Archive for the ‘News’ Category

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.

December 8, 2009

By Tracy Idell Hamilton and Anton Caputo
San Antonio Express-News

The night before CPS Energy publicly rolled out a $13 billion cost estimate for a nuclear expansion project last summer, a top executive was exasperated that the utility and its main contractor were billions of dollars apart.

Nonetheless, utility officials presented a price to the public some knew was $4 billion less than contractor Toshiba Inc. was asking for.

"Our project costs and rate projections are clearly understated," Mike Kotara, the utility’s vice president of energy development, wrote in an e-mail June 28. He was responding to word that Toshiba had said it couldn’t endorse CPS’ number.

A portion of that e-mail, along with more than a dozen others, was contained in a draft report of the investigation produced by CPS’ internal auditor, which was obtained Monday afternoon by the San Antonio Express-News.

A final version of the report was released Monday to the CPS board. It will be made public Wednesday after attorneys strike any information deemed proprietary.

The report’s conclusions support CPS management’s assertion that Toshiba’s "unofficial preliminary estimate" was only "a posturing/bargaining position."

Anxiety and anger

But the e-mails contained in the body of the report seem to tell a different story.

At the end of June and again in October, statements made by CPS nuclear officials indicate that they were anxious about getting Toshiba’s $12 billion cost estimate down and angry that partner NRG Energy said it would have to release that figure at its November analysts’ meeting.

Still, CPS executives working on the nuclear project seemed to be in agreement to keep the high cost numbers from their board.

"As far as I know, we had no intention of giving the board a new estimate for the project until we were done working on this, i.e., in January," CPS executive Jim Nesrsta wrote to an NRG official Oct. 22. "I think your discussion of incomplete cost estimates in public in November is a major problem."

The lack of disclosure ultimately felled CPS interim General Manager Steve Bartley, who resigned Nov. 25 in the wake of the report’s findings.

The auditor concluded that other executives on the nuclear team had, at worst, failed in their "responsibility of prompt disclosure."

In Bartley’s case, the report was more critical, saying "he should have recognized that news of a 50 (percent) increase in Toshiba’s cost estimate could have a devastating effect on the (City) council’s vote."

Board Chairwoman Aurora Geis said Bartley’s position held the ultimate responsibility.

"The interim general manager is accountable," she said Monday.

Robert Temple, who served as secretary of the board and vice president of nuclear development, is the only other executive to lose his job. His resignation is effective Dec. 15.

But the investigation found "no evidence of a failure to disclose material information" on Temple’s part.

Geis would not comment on why he was forced out.

Toshiba’s estimate

The first signs of trouble that would lead to the potential collapse of the nuclear project started with Toshiba’s 2008 cost estimate, which utility officials contend they didn’t officially receive until July of this year.

That’s because, while Toshiba was prepared to give the partners a cost estimate in late 2008, the world economy had just cratered, prompting CPS and NRG to ask for an estimate that took the financial downturn into account.

Toshiba instead said it would defer its estimate until 2009’s recalculation. In the meantime, CPS came up with its own estimate: $10 billion without financing.

In mid-June, a Toshiba executive sent an e-mail to Temple that it couldn’t "endorse" that amount. A week later, Kotara gave a progress report to the CPS board, offering up the $10 billion figure – $13 billion with financing. To hit that, Toshiba’s cost would have to be about $8 billion.

The board approved releasing that estimate June 29, kicking off CPS’ campaign to pitch the project at dozens of public meetings across the city.

A flurry of e-mails the night before, from a nuclear executive at the South Texas Project, John Bates of Nuclear Innovation North America and the CPS nuclear team reveal anxiety that Toshiba wouldn’t endorse CPS’ numbers and that it hadn’t signed a contract with its main subcontractor, Fluor Corp., because Fluor’s estimate was deemed too high.

NINA, a partnership between NRG Energy and Toshiba, owns 50 percent of the nuclear expansion project. CPS owns the other half.

In that e-mail chain, Kotara expressed disappointment that "we have come this far, and only now are learning of how wide the gap is between our estimate and Toshiba’s."

Temple and Nesrsta suggested that the figure was "just part of the negotiation." To which, Kotara replied: "That’s all well and good, but we should not have used an ‘optimistic number’ for our Long Range Resource Plan analysis."

Castro’s role

The report briefly touches on Mayor Julián Castro’s role in the controversy. While news of the higher estimate broke Oct. 27, a day after Castro said the estimate was leaked to his office, the report suggests he knew earlier.

He said his aide learned of the higher estimate from NRG attorney Frank Burney on Oct. 26, but the report says Castro had a conversation with Bartley on Oct. 19 in which Castro asked him, "Where are the numbers going?"

Bartley answered that "we could end up with $1 billion more," according to the report.

Castro said Monday that he was never asked by the auditor about that conversation, which he says was about whether San Antonio could afford the project, not Toshiba’s estimate. "I asked how far up the price could go and still be in the affordability range. He said up to $1 billion more."

