February 15, 2010
Citibank ranks nukes potential ‘corporate killers,’ but CPS still wants a taste
San Antonio Current Queblog
Thursday morning, San Antonio Council members are expected to vote on increasing electric and gas rates for CPS customers. Though the 6.5- percent and 7.5-percent increases – the first of an anticipated decade of rate hikes the utility says it needs to keep up with capital development projects and the area’s growth – do not include future payments for the expansion of STP nuclear complex.
It’s no wonder some San Antonio residents nearly messed themselves when a small-town newspaper editor published a story suggesting San Antonio was about to recommit itself to the planned expansion of the South Texas Project nuclear complex. It turns out that when
cover-ups over increased cost estimates were souring the public here in San Anto, none other than Citibank was warning off potential investors in the United Kingdom.
In a starkly titled financial assessment, "New Nuclear – The Economics Say No,’ Citibank reps suggested in November that any number of hurdles to construction of new plants represented "corporate killers." Though the clarion call followed just announced commitments to new nukes in the UK, it could now be applied in the United States. President Obama said earlier this month he hopes to pony up $54 billion in federal loan guarantees to kick off a new wave of nuke construction.
Daniel Weiss cites San Antonio’s sticker-shock experience – and the lack of Wall Street enthusiasm – as he picks apart Obama’s move for Climate Progress.
The enormous technical and financial risks involved in the construction and operation of new nuclear power plants make them prohibitive for private investors, rebutting the thesis of a renaissance in nuclear energy, say several independent European studies.
The risks include high construction costs, likely long delays in building, extended periods of depreciation of equipment inherent to the construction and operation of new power plants and the lack of guarantees for prices of electricity.
Adding to these is the global meltdown and the consequent cautious behaviour of investors as also fiscal and revenue difficulties of governments in the industrialised countries, say the studies.
In the most recent analysis on the feasibility of new nuclear power plants, the Citibank group concludes that some of "the risks faced by developers … are so large and variable that individually they could each bring even the largest utility company to its knees financially."
Citibank concludes these enormous challenges will result in soaring costs. It’s the same position local opponents of the STP expansion have been making for two years, though they are rarely credited for their foresight by the elected leadership or in local media.
While some jumped when they read an error-choked Bay City Tribune article predicting a San Antonio "resolution backing STP Units 3 & 4 – possibly within the next few days," they needn’t have. The current Mayor and Council have all but washed their hands of the expansion. However, there is a lingering residue – an irrepressible hope to gain a share in the project in return for the millions CPS has already spent – that could keep the City in thrall to the planned new units for years to come.
A better plan, suggests Karen Hadden, director of the SEED Coalition: "They should get out. They should get out clean right now." Take the money and run.
SEED was key to bringing some of the earliest numbers that suggested the nuke expansion would be far above the $5 billion, as NRG first suggested.
Now with the project about to break down, the state of Texas is showing its hand as an interested party for the first time. Public Utility Commission Chairman Barry Smitherman (with Governor Perry’s "full support") sat the squabbling CPS Energy interim GM and NRG Energy CEO down for a four-hour talk last week. More meetings are expected.
CPS wants to withdraw from the planned two-reactor expansion at Bay City but still benefit from a share of ownership commensurate with the value of its land and water rights at the site and the $350 million already paid in. A district judge ruled recently that CPS should be compensated if it withdraws and suggested the two get back to the bargaining table.
But where was the state and Smitherman during all those months the SA community was being sold on the project with fictitious numbers?
When talk turns to rate hikes, Hadden says CPS is just not ready.
"They haven’t fixed the problems at CPS Energy. They haven’t gotten better accountability. They haven’t done an outside independent investigation. They don’t have a line-item proposal. They haven’t withdrawn from the nuke," she said.
Without stricter oversight, CPS could potentially take the rate-hike cash and turn around under a more receptive Council and reengage with the STP project, Hadden suggested. "This is a backdoor for nukes."
(Citibank’s full report is below.)
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