Mayor willing to dump CPS plan

By Anton Caputo and Tracy Idell Hamilton- Express-News
Mayor Julián Castro is ready to pull out of the nuclear project if CPS Energy executives don't return from Japan with a significantly lower cost estimate.
Castro said Thursday he wouldn't wait until January - when the next cost estimate from contractor Toshiba is due - to begin "prudently" withdrawing from the nuclear project if CPS Energy officials fail to deliver news of a better deal Monday.
"I'd like to hear definitely whether or not this falls within the affordability plan articulated by CPS," he said. "If not, then we move to option B."
CPS Energy, which is partnering with New Jersey-based NRG Energy to build two more reactors outside Bay City, told the community all summer the project will cost $13 billion. At that level, the utility said it can build the reactors and hold bill increases to 5 percent every other year for the next decade.
But the recent revelation of a cost estimate from Toshiba as much as $4 billion more than the utility is willing to pay has caused something of a political crisis in San Antonio.
CPS interim General Manager Steve Bartley led a team to Japan this week to negotiate with Toshiba and is expected to divulge the results of the trip at the city-owned utility's board meeting Monday.
Castro said that without a lower estimate now, there is little reason to delay.
Councilman Ray Lopez said he agreed with Castro that the city should be ready to react if the news from the trip isn't good.
"There's no reason to go into January if CPS Energy can't keep the cost below the 5 percent bill increases every other year, and there's always been concern about that," he said.
Lopez said he hoped the utility would come back to the council and withdraw its recommendation to move forward with the nuclear expansion project if the estimate hasn't come down significantly.
Others, including Elisa Chan and John Clamp, think Castro's declaration is premature.
"Politically, it may seem to be the right thing," Clamp said. "But I think it deserves a council conversation."
Chan says she doesn't understand the rush.
"Why don't we keep our options open?" she asked. "And don't we have a contractual obligation to keep up our investment?"
Castro, however, said CPS Energy would take the necessary steps to "protect its investment" if it decided to get out. This could include investing more in the project while it looked to sell its share, although Castro said he'd rather not.
NRG spokesman David Knox wouldn't comment on the possibility of CPS Energy pulling out of the deal, but said the company was working hard to bring down the project's costs.
At issue is the price Toshiba will charge to build the plant. In CPS Energy's $13 billion estimate, Toshiba's portion is $8 billion. The remaining money breaks down to about $1 billion for licensing and other fees, $1 billion for contingencies and $3 billion for financing.
However, Toshiba's preliminary estimate of its share of the cost, which were leaked to the mayor and the San Antonio Express-News late last month, came in at $12 billion.
"We've already reduced that estimate substantially and will continue to reduce it further," Knox said. "If we thought the cost would be the ($12 billion) estimate - we wouldn't do it."
Councilman Reed Williams, who has pushed CPS Energy to sell down its share of the investment to reduce its exposure to just this sort of risk, said the nuclear expansion should be looked at as an opportunity, not a necessity.
"And if it's an opportunity, it has got to be compelling," Williams said.
Unless CPS Energy can wrench Toshiba's price back down near $8 billion, he added, it's no longer compelling.
"I think people are beginning to believe how hard it is to keep a project like this together," he said, pointing to the yen's strength against the dollar, and the possibility that inflation could climb rapidly in the United States before 2012, when a fixed price agreement is expected.
Both would increase the cost of the project, and neither is within the control of CPS, he said.
Walking away from the deal also gives the utility and ratepayers some breathing room, he said.
Because the city wouldn't need the additional energy for more than a decade, and because no other potential sources have such a long development time, a decision about what to do instead doesn't need to be made immediately.
"We don't have to get on another horse right away," he said. "We can rest our rear ends for a while."

 

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