Download CPS South Texas Project Investigation Report.

December 5, 2009

By REBECCA SMITH
Wall Street Journal

Spooked by escalating costs, a city-owned utility in San Antonio is considering backing out of a venture with NRG Energy Inc. to build two next-generation nuclear reactors in Texas.

CPS Energy is expected to make a final decision next month, after it gets an updated cost estimate from Toshiba Corp., which will oversee construction of the two reactors. The project is one of the furthest along in a new crop of nuclear proposals, but it is proving unpopular with city officials.

The cost of the reactors, estimated at $10 billion to $12 billion before financing costs, is causing concern at a time when the utility is making big investments in renewable energy and pollution controls. Nuclear-reactor costs also look high right now against competing types of generation, such as gas-fired plants.

The San Antonio city council was poised to approve a $400 million bond issuance in late October, but held back when new numbers came to light that indicated the nuclear project could cost more than expected. Like most municipal utilities, CPS has an appointed board that reports to elected city officials, whose approval is needed for rate changes or bond issuances.

The political ruckus that ensued led to the Nov. 27 resignation of the utility’s interim general manager, Steve Bartley, and deputy general counsel, Robert Temple, who tendered his resignation, effective Dec. 15.

A utility spokeswoman said she expects the utility to decide by Jan. 15 whether to proceed with its investment in the South Texas Project, Units 3 and 4, where CPS already owns Units 1 and 2 with NRG Energy.

City officials say the cost estimate from Toshiba for the two-reactor project ballooned to $12.1 billion last summer from a preliminary estimate of $8.6 billion in 2007, catching them off guard. Utility documents show its board was working with a figure of $10 billion. NRG says that it is confident it will be able to get the cost below $10 billion, before about $3 billion in financing costs are added.

Even at $10 billion, the price might be “outside the affordability range for CPS,” said Steve Winn, president and chief executive of Nuclear Innovation North America LLC, the nuclear-development company 88%-owned by NRG and 12%-owned by Toshiba that would hold at least a 40% stake in the project.

Mr. Winn said his company is talking with investors who could replace CPS, if it decides not to proceed. CPS was expected to take a 20% to 40% interest that could cost it $2 billion to $4 billion, before financing costs were added.

Mr. Winn said NRG is working with Toshiba to reduce the cost. One problem is that the project involves $3 billion worth of equipment purchases from Japanese vendors, and a falling dollar and strengthening yen have pushed up those equipment costs.

Even if the final cost is about $10 billion, some city officials feel the project is too costly. “Based on the numbers I’ve seen, I don’t think it’s the right decision to proceed,” said Councilman Reed Williams. He said it made economic sense for CPS to build gas-fired plants or buy electricity from others.

Outside the nuclear arena, CPS plans to spend more than $5 billion on modernization efforts, including $871 million on energy-efficiency programs, $2.5 billion on renewable-energy projects and $2.1 billion on environmental upgrades to power plants. To finance the investments, it is proposing to raise rates through bill increases every other year for the next decade, totaling about 25%.

CPS’s skittishness about the cost of nuclear energy is understandable. The first two units at South Texas Project were supposed to cost less than $1 billion but ended up costing more than $5 billion. With that history seared into its memory, San Antonio officials have been sensitive to anything suggesting they could, again, get blindsided by escalating costs.

A change in leadership also appears to be having an effect, with San Antonio’s 35-year-old mayor, Julian Castro, who was elected in May, expressing reservations about the wisdom of a big nuclear investment. The city already has invested $300 million in the project.

NRG hopes to win permission to begin construction in 2012, and to put units into service in 2016 and 2017. “The project will go forward regardless of CPS’s decision,” said Mr. Winn, adding that he did not believe the matter would affect NRG’s ability to garner important federal loan guarantees for the project.

Write to Rebecca Smith at rebecca.smith(at)wsj.com

June 30, 2009

Victoria Advocate

Exelon Nuclear won’t decide whether to build a Victoria County plant for at least three years – and possibly as many 20.

The company bought itself a two-decade window to weigh its options by announcing Tuesday it will seek an early site permit instead of a construction and operating license.

Exelon planned to decide by early next year whether to build locally. Unforeseen U.S. economic woes, unpredictable energy prices and a lack of ample federal loan guarantees threw a reactor-sized wrench into those plans, Exelon spokespeople said.

The decision to file the early site permit, though, gives nuclear supporters hope. The move shows Exelon hasn’t given up wholly on building locally, they say.

"The fact they’re willing to move forward with this early site permit means they still have strong confidence in Victoria and in this site," said Dale Fowler, president of the Victoria Economic Development Corp. "I view that as very positive."

Even so, Fowler and Mayor Will Armstrong said the move disappoints. The economic boom of breaking ground on hundreds of new jobs and homegrown energy is delayed for years.

An early site permit, if granted, gives a federal stamp of approval to the proposed Victoria County location. The Nuclear Regulatory Commission will evaluate factors such as site safety, environmental impact and emergency planning.

