Missouri Nuke plan legislation is on its way

[bananas]

http://primebuzz.kcstar.com/?q=node/16688

Nuke plan legislation is on its way

JEFFERSON CITY | If you follow the Missouri legislature this year, you're going to hear a lot about Senate Bill 228 .

The bill, introduced today by Lowry City Republican Delbert Scott, addresses CWIP - Construction Work in Progress - the law that prevents utilities from charging customers for power not yet being generated.

AmerenUE, the utility serving much of eastern Missouri, says the rule must be rolled back for it to build Callaway 2, a new nuclear reactor in Central Missouri.

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For Ameren, the cost of the plant will likely exceed its net worth, making financing difficult. By charging rate-payers immediately for costs associated with the plant, Scott and others said it could save perhaps $1 billion in interest costs, making the the project much more feasible.

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[phantom power]

1. I have a question about this situation, which is not about nuclear power...

Ameren's strategy is being framed here as "making customers pay for power that isn't being generated yet."

Wouldn't the sane way to frame this be: "Ameren is using its current revenue to pay for an upcoming capital investment?" You know, what companies do, to expand.

Also, what does it mean for something to cost more than it is worth? If it cost $X, then consider the possibility that it's net worth is $X.

[kristopher]

2. There is a shortage of real information but some speculation

"Wouldn't the sane way to frame this be: "Ameren is using its current revenue to pay for an upcoming capital investment?""

No, it wouldn't. Current revenues are paying for facilities already in place, built and producing electricity. You are confusing capital investment with the purchase of the product. What Ameren is seeking is to start the revenue stream from electricity they *might* someday sell and use it to capitalize their project - apparently without paying interest on those funds, I should add.

My reading of "cost more than it's worth" is that the projected costs exceed the projected profits able to be generated by the unit. Some people think that is a good indicator that a project isn't needed.

[phantom power]

3. I suppose, but consider...

the net effect is that the customers get charged more, and the extra money is used to build new capacity. We're having rate increases out here, and it's partly to pay for new capacity. Another example: we are on a voluntary plan where we pay a few dollars extra each month to pay for renewables build-out.

If Ameren had just increased its rates, and said "we're increasing rates so that we can pay for future capacity increases," I assume nobody would think that was crazy. It has the advantage of reducing the need for credit, in which case customers would be paying for interest on a loan, as well.

I can see how if somebody projects that a new plant will not make enough money to pay for itself over its lifetime, then that's a good argument for not doing it. What I wonder is, are we seeing evidence that no new capacity is needed, or is it evidence that customers are not yet ready to accept the new reality that energy will be more expensive in the future? Cynical guy that I am, I kind of suspect the latter, but I've been wrong before.

[kristopher]

4. Here is an article By Forbes, it is more informative.

http://www.forbes.com/feeds/ap/2009/01/05/ap5880774.html

What really leaps to my mind, however, is the paper by Jacobson that calculated the opportunity costs of nuclear. This is a terrific example that brings that lost money into clear focus. The $1B in interest that the utility wants to save is real money that 1) someone is not earning (ratepayers) 2) that could be doing something more productive.

http://www.rsc.org/delivery/_ArticleLinking/DisplayHTMLArticleforfree.cfm?JournalCode=EE&Year=2009&ManuscriptID=b809990c&Iss=Advance_Article

See section 4b

[bananas]

5. These regulations are a result of the boondoggles of the last nuclear build-up

WPPSS won't be paid off until 2021, and those payments are 15% of customer electric bills.
The nuclear industry now says, "please let us rip you off again, like we did last time."
They are asking, in effect, for a loan from customers.
The CBO says the risk of default of these loans is "very high - well above 50 percent".
The utilities can't get private financing because they are such a risky investment,
why should ratepayers be forced to make such a bad investment?
T. Boone Pickens is making money building windmills, but Warren Buffett cancelled a nuclear plant because "due diligence process has led to the conclusion that it does not make economic sense to pursue the project at this time."

