December 7, 2009

By Anton Caputo
San Antonio Express-News

CPS Energy wants a court in Bexar County to clarify the utility’s rights if it chooses to pull out of the crumbling nuclear deal.

CPS filed a petition late Sunday with state District Court in Bexar County that "specifically requests defining the liability of both parties should either decide to withdraw from the project," utility officials said in a written statement.

The filing came the night before Steve Winn, CEO of partner Nuclear Innovation North America, traveled to San Antonio to discuss the project with CPS executives. New Jersey-based NRG Energy owns most of NINA.

That meeting was canceled.

"We are perplexed by CPS’ legal action, as we had come to San Antonio (on Monday) to discuss options for preserving the value of CPS’ investment," said NRG spokesman David Knox. "Over the past few weeks, we have repeatedly expressed our willingness to engage in a dialogue designed to protect that value while maintaining the forward momentum" of the planned expansion of the nuclear South Texas Project near Bay City.

"While we remain hopeful that we can reach a speedy and satisfactory outcome for all parties concerned, the fact that litigation has been initiated effectively limits our ability to communicate as partners in this important and valuable project."

Despite rumors to the contrary, Knox said NRG had no intention to file litigation.

There are two participation agreements between the partners. According to CPS’ court filing, neither agreement specifically addresses what happens if a partner in the nuclear project decides it wants out.

One was written in 1997, when the expansion was first discussed, but years before it was officially proposed. CPS was involved in this agreement because it owns 40 percent of the two reactors that have been in operation at STP since the late 1980s.

A supplemental agreement was written in 2007.

CPS Energy has invested nearly $300 million in the project’s engineering and planning so far, even though a permit to build and operate the reactors isn’t expected until 2012. Still, the utility believes that the "value of participation and related rights in and improvement to the project site" are worth more than $2 billion, according to the court filing.

"A real and substantial controversy exists because the participation agreements are silent or ambiguous with respect to the rights of these co-tenants in the event an owner opts to unilaterally withdraw," CPS argues in the petition.

CPS acting General Manager Jelynne LeBlanc-Burley said the court filing does not mean that CPS will definitely terminate its interest in the nuclear deal.

"It’s critical to get clarity on those rights," she said.

Mayor Julián Castro, who sits on the CPS board of trustees, called it a "relatively innocuous lawsuit" that simply seeks to bring clarity to the existing agreements. "We need to get that down."

The board was not asked to formally approve the lawsuit, he said, but trustees were made aware of it.

CPS is a 50-50 partner in the nuclear expansion project with NINA, and NRG Energy owns 88 percent of NINA. Toshiba Inc., the contractor for the expansion project, owns the rest.

The utility and the City Council are expected to make a decision in mid-January on whether they want to continue with the project or begin the process of getting out. The latter is thought likely after the debacle over why high cost estimates from Toshiba were kept from the utility’s board and the council.

The utility had told the public that the project would cost $13 billion. But it’s now clear that Toshiba had for many months been estimating at least part of the project $4 billion higher than CPS had.

CPS has asked the court to "expedite" its decision.