"Once they get the early site permit, then they could apply for a license to build and operate a nuclear power plant," said Victor Dricks, a Nuclear Regulatory Commission spokesman.

The early site permit, and construction and operating license, each require about three years of federal study. If Exelon one day chooses to build the plant, some data from the early site permit can be used toward the construction and operating license.

"It could expedite that second licensing process," Dricks said.

Exelon spokespeople said Tuesday’s announcement does not reflect disinterest in this region.

"Victoria is a great site for a nuclear power plant," said Bill Harris, Exelon’s Victoria-based spokesman. "Economically speaking, now’s not the time."

Craig Nesbit, another spokesman, added, "We are not walking away from Victoria. We are simply extending the decision time, giving ourselves more time to let things settle out a bit."

The company renewed recently its water reservation agreement with the Guadalupe-Blanco River Authority.

Exelon extended its agreement – a reservation of 75,000-acre-feet of water per year – for another year, said Bill West, the river authority’s general manager. The one-year agreement costs Exelon $1.1 million.

Exelon won’t likely reserve the costly river water for extended periods beyond its one-year agreement, Nesbit said.

"In order to do an early site permit, we have to have a fairly competent water supply," the Exelon spokesman said. "We’re going to continue talking with the Guadalupe-Blanco River Authority. We have water reservations through next June. If the river authority has other uses for that water after that, they’ll use it elsewhere."

Exelon could turn to other river authorities or the Gulf of Mexico for needed water, Nesbit said. The Guadalupe River, however, is the company’s best option.

West would not speculate about other water customers the river authority could sell to, or how Exelon’s decision will affect regional water planning.

"We’ve got some time to work on it," West said.

In the meantime, Exelon continues its hostile bid to take over NRG Energy, which proposes to build two new reactors in Bay City. The city is home to the South Texas Project, an operational nuclear power plant.

NRG Energy is one of four likely recipients of $18.5 billion in federal loan guarantees, the Energy Department announced in May.

NRG stockholders meet in mid July to further discuss the takeover attempts.

Nuclear opponents say that while the economic sky fell on Exelon’s attempts to build locally, problems bubble in other areas.

"There are major water issues regarding the Victoria site," said Jim Blackburn, Goliad County’s Houston-based environmental lawyer. "The decision gives Exelon time that frankly does not surprise me they need. I think they’re aware of the serious concerns at the Victoria site, specifically as they relate to water."

San Antonio Business Journal
Monday, February 23, 2009

Environmental groups throughout Texas are lining up to oppose the South Texas Nuclear Operating Co.’s plans to build two additional reactors at its plant near Bay City, Texas.

The Nuclear Regulatory Commission has filed notice in the Federal Register giving citizens the ability to challenge the proposed reactors. Groups have 60 days to oppose the proposed expansion of the nuclear power plant. The Nuclear Regulatory Commission must still grant a license to build the new reactors.

Environmental groups planning to formally oppose the project include the newly formed Bay City-based South Texas Association for Responsible Energy (STARE), the Sustainable Energy and Economic Development (SEED) Coalition, and Public Citizen.

The South Texas Nuclear Operating Co. is owned by NRG Texas LLC (44 percent), San Antonio-based CPS Energy (40 percent) and Austin Energy (16 percent). The company currently has two nuclear-power generating reactors in operation near Bay City, which is 90 miles southwest of Houston.

NRG and CPS Energy are pursuing the proposed expansion, which will generate more than 2,600 megawatts of electricity, cost $6 billion to build and create enough electricity to power more than 3 million homes, according to a 2008 report by the Texas Comptroller for Public Accounts. Austin Energy has declined to participate in the expansion.

“New reactors would saddle homeowners and taxpayers with additional debt for infrastructure, more radioactive waste that would sit in our community, and more risk of nuclear accidents, health impacts and radioactive exposure,” contends Susan Dancer, executive director of STARE. “These are among the many reasons we will intervene in opposition to more nuclear reactors.”

“There are cleaner, more affordable ways to generate electricity," says Cindy Wheeler of the Consumers’ Energy Coalition in San Antonio. “With the economic downturn, we shouldn’t generate power that’s not needed. San Antonio has reduced energy use by 16 percent over the past two years.”

CPS Energy officials say the utility must look for ways to meet the energy needs of customers.

“At CPS Energy, we constantly look at all viable options to provide our customers with reliable, cost-competitive electricity that’s produced in an environmentally responsible manner,” says CPS Energy spokeswoman Theresa Brown Cortez. “Currently, we use low-sulfur coal, renewable sources such as wind and solar, nuclear energy, natural gas as well as energy efficiency and conservation to meet our customers’ electrical needs.”

CPS Energy officials say its staff will continue to evaluate options for generating electricity to meet the future needs of ratepayers.

“As we’ve indicated on numerous occasions, a decision on CPS Energy’s participation in expanding (the nuclear power plant) won’t come until later this year,” Cortez says.