Nuclear “Renaissance” Meets Economic Reality, But Who Gets the Bill?

Crystal River Nuclear Generating Plant, Unit 3, 80 miles north of Tampa, FL. (photo: U.S. NRC)

Crystal River is back in the news. Regular readers will recall when last we visited Progress Energy Florida’s (PEF) troubled nuclear reactor it was, shall we say, hooked on crack:

The Crystal River story is long and sordid. The containment building cracked first during its construction in 1976. That crack was in the dome, and was linked to a lack of steel reinforcement. Most nuclear plants use four layers of steel reinforcement; Crystal River used only one. The walls were built as shoddily as the dome.

The latest problems started when Crystal River needed to replace the steam generator inside the containment building. Rather than use an engineering firm like Bechtel or SGT–the companies that had done the previous 34 such replacements in the US–Progress decided it would save a few bucks and do the job itself.

Over the objections of on-site workers, Progress used a different method than the industry standard to cut into the containment building. . . and that’s when this new cracking began. It appears that every attempt since to repair the cracks has only led to new “delamination” (as the industry calls it).

Sara Barczak of CleanEnergy Footprints provides more detail on the last couple of years:

The Crystal River reactor has been plagued with problems ever since PEF self-managed a steam generation replacement project in September 2009. The replacement project was intended to last 3 months, until PEF informed the Commission that it had cracked the containment structure during the detensioning phase of the project. PEF subsequently announced that the CR3 reactor would be repaired and back in service by the 3rd quarter of 2010…then by the 4th quarter of 2010…and then by the first quarter of 2011. On March 15, 2011 PEF informed the Commission that it had cracked the reactor again during the retensioning process and subsequently told the Commission that it estimated repair costs of $1.3 billion and a return to service in 2014. Shortly thereafter, the Humpty Dumpty Crystal River reactor suffered yet another crack on July 26, 2011.

That July crack was later revealed to be 12-feet long and 4-feet wide–and here, at least when it came to notifying the Nuclear Regulatory Commission, “later” means much later. . . like four months later.

The issue, of course–as anyone with a lifetime crack habit will tell you–is that this all gets very expensive. Not only is there the cost of the repairs. . . and the repairs to the repairs. . . and the repairs to the repairs to the repairs. . . there is the cost of replacing the energy that was supposed to be supplied to PEF customers by the crippled reactor.

And then there is the cost of the new reactors. . . .

Wait, what?

Yes, based on the amazing success they have had managing Crystal River–and something called a “determination of need,” which was granted in 2008–Progress Energy holds out hope of someday building two of those trendy new AP1000 nuclear reactors at another Florida site, this one in Levy County.

And who is expected to pick up the tab? Who is on the hook, not just for repairs and replacement energy at Crystal River, but for PEF keeping its options open at Levy? Well, not surprisingly in “privatize profits, socialize risk” America, the plan was to stick Florida ratepayers with the bill (again Footprints provides the numbers):

Customer bills for instance, were expected to increase by $16/mo. in 2016; $26/mo. in 2017 and a whopping $49/mo. in 2020. Initially, Progress expected the proposed reactors to cost $4-6 billion each, coming online beginning in 2016. Just a few years later, the estimated costs have skyrocketed to over $22 billion and the online date, if the reactors ever even come online, has bumped back to 2021 and 2022. And the Office of Public Counsel believes that PEF may not intend to complete the reactors until 2027, if at all. The company has spent over $1 billion dollars on the Levy nuclear reactors and has yet to commit to build them. And the company is entitled to recover all its preconstruction and carrying costs from its customers before even a kilowatt of electricity is produced. In fact, even if the project is never completed PEF can recover all its construction costs from customers courtesy of the 2006 anti-consumer “early cost recovery” state law…essentially a nuclear tax scheme.

But now, as of this week, there is a new plan. . . stick Florida ratepayers with the bill:

The state Public Service Commission on Wednesday unanimously approved an agreement that will increase the power bills of Progress Energy Florida customers — who already pay among the highest rates in the state.

It is supposed to be a win for consumers.

The deal includes a $288 million “refund” of money customers were to pay to replace power from the crippled Crystal River nuclear plant, which has been offline since fall 2009 and might never return to service.

PSC staff concluded that customer rates still would increase. The average Progress customer’s bill on Jan. 1 is expected to increase $4.93 a month per 1,000 kilowatt hours of usage, from $123.19 to $128.12, subject to adjustments for fuel costs.

