well as the reasonableness, and appropriateness, of OPG's choice of the discount rate used to calculate net-present-value. (3) The Hearing Panel should increase the contingency allowance for end-of-life decommissioning costs, from 30% to 50% (4) OPG should be required, as a condition of approval, to pay what the Panel determines to be the accurate net-present value of the decommissioning costs, including any variations caused by the acceptance of item (3), into a trust fund, or similar investment vehicle, to cover these actual decommissioning expenses. 10

12 " CURRICULUM VITAE: Robert Stephen Thompson Stone School Line, RR2 Clinton ON, NOM 1LO Education: (1) Bachelor of Science in Agriculture (Ag economics) the University of Guelph, (2) Master of Business Administration, the University of Western Ontario, Other Qualifications: Canadian Securities Course, 1983 Employment: (l) Farm Credit Corporation, London, Ontario - credit advisor responsible For 6-township territory lending mortgage money to farmers, and Administering these, and previously-made loans, (2) The University of Guelph - designed and taught Farm Management Analysis, and Business Finance, (3) Since 1974, I have owned, and operated, my own grains farm near Clinton. (4) Since 1983, I have operated my own income tax and farm management Business, and now have some 500 clients, many of which have self Employed income, often as not, farm income. (5) Since 1975, I have completed a wide variety of consulting projects, Ranging in scope from providing expert witness services in farm Related litigation, to preparing business proposals, to acting as agent In lieu of Counsel for farm groups in several undertakings proposed by Ontario Hydro. Personal Interests: (1) I served several terms on the Board of Directors of the Clinton Public Hospital, and was a member of that Board's Finance Committee. (2) I have been on the Board of Directors of the Huron County Federation of Agriculture (HCFA) for almost 30 years, and served For four of those years as President. The HCFA, with some 2000 Members, is the largest general farm organization in the County, Which itself, has long had annual farm-gate sales 40% larger than Any Atlantic Province. 11

13 ., APPENDIX TABLE II Present Value of $1.00 V = $lll+i)-n 0 n.5% 1% 1. 5% 2% 2.5% 3% 3.5% 4% 5% 6% W W (Continued) APPENDIX TABLE II Continued n L,O 50 7% 8% 9% ,7.502.L,)., W lq%j ~ : % 14% 16% 20% 25% ; Oll.004.em

14 .", t. I APPENDIX TABLE I Future Value of $1.00 V ; $l(1+i)n N n.5% 1% 1. 5% 2% 2.5% 3% 3.5% 4% ' % % (Continued) APPENDIX TABLE I Continued n 7% B% W ' % % % % % % %