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New Report Finds CPS Energy Choosing Most Expensive Power Option in South Texas Nuclear Project Expansion

April 29, 2009   

New Report Finds CPS Energy Choosing Most Expensive Power Option in South Texas Nuclear Project Expansion

SAN ANTONIO — The proposed expansion of the South Texas Nuclear Project (STP) would cost as much as $22 billion, boost the cost of electricity for consumers and curtail investment in energy-efficiency programs and solar power, a report released today by Public Citizen finds. 
The report, “Costs of Current and Planned Nuclear Power Plants in Texas: A Consumer Perspective,” provides some answers to many of the key questions about CPS Energy’s proposed partnership in the STP expansion that municipal candidates have said must be resolved before they can decide what is right for San Antonio. 
“We’ve been down this road before,” said Tom “Smitty” Smith, director of Public Citizen’s Texas office. “This nuclear expansion will have a significant impact on consumers in San Antonio, and perhaps throughout the Texas market. It is an irresponsible investment.”
The report also finds that the massive capital outlays for nuclear power may drain available financial resources needed to pursue San Antonio’s visionary Mission Verde project, Mayor Phil Hardberger’s aggressive plan to green the city’s infrastructure, businesses, energy sources and technology. According to Peggy Day, from the Alamo Group of the Sierra Club, Mission Verde could turn San Antonio into one of the nation’s greenest cities, even as it creates nearly 10,000 local and non-local jobs.
“This new report indicates that we’re going to have to decide now which energy future we want for San Antonio,” said Bexar County Commissioner Tommy Adkisson. “If CPS becomes a partner in the South Texas Project expansion, we are simply not going to have the financial resources to front Mission Verde. We can either choose the most expensive option possible and send our jobs to Bay City and overseas contractors, or pay a fraction of the cost to create thousands of jobs here at home and power the city with clean, green energy.”
To estimate the real cost of the STP expansion, report author Clarence Johnson, an independent consultant with 25 years of experience in the electric utility regulatory world, investigated the construction and cost history of the original power plant. Johnson also served as the director of regulatory analysis for the Texas Office of Public Utility Counsel and has presented expert testimony in nearly 100 regulatory proceedings on a wide range of issues, including generation capacity expansion.

The report finds that given the history of cost overruns and delays from the last generation of nuclear power plants, the construction cost and schedule for STP ($5.8 billion with a four year completion time) are incredibly optimistic. Most nuclear power plants built in the 1970s and 1980s left a legacy of cost overruns and construction delays, but coming on line seven years after the proposed construction date and four and a half times over budget, STP, which was completed in 1989, was among the worst. 

“Studies produced by the NRC itself have found that things went as poorly as they did due to the inexperience of the project team,” Johnson said. “The single most important factor in assuring quality and timeliness in nuclear power plant construction is prior nuclear construction experience. Unfortunately, NRG Energy, the company building STP, lacks that crucial experience. Given the fact that no new nuclear power plants have been built in the U.S. in two decades, NRG is unlikely to find seasoned nuclear personnel, engineers or project leaders this time around.”

The report also finds that the current low cost of nuclear fuel in Texas does not tell the whole story of its real impact on ratepayers. Consumers continue to pay for cost overruns and budget shortfalls from STP’s bungled and hugely expensive construction through charges on their utility bills. Customers in the Electric Reliability Council of Texas (ERCOT) continue to pay $3.4 billion for nuclear assets through these transition charges, as well as $45 million a year for nuclear decommissioning, the process of safely retiring, dismantling and storing the waste from a nuclear power plant.
“Consumers pick up the tab when these nuclear power plants go over budget,” said Eric Lane, representative of the Consumer Energy Coalition. “We’re still paying legacy costs for STP and are helping NRG save up for when that plant has to be decommissioned. When the time comes, if NRG hasn’t collected enough money to pay for decommissioning costs, it will just keep charging ratepayers  even after the plant ceases to produce electricity. We really need to be looking at what San Antonio is going to have to pay for its share of this $20 billion.”
Another hidden cost for ratepayers exists in the form of nuclear subsidies. The nuclear industry has been very successful at securing federal subsidies for this new wave of nuclear projects in the form of loan guarantees, production tax credits, investment tax credits and insurance. Of these, loan guarantees impose the greatest risk on taxpayers. The Congressional Budget Office has stated that the likelihood of default on these loans is 50 percent or greater. In the last wave of nuclear power plant construction, at least 40 nuclear power plants were abandoned prior to completion – proof that the risk to taxpayers is real and substantial.

NRG also already holds a dominant market share of the ERCOT market. If STP is expanded as  proposed, NRG will have the even greater potential to exercise market power and drive up generation prices to reduce the losses that will result from inevitable cost overruns and construction delays. The high cost of nuclear capacity could indirectly translate into higher power prices for all Texas consumers.
Finally, the report finds that nuclear energy is uneconomical when compared to other alternative sources of power generation. A new nuclear plant will be 50 percent more expensive over its life than the primary conventional alternative, combined cycle gas generation. This runs squarely against industry claims that nuclear power represents the cheapest energy source available.

“Even when compared with renewable energy sources such as wind and solar, nuclear power simply does not measure up,” said David Foster, director of Clean Water Action. “But energy efficiency is by far our most cost effective resource. For just 15 percent of what we would spend on STP, Texas could save as much energy as would be provided by 14 new nuclear reactors.  We don’t need to generate massive amounts of new energy when we can use less for just a fraction of the cost.”
To download the full report, a fact sheet of its major findings and a chronology of STP, visit https://www.citizen.org/our-work/texas-issues.