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Austin utility customers to not absorb costs of building new nuclear reactors
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Artist's rendering of proposed additional nuclear reactors at STP.
Utility payers in the Austin area won’t be held accountable by the surprise $4 billion rise in estimated costs to build two new nuclear reactors at the South Texas Project (STP) Electric Generating Station near Bay City, Texas. The the two-unit station is partially owned by Austin Energy. The proposed project was originally estimated to cost $5.4 billion, then rose to $13 billion, and is now estimated to cost $17 billion.
“Because Austin Energy declined participation in the expansion, Austin ’s rates will not be impacted,” said Leslie Schneiweiss today, who is a Senior Public Information Specialist for Austin Energy.
STP Nuclear Operating Company manages the electric generating plant for its owners who share energy in proportion to their ownership interest. Austin Energy (AE), The City of Austin owns just 16 percent, while CPS Energy of San Antonio owns 40 percent and Houston’s NRG Energy, Inc. owns 44 percent. The two-unit nuclear facility has a 2,725 megawatt generating capacity and operates at a 98.8 percent capacity factor, for which it receives industry awards.
The Austin City Council decided in February to decline participation in the expansion of the STP proposal to build two new reactors at the site in Matagorda County, after a detailed risk assessment and financial analysis revealed that the potential return to the City would not be sufficient given the potential risk.
Austin , as a minority shareholder in the STP, would have no control over construction costs, schedule delays, and future fuel and energy prices. The analysis indicates that investment in the proposed project could require cash outlays by the City of $2 billion or more over at least the next seven years, according to Austin Energy. Such a sum would require the issuance of significant debt relative to Austin Energy’s size that could result in a downgrade of its credit rating, leading to higher future borrowing costs.
Higher borrowing costs is concern that is very real for the other two investing companies. According to Karen Hadden, Executive Director of the Sustainable Energy and Economic Development Coalition, Moody’s Investor Service gives NRG a bond rating just above “junk” grade. She said that NRG hasn’t found the additional investors it needs for the reactors. Moody’s, which rates the credit worthiness of large borrowers has lowered CPS’s energy outlook fro negative to stable, according to the San Antonio News-Express.
CPS Energy may have taken that as a warning to better manage its risk and debt to maintain a good credit rating. The San Antonio utility voted unanimously in October to reduce its 50 percent stake in the project to between 20-25 percent. Hadden expressed relief on that Austin has chosen to opt out of building the two additional reactors.
“We learned from our experience last time, since the reactors went six times over budget and were eight years late going online,” she said Friday.
San Antonio’s City Council was expected to vote to approve a $400 million bond issue last week when it came out that Toshiba, Inc. had raised its cost estimates to build the new reactors. Two executives from CPS Energy’s nuclear development team were suspended Tuesday because the estimate increases were initially kept secret.
Austin Energy’s 16 percent share in Reactors 1 and 2 is equivalent to 422 megawatts, said AE spokesperson Schneiweiss, who also reported that the additional 432 megawatts of nuclear-generated energy within the projected time frame is almost double the amount of additional generation that Austin Energy expects to require by 2020. The concern also remains over the long-term risks associated with radioactive waste disposal.
Austin Energy’s proposed plan includes 900 megawatts of additional capacity, including a 200 megawatt expansion of natural gas-fueled Sand Hill Energy Center, a 100-megawatt biomass plant, a doubling of the utility’s wind-generation portfolio to about 1,000 megawatts, and an additional 100 megawatts of solar capacity.
Schneiweiss laid out our current energy portfolio:
25-27% - Nuclear
32% - Coal
26% - Natural Gas
4% Purchased
10-12% Renewables
Buddy Eller, spokesperson for STP also confirmed Friday that, because it is a different ownership group, the costs associated with the proposed building of Reactors 3 and 4 are completely separate from the costs of operating Reactors 1 and 2, which he says have the lowest production costs in the industry.
“The existing reactors continue to provide clean, economical and reliable energy for two million people - and it’s carbon-free,” said Eller. The original reactors, which have just passed their 20-year anniversary, have a 40-year license to operate, which could be extended for another 20 years. He noted that the $17 billion is only a preliminary cost estimate that is being negotiated with the Japanese contractor.
Eller added, “We need to do a much better job at energy efficiency, invest in renewables and look at our base-load of energy options.” He sees a larger role for nuclear power in the long term future of energy in Texas.
