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posted on:
3/6/2012 11:48:18 AM EST
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Paying for Nuclear
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From Gerry Herr: Nordic Energy
Paying for Nuclear
If the United States is to see a nuclear power renaissance, rate increases in many states will kick in long before the plants are operational. For utility customers in Georgia, South Carolina and Florida they already have.
Georgia Power, part of Southern Co., announced a monthly increase of 57 cents for the average customer beginning January 2012 for financing two additional nuclear reactors at Plant Vogtle near Augusta. In Florida, the Public Service Commission in October unanimously agreed that Florida Power & Light customers must pay $196 million in 2012. Another rate increase later in 2012 is expected for South Carolina Electric & Gas Company and state-owned Santee Cooper. The joint project aims to build two new units at the Virgil C. Summer Nuclear Station and received a 1.1 percent rate increase in 2009 to start recovering financing costs.
None of these new projects has final regulatory approval. The Nuclear Regulatory Commission did grant a license to the new Vogtle reactors this year, making it the first new U.S. nuclear to be given such approval in 30 years. The South Carolina one could come this year but the one in Florida is unknown. All are using mechanisms designed to spread the massive costs of such ventures over a longer period of time. These new projects inch forward in a regulatory environment that incorporates some painful lessons from the past. Contracts for nuclear construction now attempt to segment some risks, such as a spike in the price of steel, that are truly unavoidable, while design work and site construction expenses are subject to better oversight mechanisms during the building phase.
In Georgia, for example, Southern, the lead partner in the $14 billion project makes monthly expense reports and submits to a state regulatory cost review every six months. Additionally, the company pays for an independent expert who monitors the project and reports to the commission.
Allowing utilities to recover costs for Construction Work in Progress, or CWIP, strikes a middle ground that allows up-front customer rate increases to mitigate the big rate shock that typically comes with a new nuclear plant in use. However, CWIP recovery does involve some degree of approval before the final costs are known, which some contend might limit the incentives to control costs.
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