That’s a “win” for Floridians, it seems, because they are paying out something less for Progress Energy’s mistakes–at least in the near term. But even that caveat is subject to scrutiny:

While the agreement provides a replacement power cost refund over 3 years of $288 million to PEF customers (due to the CR3 outage) – it comes packaged with a base rate increase of $150 million and it precludes the parties from challenging up to $1.9 billion (yes, billion) fuel and replacement power costs from 2009 to 2016.

And that’s not all. Also in the agreement is a requirement that PEF start (yes, that is start) the latest repairs on Crystal River by the end of 2012; if they do not, Progress has to “refund” an additional $100 million to consumers. Missing, however, from the agreement is any new estimate (given the latest revelations, not to mention any post-Fukushima upgrades required) of the cost should PEF actually try to remedy all of Crystal River’s problems–and perhaps even more glaring, questions remain as to who will pay (and how much it will cost) should PEF decide to stop throwing good money after bad and decommission Crystal River reactor 3.

Also missing from the calculation is any determination of what PEF’s insurance will cover–Crystal River’s insurer stopped paying out in early 2011, and they have yet to decide if they will pay anything more. . . at all.

The agreement also fails to put an end to what is now becoming a regular part of the nuclear power finance scam–collecting public money for plants that will never be built. As the Southern Alliance for Clean Energy (SACE, which is affiliated with CleanEnergy Footprints) observed when it opted not to sign on to the Florida rate agreement:

PEF hasn’t committed to actually building the Levy Co. reactors. Having customers pay for the company just to maintain the “option” at a later date to build reactors is unfair to today’s customers – and runs counter to the Commission’s “intent to build” standard. The agreement allows the company to collect another $350 million from customers, presumably for pursuing their Nuclear Regulatory Commission license (without any prudency review) for reactors it hasn’t committed to build? In fact, the agreement contemplates that the company will cancel its engineering and procurement contracts as well, further demonstrating the unlikelihood of project completion.

If something sounds familiar here, it should. Southern Company has been using heaping helpings of Georgia ratepayer money to do all kinds of preliminary work on their Vogtle site, purportedly the future home of two new AP1000 reactors, just granted a combined construction and operating license by the NRC in January.

The big difference so far between Levy and Vogtle has been Southern’s ability to line up some financing for its Georgia construction–thanks to $8.33 billion in federal loan guarantees granted the project by the Obama administration almost two years in advance of the NRC approval.

PEF does not have this kind of guarantee, but that did not stop them from trading on the possibility:

Progress Energy Florida officials said Thursday that President Obama’s plan to offer federal loan guarantees to encourage investment in nuclear power plant construction will be a strong incentive to move forward with the company’s proposed Levy County plant.

The project, however, is facing delays of between 20 to 36 months due to economic and regulatory problems, making the plant’s future uncertain despite the company’s insistence the project isn’t cancelled.

“It (the loan guarantee program) will definitely play a role in that decision (whether to continue with the project). It is one of many, but a very important one,” said Progress Energy spokesman Mike Hughes.

That was in 2010, right after President Obama announced the new Department of Energy loan program–but two years later, PEF has not secured a federal guarantee, and so has not secured any financing. . . and thus has also not committed to ever building the Levy plant. But none of that has stopped Progress from collecting money from Florida consumers just to keep hope alive, as it were. And none of that has apparently stopped any of Florida’s public service commissioners from telling PEF that this practice is just jake with them.

Even with NRC approval and some federally guaranteed money, it is still not a sure bet that the Vogtle AP1000 reactors will ever come on line. PEF’s Levy project has no license and no loan guarantee.

The folks at Progress Energy are not stupid–at least not when it comes to short-term financial gain–they know how very slim their chances are of ever pushing even a single kilowatt out of Levy County, but they also know where the profit is in the nuclear power game. It is not, quite obviously, in the construction of nuclear power plants–rife as that process is with lengthy delays and massive cost overruns–and it is not, some might be surprised to learn, so much in electric generation, given that plants in the US are now suffering “unusual events” that force one or more of them offline pretty much every week. Unusual events cost money–in parts and labor, and in time lost to repairs and inspections–and, as has been demonstrated at Crystal River, there is the cost of replacement energy.

