Castro reboots nuclear debate

August 9, 2009

By Tracy Idell Hamilton
San Antonio Express-News

After a series of behind-the-scenes negotiations, Mayor Julián Castro stirred up San Antonio's nuclear debate last week, forcing CPS Energy to publicly re-evaluate other options.

In the first major move of his administration, Castro found an unlikely ally in first-term Councilman Reed Williams, a retired oil executive who has emerged as a quiet but influential figure in the debate.

As CPS continued to push its recommendation to up its investment in nuclear energy, Castro and Williams separately pressured the city-owned utility, demanding details about the proposal, which they felt left ratepayers too exposed to financial risk.

Slowly, CPS officials began to yield, and after a grueling two-hour meeting July 24 with CPS interim General Manager Steve Bartley and others, Castro's chief of staff, Robbie Greenblum, had what he considered a breakthrough.

Bartley asked for a meeting with the mayor, and three days later, he and CPS CEO Milton Lee assured Castro that the utility had other options in reserve.

"It was a pivotal moment," Greenblum said. "It was clear they were finally thinking differently."

CPS long had insisted that investing in a 40 percent share of two new nuclear reactors at the South Texas Project and selling off half that energy was the best and most affordable choice to meet San Antonio's future energy needs. Finally, officials were agreeing that something less still was workable.

Talk so far has centered on a possible 20 percent investment, but Castro says he will listen to whatever CPS brings forward in the coming weeks.

Whatever the final deal, reducing CPS' share of the two reactors would go a long way to assuage concerns raised by Castro and some members of the public over the 40 percent proposal.

It would lower the cost of the investment, reduce ratepayers' risk of exposure to cost overruns and force the utility to make its next major energy decision sooner.

That could mean a greater opportunity to invest in renewable energy options, which Castro believes will be important for San Antonio's future.

How his decision not to support CPS' proposal will play out as the nuclear debate moves forward is unclear. Anti-nuclear activists, who are expected to come out in force to Castro's town hall meeting Monday night, are unswayed.

"We don't want 40 percent, we don't want 20 percent, we don't want any percent," said Cindy Weehler, an organizer of the newly formed Energia Mia, a coalition of anti-nuclear groups and individuals.

The group also has demanded "no rate hikes," which Castro says isn't a possibility.

"The choice is not between rates going up and rates staying the same," he said. "The question is, what is the smartest investment for ratepayers to meet our energy demand?"

But even COPS/Metro Alliance, a broad-based coalition of church congregations that has taken a more pragmatic stance on the issue and has met directly with CPS officials to press its concerns, remains skeptical.

"We applaud the mayor for taking this position," said Gloria Mora, a leader from St. Leo's Catholic Church. "But we still want to see alternatives to nuclear."

Questions about cost

Bartley insists alternative options always have been on the table, but he acknowledged utility officials have been publicly focused on their official recommendation, which they rolled out June 29.

They've pushed the 40 percent level of investment not because that's the amount of energy San Antonio will need - they've said 20 percent would do - but because 40 percent would give CPS veto power over decisions made by its partner, NRG Energy, which would also have a 40 percent stake.

But to make that investment affordable to residents, CPS says it would sell half of the power generated on the wholesale market. That's become a huge sticking point for Castro, COPS and others who say the utility should adhere to its core mission of serving ratepayers.

Today's price tag for 40 percent is $5.2 billion. Ratepayers will fund that through 5 percent increases in their bills every other year.

Reducing the utility's investment in nuclear wouldn't reduce the percentage of the increase, says Mike Kotara, CPS' vice president of energy development, but would shorten the number of years they would be necessary.

Also, the cost today is just an estimate and won't be fixed until at least 2012, when the Nuclear Regulatory Commission is expected to grant the project a license.

Until then, Kotara estimates the utility will spend about $800 million of the $5.2 billion, mainly on engineering and licensing costs, before a fixed-price contract could be signed. It's already spent $276 million.

