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.

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The Party Line – December 30, 2011: The Party Line, Nuclear Style

As we close out 2011, readers of this space will likely not be surprised to hear the following:

  • The crisis at Japan’s Fukushima Daiichi nuclear facility continues and continues to poison the planet;
  • Accidents and events at nuclear reactors across the United States continue at a headshaking pace (something goes wrong somewhere pretty much weekly);
  • The nuclear industry continues its full-court press against any new safety rules that might spring from lessons learned from Fukushima or the domestic events;
  • Industry-friendly regulators continue to help slow-walk new rules while also working with allies in Congress to oust the slightly more safety-minded Nuclear Regulatory Commission chair, Gregory Jaczko;
  • Chairman Jaczko continues to hope his faith in a moderate path and a captured regulatory agency will guarantee a safe nuclear future and help save his job; and
  • All of this has happened before.

Last point first: Ryan Grim has a great follow-up on this month’s attempted coup at the NRC–where four commissioners, in coordination with members of congress and nuclear industry lobbyists, have gone public with complaints about the NRC chairman, Greg Jaczko. While the commissioners have stopped short of calling for Jaczko to step down, several GOP congressmen are pressing for just that result.

As Grim reports in the Huffington Post, the effort to oust Jaczko not only continues in the wake of two congressional hearings on the matter, the whole ugly putsch closely resembles moves in the 1990s to discredit another regulation-minded nuclear regulator. And the stories even include some of the same players.

Like with the current “scandal,” the plot is not a simple one to summarize (so please read Grim’s detailed story), but the highlights include a former National Resources Defense Council scientist, Terry Lash, who was appointed by the Clinton administration to run the Department of Energy’s Office of Nuclear Energy, his deputy, one William Magwood, and a staffer for the very nuke-industry-financed Sen. Pete Domenici (R-NM) named Alex Flint.

Thanks to an exploited possible gaffe in protocol and the coordinated work of Domenici, Magwood and Flint, Terry Lash was eventually pushed aside. And Magwood would take over the nuclear division at DOE, first as acting director, and then, under George W. Bush, as the office’s permanent head.

And yes, you’ve read two of those names here before. Bill Magwood is a commissioner at the NRC, a former consultant to the nuclear industry, and one of the most vocal critics of Chairman Jaczko. Alex Flint has run through the classic DC regulatory revolving door, moving between Senate staffer, nuclear industry lobbyist and back, most recently settling in as the top lobbyist for the Nuclear Energy Institute (NEI), the industry’s largest trade association.

The story is as troubling as it is tired. A government agency manipulated by the industry it is supposed to regulate. An industry, protected by bought politicians, avoids accountability while profiting from government largess. Some of that profit is then turned around to lobby and buy another administration’s worth of officials.

And an agency chief who is maybe too slow to realize that the industry and its surrogates will work relentlessly to undermine him and the regulatory body he tries to command.

The lessons here seem obvious and familiar. . . and yet they seem to be lost on so many.

It has been all-too-rare to see broad coverage of the US nuclear industry in the establishment press, yet, during the first week of December, nearly every news organ was Johnny-on-the-spot, repeating the industry storyline. Gregory Jaczko, it seems, was a temperamental leader, so difficult to work with that the NRC’s mission had been compromised.

Beyond the unremarked upon humor inherent in seeing Republican Senators and Representatives suddenly so concerned with nuclear safety, Jaczko himself provided under-reported frame-relief by proving so difficult to work with that he was able to secure the NRC’s unanimous approval of the new Westinghouse AP1000 reactor (despite some very serious concerns about that design and no financial support for construction without billions in federal loan guarantees). And the rest of the commission was able to out-vote Jaczko, four to one, to fast-track the construction and licensing of the new reactors, slated for plants in Georgia and South Carolina.

But perhaps most remarkable is that despite the industry push-back and power-politics, Jaczko still seems to think and act as if nuclear power can be regulated to a safe and prosperous future. The viciousness of the industry attacks and the seriousness of the events of nuclear’s annus horribilis should really disabuse him of that notion.

And the horrible year is not yet over. The last two weeks have seen the first of the debris from the Japanese tsunami hitting US shores, Pacific seals being tested after showing up in Alaska with skin lesions and other symptoms consistent with radiation poisoning, and a report from the International Journal of Health Services linking some 14,000 excess deaths in the US to the fallout from the Fukushima reactors.

Then there is the Japanese interim report on their nuclear disaster describing a regulatory agency unable and unwilling to take control of the crisis. There is the Tokyo Electric Power Company (TEPCO) contention that they are not legally responsible for fallout once it lands on someone else’s property. And here in the United States, there was a valve leak at Mass Pilgrim, a condenser leak at New York’s Fitzpatrick plant, and an event at Vermont Yankee where both of the cooling system’s backup power generators were offline at the same time.

Still, the nuclear industry pushes the notion of an impending nuclear renaissance. It wasn’t true before Fukushima, and it certainly isn’t true after, but with even their supposed nemesis on the NRC helping them build new reactors and relicense old ones, why not keep working the system?

As noted here (but few other places), the December hearing before the Senate Environment and Public Works Committee that was so dominated by the Jaczko cause célèbre was originally scheduled months earlier to track the progress of recommendations from the Fukushima taskforce. An August admonition from Sen. Barbara Boxer (D-CA) seemed to move the commissioners to put some of the recommendations on what passes for a fast track at the NRC, but even that has now been reversed by a majority of commissioners who voted themselves the ability to reject the very rules they previously ordered up. But all the attention in oversight hearings has been focused on Jaczko and his management style–learning the lessons of Fukushima and how that might improve US nuclear safety has been less than a footnote.

So, though Jaczko continues in his job with the public support of the White House, the nation’s regulatory agenda has already been altered. The nuclear industry may not yet have their head, but they’ve demonstrated they own the body.

And now a new year is upon us. The flip of the calendar will not wrap up the Fukushima disaster any more than it will end the parade of lesser events at American nuclear facilities. The nuclear industry will not decide to embrace safety upgrades and stricter regulation any more than the financial community will embrace nuclear power as a good risk. And no matter how many moves Gregory Jaczko makes in the direction of Bill Magwood or his industry masters, neither will ever like him. . . or consider calling off their well-practiced campaign to oust him.

Happy New Year.