No, the real profits in the nuclear racket come from the ability to collect on services not rendered and a product not delivered, or at least not delivered regularly. Because the system backstops the financing of nuclear facilities while also allowing plant operators to pass both real and anticipated costs onto ratepayers, many American taxpayers are poised to pay twice for nuclear power plants that don’t produce power.

And it would be remiss to close without adding a few more points.

Much has been made of the failure of solar panel manufacturer Solyndra, which also received aid from the federal government in the form of loan guarantees. Solyndra ultimately got $527 million from the government; contrast that with what has been granted to Southern for Vogtle. Or, starker still, look at the entire alternative energy loan program, now projected to cost out at under $3 billion, and then look back to 2010, when Barack Obama pledged $54.5 billion to the DOE loan guarantee program designed to foster investment in nuclear power.

In addition, while the government will actually recoup most of the money lost on Solyndra when the factory and inventory are auctioned off, the “leftovers” from a failed nuclear plant–even the parts that are not contaminated with radioactivity–are much harder (if not impossible) to move.

The focus of this story has been on the costs–because the case of Progress Energy Florida is such a glaring example of how nuclear operators fleece America–but the fact that a company so focused on the bottom line, regardless of its effect on public safety, is still allowed to play with something as dangerous as a damaged nuclear power plant should not be overlooked. Alas, as was exposed last year, nuclear regulators and the nuclear industry seem to agree that safety should be addressed with an eye toward cost. So, while Crystal River is a scary mess, the reactor in question is actually offline right now. The same cannot be said, for example, about Ohio’s Davis-Besse plant, which has cracking problems of its own, but was allowed by the NRC to restart in January–over the vociferous objections of industry watchdogs, engineers, and Rep. Dennis Kucinich (D-OH).

And then there is Palisades, on the shores of Lake Michigan, where numerous events and releases of radioactivity in the last year caused the Nuclear Regulatory Commission to issue a downgrade of the plant’s safety rating–but the NRC did not order the plant to shut down. Palisades is owned by Entergy Nuclear, who was recently cited for “buying reactors cheap, then running them into the ground.” In addition to Palisades, Entergy owns nine other plants–Arkansas Nuclear One, Nebraska’s Cooper Nuclear Station, Fitzpatrick in upstate New York, Grand Gulf in Mississippi, Indian Point, just north of New York City, Pilgrim, outside of Boston, River Bend and Waterford, both in Louisiana, and Vermont Yankee.

The case of Vermont Yankee is especially upsetting. Yankee is a GE boiling water reactor, similar to the model that failed so catastrophically at Fukushima–but the NRC voted to extend its operating license just days after the Tohoku quake. The state of Vermont had a better idea, declaring that the nuclear plant should shut down by March 21, 2012. However, in January, federal district court judge J. Garvan Murtha ruled Entergy could ignore Vermont’s order and continue operating. The state is appealing the ruling, but in the meantime, Yankee continues to operate. . . and continues to leak tritium into the groundwater, and into the Connecticut River.

It is not clear who will be paying for any attempt to clean up the Vermont Yankee leak–though one can guess–nor is it clear what will happen to new nuclear waste produced after March 21, since the Vermont statehouse has forbidden any new waste storage on the site. Indeed, storing used nuclear fuel is a nationwide problem that poses real dangers in the near term, and will likely cost billions of public dollars in the long term.

And that’s the bottom line–the real bottom line–for the industry’s oft-ballyhooed “nuclear renaissance.” Plant operators and captured regulators can try to obscure the safety concerns with diversionary dustups and magical thinking, but economic realities, like facts, are stubborn. Without huge injections of public money, nuclear power simply cannot continue to function–and the public is in no mood for another multi-billion dollar government bailout.

The Party Line – December 2, 2011: Nuclear’s “Annus Horribilis” Confirms Its Future Is in the Past

In the immediate aftermath of the Japanese earthquake and tsunami that triggered the horrific and ongoing disaster at the Fukushima Daiichi nuclear power generating station, President Barack Obama went out on a bit of a limb, striking a tone markedly different from his fellow leaders in the industrialized world. Speaking about Japan and its effect on America’s energy future–once within days of the quake, and again later in March–the president made a point of reassuring Americans that his commitment to nuclear power would stay strong. While countries like Germany and Japan–both more dependent on nuclear power than the US–took Fukushima as a sign that it was time to move away from nuclear, Obama wanted to win the future with the same entrenched industry that so generously donated to his winning the 2008 election.

