Nuclear project still alive

November 16, 2009

By Anton Caputo
San Antonio-Express-News

CPS Energy's board of trustees agreed Monday to wait until January before deciding to build two more nuclear reactors outside Bay City. But even if the city pulls out of the nuclear project, the utility said it will still need a rate increase next year and more than a half-billion dollars in financing for other projects.

Interim General Manager Steve Bartley, who recently returned from Japan, where he discussed cost estimates with contractor Toshiba Inc., asked for the extra time.

Bartley promised that the utility would put together a new cost estimate for the project and an analysis of alternatives if the utility opts out of nuclear expansion. Both will be complete by the end of the year. Bartley then will present his recommendation to the board two weeks later on Jan. 15.

Mayor Julián Castro, who last week threatened to pull the plug on the nuclear option well before the end of the year if the cost wasn't reduced, said he was willing to wait.

"Because I am satisfied that CPS is seriously preparing for alternatives, I think it's prudent," he said. "Our business partner has requested until Dec. 31 to deliver an official estimate and, given my confidence in our ability to pursue alternatives, I believe we should honor that request."

Castro became upset last month when a leaked cost estimate from Toshiba came in as much as $4 billion higher than CPS expected. San Antonio's municipally owned utility has said the project will cost about $13 billion and could be done while keeping bill increases to roughly 5 percent every other year for the next decade.

Bartley led a team to Japan last week to discuss the project with executives from Toshiba and other companies involved. These include NRG Energy, which is CPS' partner in the deal; Fluor Corp., which will do most of the construction; and Nuclear Innovation North America, a partnership between NRG and Toshiba.

Bartley said he made it clear that CPS would not take part if the costs are not close to what it has promised the community.

"Our contractors have stated they understood our message and pledged to provide a new, lower cost estimate no later than Dec. 31," Bartley said.

Opponents of the nuclear project said Monday that they were unimpressed with the report Bartley brought back from Japan.

"He comes and doesn't deliver a price, but delivers a process," said Tom "Smitty" Smith of consumer advocacy group Public Citizen. "What kind of board would let its chief executive officer go off and negotiate and come back with nothing new?"

Some CPS board members were clearly frustrated with the way things unfolded Monday.

Member Stephen Hennigan, said he had never seen or been officially briefed on the cost estimate from Toshiba that Bartley and his team are trying to reduce.

"We're working to reduce a confidential number that was provided in mid-October from Toshiba, and that is different than the number that the board voted on?" he asked. "I don't know that number."

Two CPS executives have been suspended while the utility investigates how and why that cost estimate was kept from upper management and the board.

Hennigan also pointed out that the complicated web of corporate interests in the deal puts CPS in the position of cooperating with NRG to persuade Toshiba to bring its price down, while, at the same time, NRG and Toshiba are partners in NINA, which has a stake in the nuclear project.

"We're actually finding ourselves in co-owner meetings with, in fact, a contractor who is contemplating building the project," he said.

Even if CPS opts out of the nuclear deal, it's going to need an infusion of cash and a rate increase to keep its books solid, Chief Financial Officer Paula Gold-Williams told the board Monday. If not, the utility's financial integrity and credit rating could suffer while it tries to finish its new coal plant and several other large environmental projects, she said.

The financial plan, if the nuclear project continues, involves the utility asking the City Council for permission to borrow $400 million in January and raise rates 9.5 percent. Because of the various fees on an electricity bill, utility officials say this rate increase equates to a 5 percent rise in bills they have promised.

The utility then will ask for permission to borrow $550 million in the spring for non-nuclear projects.

If CPS opts out of the nuclear project, it will need to bump the $550 million bond issue to January, Gold-Williams said, along with a 7.5 percent rate increase.

Hennigan said, "You are going to need $550 million non-nuclear by the spring, and if we don't do that we will put this utility in peril."

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