CPS plans to sell excess energy

By Vicki Vaughan
San Antonio Express-News

CPS Energy hopes to sell nuclear-generated power as a means of moderating rate hikes in San Antonio should it partner in an expansion of the South Texas Project nuclear plant near Bay City.

Without a plan to sell power at wholesale to others, city-owned CPS would have to request a 7 percent to 8 percent rate increase every other year, CPS Energy interim General Manager Steve Bartley told the San Antonio Express-News Editorial Board on Tuesday.

"We have considered how we could stay a 40 percent owner of the addition to the plant while minimizing the impact to the community," Bartley said.

The answer, he said, is to sell half of CPS Energy's share of electricity in the wholesale market, as the expanded plant would produce more power than San Antonio can use.

Selling power to new customers will help the utility pay for the plant, he said. Adding two reactors to the South Texas Project will cost $10 billion - $13 billion when the cost of financing is included. CPS' share of that will be $5.2 billion if it holds a 40 percent stake in the expansion.

Although CPS Energy officials declined to identify potential customers, there are scores of regional utilities, municipalities and electric cooperatives that are potential clients, Bartley said.

"In return, they'll ask for longer-term contracts than what we historically have done," Bartley said. The contracts could extend for 20 years or more, CPS Energy Chief Executive Milton Lee said.

The utility already has a history of selling electricity to others.

"We have very long-term contracts with the cities of Hondo and Castroville and to Floresville Electric Light & Power," said Mike Kotara, CPS Energy executive vice president of energy development. "And we've been selling to regional customers over the last five years."

Utility officials also stressed that it's important to maintain a 40 percent ownership in the expansion of the South Texas Project, which calls for the addition of two nuclear reactors. Some city leaders have suggested that CPS Energy take a smaller ownership stake.

A 40 percent ownership position would give CPS Energy veto power over major decisions by the other partners, Bartley said.

CPS Energy and NRG Energy of New Jersey are partners in the expansion's license application pending before the Nuclear Regulatory Commission. NRG Energy, which seeks another partner for the plant's expansion, would maintain a 40 percent ownership stake, while a new partner would own 20 percent, Kotara said.

A public discussion of the merits of the project is under way and will culminate in October with a decision by the City Council on whether to proceed.

CPS Energy and NRG Energy will have spent about $2 billion - about $1 billion each - by the time the Nuclear Regulatory Commission issues a license for the expansion. That is expected in spring 2012.

"What's most in their favor is that (CPS and NRG) are getting some federal support and it's an existing site - that's really crucial," said Kenneth Medlock, energy studies fellow at the James A. Baker III Institute at Rice University. CPS Energy and NRG Energy are on the short list to receive federal loan guarantees for the nuclear plant expansion.

"If they were doing this at a brand-new site," Medlock said, "then I would be much more skeptical that this would get done."

And it should help that the cost of commodities has fallen substantially in a year's time.

"All the metals are roughly 60 to 70 percent of their peak last summer," Medlock said. "Everything has come way off."

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