http://en.wikipedia.org/wiki/Washington_Public_Power_Supply_System

In 1983, it became infamous for defaulting on $2.25 billion USD worth of bonds after construction on two of its nuclear power plants, WNP-4 and 5, was halted. The default remains the largest municipal bond default in the history of the United States, acquiring the nickname "whoops" in the financial media. As of 2008 about 15% of residential electric bills of participating public utilities still go to paying principal and interest on the abandoned plants.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=115x143316

WPPSS itself may have receded into the dim recesses of the region's consciousness, but WPPSS payments continue to show up every month on the region's electric bills. The Bonneville Power Administration had guaranteed nearly all the bonds sold to finance the first three plants. BPA customers will continue paying for those uncompleted plants through 2021. Currently, the annual debt service tab runs to roughly $311 million.

http://www.cato.org/pub_display.php?pub_id=3134

The Congressional Budget Office believes "the risk of default on such a loan guarantee to be very high -- well above 50 percent. The key factor accounting for the risk is that we expect that the plant would be uneconomic to operate because of its high construction costs, relative to other electricity generation sources."

http://www.commondreams.org/news2008/0128-09.htm

FOR IMMEDIATE RELEASE
January 28, 2008
4:01 PM


CONTACT: Nuclear Information and Resource Service (NIRS)
Michael Mariotte 301-270-6477

NIRS Statement on Cancellation of Idaho Nuclear Reactor


TAKOMA PARK, MARYLAND - January 28 - Today, MidAmerican Nuclear Energy Company announced that it is cancelling its plans to build a new nuclear reactor in Payette County, Idaho.

The company cited the poor economics of nuclear power for its decision, saying that its “due diligence process has led to the conclusion that it does not make economic sense to pursue the project at this time.”

MidAmerican was planning on Warren Buffett’s Berkshire/Hathaway company to provide major financing for the project. Buffett is a major owner of MidAmerican.

Which leads NIRS to the obvious conclusion: if Warren Buffett cannot figure out how to make money from a new nuclear reactor, who can?

“This cancellation is the first of the new nuclear era,” said Michael Mariotte, executive director of Nuclear Information and Resource Service, “but it won’t be the last. Even before any new nuclear construction has begun in the U.S., cost estimates have skyrocketed and are now 300-400% higher than the industry was saying just two or three years ago.”

“The extraordinary costs of nuclear power, coupled with its irresolvable safety and radioactive waste problems, killed the first generation of reactors, and are going to end this second generation as well. But it would be tragedy if the U.S. wasted any money on new reactors, when resources are so desperately needed to implement the safer, cheaper, faster, and sustainable energy sources needed to address the climate crisis,” Mariotte added.

[bananas]

6. Here's an example

http://www.citact.org/newsite/modules.php?op=modload&name=News&file=article&sid=272

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Construction Work In Progress for power plant construction first became a controversial issue in Indiana in the late 1970s when the Public Service Company of Indiana (now PSI Energy) saw the projected cost to construct the ill-fated Marble Hill nuclear plant located near Madison, Indiana skyrocket from under $1 billion to over $7 billion. PSI-sponsored CWIP bills were defeated in the General Assembly in 1979, 1980 and 1982. An attempt to circumvent the legislative will was also defeated when the Attorney General ruled PSI’s so-called “trended rates” proposal to the IURC to be unlawful because it was no more than CWIP by another name.

PSI repeatedly sought passage of power plant CWIP because Wall Street investors had become increasingly skeptical of the viability of the Marble Hill nuclear plant due to construction problems, cost overruns, safety concerns, and reduced demand for electricity. As a result, financing the project through the sale of stocks and bonds became increasingly difficult and expensive. Indeed, after Governor Robert Orr endorsed the report of a Citizens Task Force concluding that it made more sense to cancel Marble Hill rather than finance its completion with ratepayer money, PSI abandoned the project due to its inability to secure the necessary capital from private investors.

The General Assembly rejected power plant CWIP three times because of intense and widespread opposition from all classes of utility customers. This opposition resulted primarily from strong ratepayer resistance to becoming involuntary financiers of Marble Hill, a project which most PSI customers viewed as unneeded and unwanted but one whose rapidly escalating costs they would ultimately have to pay if it was completed. In 2002 the legislature was unmoved by appeals from CAC and others to reject CWIP once again.

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