ANALYSIS - Nuclear Industry Eyes Oversupplied US South
Date: 25-Feb-08
Country: US
Author: Eileen O'Grady
This week, North Carolina-based Progress Energy became the fifth company since last fall to submit a license application with the US Nuclear Regulatory Commission. Progress wants to build two reactors at a site near Raleigh which is already home to one reactor.
Of the 21 reactor sites identified in NRC filings, 15 are in the South. Four are in Texas, three in South Carolina, two each in North Carolina and Florida, and one each in Alabama, Georgia, Louisiana and Mississippi.
Unlike much of the United States, utilities in the South operate under traditional rate regulation which encourages investment in power plants and limits competition from third-party electric suppliers.
Utilities are attracted to the South for new reactors by prospects for future electric growth and by billions of dollars in federal financial incentives that are up for grabs. Because nuclear plants emit no carbon dioxide, the technology is viewed as a potential solution to rising public concern over climate change.
Nuclear-revival critics said Southeastern residents are still saddled by soaring nuclear costs from the 1980s while a glut of little-used power plants could meet future demand.
A RUSH OF NEW FILINGS
Frank Spencer, a former Mississippi assistant attorney general, has not forgotten the years-long legal battle over Entergy Corp's Grand Gulf station that pitted elected officials in Arkansas, Louisiana and Mississippi against the utility and state and federal regulators. The fight over who would pay went to the US Supreme Court.
Spencer battled unsuccessfully to keep Mississippi residents from paying more than their share of Grand Gulf's price tag which ballooned to more than $3.4 billion from $900 million.
"It was a huge burden, with the increase in rates," said Spencer, now a minister who runs a soup kitchen and shelter in Jackson. "It was the most costly plant at the time and Mississippi had to pay for one-third of it."
Today, a typical Entergy Mississippi customer still pays $12 a month for overruns at the 23-year-old nuclear plant, according to state regulatory filings.
The NRC expects a rush of new reactor filings this year from utilities seeking to qualify for nuclear production tax credits, financial risk insurance and federal loan guarantees created by the 2005 Energy Policy Act.
Georgia, Mississippi, Louisiana and Florida are among states considering more incentives to attract new reactors.
Outside of Texas, the Southeast has more than enough existing gas-fired generation to meet power needs for another decade, according to long-term forecasts from two power agencies. Utilities view these plants as unattractive because of the high and volatile cost of natural gas.
Yet few regulators have asked companies to compare the risk of future gas volatility to the uncertain expense to build the next nuclear unit even as costs soar for steel, concrete and skilled labor.
An index of power-plant construction costs showed that since 2000, the price of a new reactor has risen almost 200 percent, said Cambridge Energy Research Associates.
FPL Group's Florida utility told regulators its two-reactor expansion plan could cost from $12 billion to $16 billion, nearly double other company estimates from last year.
RATEPAYERS STUCK FOOTING THE BILL
Regulators should think carefully about burdening ratepayers with the uncertain costs of new reactors given the industry's history, said Peter Bradford, a former state utility regulator and former NRC commissioner.
"Regulators today should be looking a lot harder at a mechanism that a few states wound up using during the runaway cost era of the '80s and that's putting a cap on the amount that is recoverable from customers," Bradford said.
The Southeast is home to some of the most politically powerful utilities in the country, including Atlanta-based Southern Co, Charlotte, North Carolina-based Duke Energy, Juno Be