Nuke plan may cost $22 billion

04/29/2009

By Anton Caputo
San Antonio Express-News

CPS Energy continues its silence on the price of nuclear expansion plans, but a new study to be unveiled today estimates that building two more reactors in Bay City could cost $20 billion to $22 billion.

The study was contracted by the consumer group Public Citizen and conducted by Clarence Johnson, former director of regulatory analysis for the Texas Office of Public Utility Counsel.

The group will present the report at a City Hall news conference, but provided the San Antonio Express-News with an advance copy.

"We believe that CPS Energy is vastly underestimating the cost of the nuclear power plants and the impact it could have to San Antonio's ratepayers," said Tom Smith of Public Citizen.

Johnson's report is the latest in a series of outside cost analyses pushed by consumer and environmental groups to question the wisdom of expanding the South Texas Project.

It concludes that building two more nuclear reactors would cost 50 percent more over the life of the project than building natural-gas plants to provide the power.

San Antonio's city-owned utility hasn't decided whether it will partner in the nuclear expansion with New-Jersey based NRG Energy, but it already has spent or budgeted $276 million in design and engineering.

The utility will present its cost estimates at a board meeting in June or July, said Mike Kotara, CPS executive vice president of energy development.

Kotara wouldn't comment on today's report, saying he hadn't had time to study it.

"We continue to evaluate the expansion of STP 3 and 4 and the benefits and costs to CPS customers," he said.

CPS Energy owns 40 percent of STP 1 and 2, and could own as much as 50 percent of STP 3 and 4.

The project's partners hope to have federal permits to begin construction by 2012 and have the plants running by 2016 or 2017.

Johnson's study is critical of much of the reasoning CPS and NRG have used to support the plan.

STP often is credited as one of the chief reasons that San Antonio's electric rates have remained remarkably low when compared to most major cities. But Johnson points out that cost overruns and construction delays for the project were enormous, and he said similar problems could be expected with new construction.

The final cost was at least $4.5 billion more, depending on how you calculate it, than the original 1976 estimate, and construction took more than double the five years projected.

"It is a fact they came in over budget and took longer than planned," Kotara said. "It is also a fact that today the output of STP 1 and 2 are the foundation or our low energy rates."

Kotara said CPS Energy is taking steps to ensure the cost overruns and constructions delays of the past aren't duplicated in the new project.

These steps include using certified designs with improved technology that already have been built in other countries and seeking federal loan guarantees. The utility also has said it will pursue contracts that shift responsibility for cost overruns to the contractor.

Johnson calculated his estimates based on the average historical cost of nuclear plants updated for inflation and productivity changes since the time the plants were built.

Historically, the cost of nuclear power plants escalates more than normal inflation because of the massive amount of materials and specialized construction skills needed.

"It is impossible to have an ideal market to build a plant that complex," he said. "There is a significant financial and economic risk."

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