Sunday, February 02, 2014
Ind. Gov't. - "Nuclear power project financing option sticks ratepayers with tab"
John Russell of the Indianapolis Star reported again yesterday on SB 302, a bill that was withdrawn Jan. 21st and about nuclear power in Indiana. In a Jan. 16th story, Russell wrote at length about the financing option of construction work in progress (CWIP):
The only power plant in Indiana to be built under this financing plan, known as Construction Work in Progress (or CWIP) is Duke Energy's coal-gasification plant in Edwardsport. The plant, originally approved at $1.9 billion, has soared to more than $3.3 billion, with ratepayers picking up much of the increase. * * *
The Citizens Action Coalition of Indiana said CWIP financing has stung Indiana ratepayers in the Edwardsport case and should be avoided for nuclear plants.
"The only reason utility companies need CWIP is because those investments are too risky, too expensive, and Wall Street won't support them, similar to the Edwardsport (plant)," said Kerwin Olson, the group's executive director. "If an investment is sound, then CWIP isn't needed. If it's not a good investment for shareholders, why is it a good investment for consumers?" * * *
Two efforts to build nuclear power plants in Indiana in the 1980s were scrapped in the face of rising opposition and high costs.
As the ILB posted on Sept. 13, 2009:
[CWIP]was a major issue in the Marble Hill debate in the early 1980s. A rationale for its use is to prevent "rate shock," the large increase in electrical prices that occurs when a massive new electricity generating plant enters the rate base. Other alternatives to address rate shock may include joint ownership, smaller plants, rating trending, and economic depreciation. I mention this because it has been many decades since Marble Hill's construction was halted; at the time CWIP was a phrase used in everyday conversation.Mike Smith of the AP wrote on Sept. 14, 2009:
Moses pointed to Public Service Co. of Indiana's failed effort to build a nuclear plant near Madison in southeastern Indiana. [ILB - This was Marble Hill] PSI told stockholders in 1973 the plant would cost $793 million, but after a decade that saw double-digit inflation, construction delays, intensified federal regulation and high interest rates, the estimate soared to $7 billion.And from yesterday's Star story:
A task force appointed by then-Gov. Bob Orr recommended in 1983 it be canceled and PSI not be allowed to recover its costs from customers. PSI, which eventually merged with Cincinnati Gas & Electric Co. to form Cinergy Corp., abandoned the project in 1984 after spending more than $2 billion. Moses said the utility and its stockholders had to eat the costs.
Merritt said allowing utilities to recover costs from rate payers while building nuclear plants would be a "powerful incentive" for establishing them in Indiana. He supports the position of the Nuclear Energy Institute, which considers nuclear energy a source of clean-air, carbon-free electricity.
In Mississippi, the construction cost of a new coal-gasification plant has jumped from $2.8 billion to more than $5 billion. The state legislature had allowed the owner, Southern Co., to charge customers for the up-front construction costs, a move that pushed monthly bills up 15 percent this year alone.
In Indiana, the only power plant to be built under CWIP financing is Duke Energy's coal-gasification plant in Edwardsport. The cost of the plant, originally approved at $1.9 billion, has soared to more than $3.3 billion, with ratepayers picking up much of the increase.
Analyzing the track record
Some critics point to the track record and say CWIP is an open checkbook for big energy companies who can't get funding for expensive new plants from banks or Wall Street. * * *
Supporters also say CWIP is necessary because building a nuclear plant, even a small modular reactor, is so expensive that banks and Wall Street have shied away. They say they need ratepayers to help with the up-front costs that will generate benefits down the road.
But critics say the reason Wall Street won't finance nuclear power is not because it is too expensive, but because it's a losing economic proposition. Other forms of energy, including natural gas, are much cheaper today.
Wall Street, after all, invests heavily in other billion-dollar industries, from computer-chip factories to energy pipelines.
"The test that nuclear can't pass isn't how big it is, but whether energy can be generated at much lower cost in other ways," said Peter Bradford, a former member of the U.S. Nuclear Regulatory Commission and former chair of the New York and Maine utility regulatory commissions. "The answer is clearly yes."
A looming issue is how much a new nuclear project will cost — even at the small modular reactors, which are still years away from going from the drawing board to production. It's difficult to give a price for one, since a utility has yet to buy or build one.
Posted by Marcia Oddi on February 2, 2014 09:17 AM
Posted to Indiana Government