But a funny thing happened on the way to winning our energy future–namely, our energy present.

As November drew to a close, an article on AOL Energy (yes, it seems AOL has an energy page) declared 2011 to be “nuclear’s annus horribilis“:

March 2011 brought the 9.0 magnitude earthquake off northeastern Japan that sparked a tsunami whose waves may have exceeded 45 feet. Tokyo Electric Power Company’s oldest nuclear station, Fukushima Daiichi, apparently survived the earthquake, but its four oldest reactors didn’t survive that wall of water. Nuclear experts are still figuring out what all went wrong, and tens of thousands still haven’t returned home as Japanese authorities try to decontaminate radioactive hot spots.

In April, massive tornadoes that devastated the southeast swept near the Tennessee Valley Authority’s Browns Ferry plant.

In June, droughts sparked wildfires across the Southwest, including one that threatened the Los Alamos National Laboratory, where nuclear weapons materials are stored.

June also brought record floods across the upper Midwest. For weeks Omaha Public Power District’s Fort Calhoun nuclear plant was essentially an island.

August saw the 5.8 magnitude Virginia earthquake just 11 miles from Dominion Energy’s North Anna plant. The plant shut safely, and returned to service mid-November after extensive checks found no damage even though ground motion briefly exceeded the plant’s design.

That list, as readers of this space will no doubt note, is far from complete. This year has also seen serious events at nuclear plants in California, Maryland, Michigan, New Hampshire and Ohio. But, perhaps even more troubling is the strangely positive tone of the piece.

Despite its ominous headline, it seems the message is: “Yeah, lots of nasty business in 2011, but 2011 is almost over. We got through it and no one died (at least no one in the US), so. . . problem solved!” It’s an attitude absurd on its face, of course, the passage of time is not the friend of America’s aging nuclear infrastructure–quite the opposite–but it is also a point that can’t survive the week in which it was made.

Take North Anna, for example. Yes, it is true that the NRC signed off on a restart in the waning hours of November 11, but the two generators at Dominion’s plant were not back at full power till November 28 because there was indeed damage–some of which was not discovered until after the restart process began.

A week earlier, a fire at Ohio’s crippled Davis-Besse facility cut ventilation to the reactor control room. A faulty valve in a pipe sending water to the reactor core leaked on an electrical switchbox, triggering an electrical arc, which started the fire. This could have been a potentially catastrophic emergency. . . had the reactor not been shut down seven weeks earlier to replace an already once previously replaced, corroded, 82-ton reactor lid. This “transplant operation” revealed a 30-foot crack in the concrete shield building that will require a separate repair program. . . which will in no way be completed before the end of the year.

The day after that fire, November 20, the St. Petersburg Times reported that Progress Energy’s Crystal River nuclear power plant in Citrus County, Florida, had discovered a 12-foot by 4-foot crack and crumbled concrete in its containment building in late July, but failed to notify the Nuclear Regulatory Commission. This was a patently intentional omission, as Progress Energy was already reporting to the NRC about repairs to two other major cracks in the same building dating back to October 2009 and March 2011.

The Crystal River story is long and sordid. The containment building cracked first during its construction in 1976. That crack was in the dome, and was linked to a lack of steel reinforcement. Most nuclear plants use four layers of steel reinforcement; Crystal River used only one. The walls were built as shoddily as the dome.

The latest problems started when Crystal River needed to replace the steam generator inside the containment building. Rather than use an engineering firm like Bechtel or SGT–the companies that had done the previous 34 such replacements in the US–Progress decided it would save a few bucks and do the job itself.

Over the objections of on-site workers, Progress used a different method than the industry standard to cut into the containment building. . . and that’s when this new cracking began. It appears that every attempt since to repair the cracks has only led to new “delamination” (as the industry calls it).

At this point, most have determined that the best plan going forward is to tear down the substandard structure and build a properly reinforced new one, but Progress thinks they have a better idea. Crystal River’s operator is trying to replace the wall panels–all six of them–one by one.

Funny enough, the cost of this never-before-tried retrofit is about the same as the cost of a whole new building. But the full rebuild would take more time–and there’s the rub.

Every day that Crystal River is offline costs Progress money because they have to buy energy to replace what they agreed to provide to the region from this nuclear facility. Each year that the plant is offline is said to cost $300 million. The price tag on this little cracking problem so far–not counting the actual costs of the repair–is $670 million.

