Nuke Revival Puts All Risk on Customers

January 4, 2009

By Jay Bookman - The Atlanta Journal-Constitution

While Georgia Power and other utilities eagerly advocate a "nuclear renaissance," their enthusiasm for building new plants doesn't extend to sharing the considerable financial risks in volved. Nor have private investors flocked to put money in new nuclear plants.

To the contrary, Georgia Power's proposal to build two reactors at its existing Vogtle plant on the Savannah River near Augusta calls for company ratepayers -- you and me and anybody else who pays an electric bill to Georgia Power -- to bear almost all the considerable risk while making sure its stockholders and private investors bear almost no risk at all.

If the cost of the project soars, or if the project is abandoned for some reason after billions are invested, ratepayers will be stuck with the entire bill and Georgia Power will walk off scot-free.

And with Georgia Power's share of the project already estimated at $6.4 billion for just 45 percent of the plant output, that potential exposure is very large.

Nobody, not even Georgia Power officials, speaks with any confidence in those cost estimates, and for good reason. The "new generation" reactors coming on line may be better engineered than their predecessors, and the threat of global warming has given nuclear energy an environmental sheen of green. But the economics, even with lucrative federal subsidies, remain uncertain.

In Finland, the first new reactor built in Europe in 20 years is already three years behind schedule and 50 percent over budget. A little closer to home, the Tennessee Valley Authority had to more than double its cost estimate for two new Westinghouse AP1000 reactors -- the same untested reactors that Georgia Power proposes to build -- to as high as $17 billion.

In Europe, the delays and cost overruns have been blamed in part on the fact that nuclear construction, management and production skills have atrophied after a generation of disuse. The same would be true here in the United States.

"This dramatic decline in the domestic supply chain is clearly having an effect," the chairman of the Nuclear Regulatory Commission told The Wall Street Journal last spring. "The global supply chain is stretched, if not to the breaking point, at least to the tipping point."

For example, only one company in the world, Japan Steel Works L td., is capable of manufacturing the foot-thick reactor vessel needed in most designs, and the company is rushing to expand production from five vessels a year to 12 by 2012. That sounds reassuring until you realize that license applications for more than 30 new reactor units have been filed here in the United States alone, with more coming.

Compounding the problem, no AP1000 reactor has yet been built for commercial service, and its design is still being finalized with federal regulators. Yet Georgia Power is pressing the Public Service Commission to act by March to approve construction and financing of two such units.

Under the company's proposal, ratepayers would have to start paying for the units immediately, long before they were actually built and producing power. Ratepayers would also bear most of the risks if anything went wrong.

The PSC's advocacy staff has recommended that the commission reject that financing plan, arguing that Georgia Power and its stockholders should share some of the risk with the company's customers, in part to ensure that Georgia Power has incentive to keep costs low. That seems reasonable, logical, even necessary. If the company doesn't have faith that it can bring the project on line at a reasonable cost, it shouldn't push that risk onto ratepayers.

And yet that's the pattern everywhere. Utilities and private investors just aren't willing to put their own money at risk. Ratepayers' money, yes -- investors' money, no.

"No private-sector entity is investing in or proposing to invest in a new nuclear plant without direct or indirect support from the public," PSC Utility Finance Director Tom Newsome told the commission in written testimony.
Something's not right about that. It's hard to have faith in a chef who refuses to eat his own cooking.

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