CPS and NRG currently are partners with Austin Energy in the two existing nuclear reactors at the South Texas Project outside of Bay City.

Austin decided in February not to participate in the expansion, fearing cost overruns akin to those that plagued the first two reactors some 20 years ago.

More recently however, Austin's utility chief has said the city must think hard about buying more nuclear energy because it would be an inexpensive way to provide power as the city works to wean itself off fossil fuels.

On Sept. 28, the five-member CPS Board of Trustees, which includes Castro, will vote on whether to accept the staff-recommended 40 percent.

The board is doing its own careful evaluation, board Chairwoman Aurora Geis said.

"Our message is consistent with the mayor's," Geis said. "We're looking at all the options."

The board also is studying the region's demand, she said, which has decreased recently as the economy has slowed.

The utility's long-term plans for conservation - it has pledged $850 million by 2020 to save 771 megawatts of power - also will decrease energy needs. So could Mission Verde, the city's 11-point plan to become a green energy leader.

Geis also emphasized the board is supportive of the public process, and wants to see that through.

Assuming the board votes to go ahead with some form of the nuclear option, CPS then will ask the City Council, sometime in October, to allow it to issue bonds, likely between $300 million and $400 million to continue its investment.

More caution

The tight timeline worries some council members, but Castro says he's confident the board and the council can come to a decision once all the options are on the table.

Williams, who already has made himself indispensable on the issue, likely will play a key role sorting out those options.

"He's been a terrific resource because of his background in the energy business," Castro said.

Williams and the mayor make for an odd political couple: the young, Hispanic Democratic rising star and the retired Anglo Republican businessman with little political experience.

But Williams' background and reputation have given Castro a level of political cover with business leaders, many of whom have, until recently, offered unqualified support for the 40 percent proposal.

Developer Marty Wender, an outspoken supporter of nuclear, expressed faith in Williams' ability to spot weaknesses in the deal, and said he was glad to see him sitting with the mayor at last week's San Antonio Express-News Editorial Board meeting, where Castro came out against the plan.

"If (Williams) sees a risk, it's got to be looked at," Wender said. "I'm only for nuclear if it makes economic sense. If they think a smaller bite is better, that's good too."

Richard Perez, president of the Greater San Antonio Chamber of Commerce, also has taken a more cautious public stance since a meeting with Williams earlier this month.

"Everything is on the table as far as we're concerned," he said, noting that a task force would begin to examine details of the proposal in the coming weeks before the chamber offers an official recommendation.

Williams, meanwhile, has taken pains not to make an adversary of CPS. As Castro's staffers prepared for the editorial board meeting, Williams urged them to include CPS' top brass.

While aides met the suggestion coolly, by Wednesday, Lee and Bartley flanked the mayor when the meeting commenced.

Several of Williams' colleagues on the council said they're pleased he's willing to wade deep into the details.

"I'm glad he's on our team," Councilman Ray Lopez said. "He's truly an asset."

Castro's announcement, too, was praised.

"It was a strong move, definitely," Councilman Justin Rodriguez said. "It sets a tone."

Other council members have been nervous about the 40 percent proposal, Rodriguez said, so knowing that other options are being seriously considered "gives this thing new life."

Others, though, including Lopez and Councilwoman Elisa Chan, worry that a smaller share in the project could compromise CPS' ability to retain control over decisions surrounding the reactors, something CPS itself has long insisted.

On Wednesday, CPS officials pulled back from that assertion, suggesting that becoming a minority partner "might make sense for us," as Lee put it, while Bartley said the utility could strike any deal with NRG that works for both parties.

Both men will likely be pressed Monday night at Castro's town hall meeting about details of its nuclear plan and now the possible alternatives - and CPS officials promise that they're listening.

"I think you're going to see a different tone on Monday," Castro said. "We've talked to CPS about engaging more fully in the options, and I'm confident they'll do that."

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