Who will pay that bill? Well, if you live in Florida, the answer is: you:

Customers will pay $140 million next year so Progress Energy Florida can buy electricity from other sources while a nuclear plant remains shut down for repairs.

Consumer advocates opposed the power replacement charge, which will take effect Jan. 1, but it won unanimous approval Tuesday from the five-member Florida Public Service Commission.

The panel’s decision is a prelude to a determination next year whether a portion of the repair costs should be passed on to customers or paid in full by the company’s investors owing to problems that have delayed the work. The Crystal River plant was closed for repairs in 2009 but now isn’t expected to reopen until 2014. That’s about three years later than initially expected.

The repair bill is expected to total $2.5 billion. The utility wants customers to pay $670 million, or about a quarter of that amount.

Interesting how that $670 million exactly mirrors the replacement energy costs through today. Students of the Florida Public Service Commission would probably be skeptical that the bailout will really stop there–remember, Florida residents already pay a surcharge on their utility bills for possible (but in no way guaranteed) future nuclear power construction.

And to say that it’s all about the money would not be pure speculation. As the St. Petersburg Times reports, while the good people at Crystal River failed to notify the NRC (or the Public Service Commission) about their latest troubles in a timely fashion, Progress Energy didn’t dare keep secrets from the US Securities and Exchange Commission. On August 8, the same day it neglected to mention the new cracks in a report to the PSC, Progress filed its annual report to the SEC and stated “additional cracking or delaminations may have occurred or could occur during the repair process.”

Given the many revelations of just how casual SEC enforcement can be, it is disturbing to think a nuclear provider had more to worry about from the SEC than from the NRC, the agency given direct oversight of nuclear plant licensing and safety.

Disturbing, but not surprising. This year has also revealed the cozy relationship between the nuclear industry and the NRC. An AP exposé made that clear over the summer, but one need look no further than the AOL Energy story:

[Nuclear Energy Institute CEO Marvin] Fertel said the industry and NRC are “in very good alignment” on the issues raised by 2011 events. The concern for utilities is the “cumulative impact” of new rules, he said, and making sure they’re ranked so plant staffs attack those with the most safety benefit first and the cost is manageable.

The government and the industry agree–safety must be addressed with an eye toward cost. And the tens of millions of Americans living in the shadow of a nuclear reactor will see just what this means as the watered-down post-Fukushima recommendations are slowly proposed and implemented–with little fully required of plant operators before 2016.

Indeed, the global nuclear industry is proceeding not just as if it is business as usual–when it comes to the United States, manufacturers of nuclear plant components are already betting on a new wave of reactor construction. Over the Thanksgiving weekend, Yomiuri Shimbun reported that Toshiba Corp. is preparing to export turbine equipment to the US.

The turbines are for Toshiba-owned Westinghouse Electric Company-designed AP1000 reactors proposed for sites in Georgia and South Carolina. As previously reported, the AP1000 is a new reactor design–a new design that has not yet officially been approved by the Nuclear Regulatory Commission. Still, the operators of the plants have already started to procure the equipment.

All of which raises the question, how is it that, in an age when credit is so hard to come by, an industry so focused on the bottom line feels secure in moving forward with commitments on a plan that is still officially going through the regulatory pipeline?

The assurances come from the top, and so does the money.

In contrast to pledges to, say, close Guantanamo or give Americans a public health insurance option, when it comes to nuclear power, Barack Obama is as good as his word. In February, Obama pledged $8.33 billion in federal loan guarantees to Southern Co., the operator of Georgia’s Plant Vogtle, the proposed home of two new AP1000 reactors. Again, this pledge came in advance of any approval of the design or licensing of the construction.

So, perhaps the nuclear industry is right to feel their “annus horribilis” is behind them, at least when it comes to their business plans. And with the all-too-common “privatize the profits, socialize the risks” way the utilities are allowed to do business, one might even doubt this last annus was really that horribilis for them at all.

But for the rest of us, the extant and potential problems of nuclear power are not limited to any particular period of time. The dangers of nuclear waste, of course, are measured in tens of thousands of years, the Fukushima crisis is lived by millions every minute, and the natural disasters, “events” and accidents that plague an aging, expensive and insufficiently regulated American nuclear industry are an anytime, anywhere reminder that future cannot be won by repeating the mistakes of the past.