Money woes chill nuclear projects
It is little wonder that America's electric utilities are abandoning plans to build nuclear power plants. Still shaken by the accident at Three Mile Island last year, utilities are now buffeted by blows from the investment community concerned about spiraling costs of nuclear power plant construction.
Indicative of the most recent stumbling block for nuclear power was the predicament in which 88 Pacific Northwest utilities found themselves last month. In order to assure Wall Street of the soundness of investing in construction of two nuclear plants, the participating utilities recommended that their board of directors approve a plan to pay 50 percent of the interest on construction costs beginning in 1983, long before the plants are scheduled to go into operation. Failure to make such a recommendation would have doomed the partly built nuclear power plants to the scrap heap. Construction at the plants, already at a snail's pace, would have stopped cold this month.
The utilities' vote is little more than a stopgap measure, designed to allow Washington Public Power Supply System (WPPSS) -- the state agency building a total of five nuclear plants -- to return to the bond market in search of $240 million to keep the construction of the two jeopardized projects afloat until next March.
By next spring, the federal government will have completed a new electric power demand forecast for the Pacific Northwest. A blue ribbon panel will have offered its recommendation concerning the fate of the two projects. And the results of a November referendum on the issue will also be known. So, for Washington State's once ambitious nuclear power construction plant, the day of reckoning is near.
Over the next year, WPPSS must come up with $1 billion just to manage a slowed-down program for the No. 4 and 5 plants. Meanwhile, the agency's budget for its five nuclear plants under construction has jumped to $23.9 billion, up from the $15.9 billion estimate of a year ago, and far above the $4 billion program originally envisioned. The first plant was scheduled to come into operation in 1977. Now the most optimistic schedule has the first plant starting up in 1984.
How did WPPSS (innocently called "Whoops" long before its delays and costs overruns) get into this mess?
The agency argues that many of its troubles are shared by all electric utilities: the effects of inflation on the bond market, on fuel, labor, and construction material costs, and shifting environmental, safety, and licensing requirements.
In these areas, WPPSS, or "the supply system" as the current administration wishes it to be called, has indeed suffered. Last year, the Hanford site in southeastern Washington for three plants (including one of those in financial trouble) was shut down from June to November due to a dispute between contractors and labor unions. This episode alone cost the program about $1 billion.
At Satsop in southeastern Washington, site of two power projects, unanticipated erosion problems and then a crane collapse in May 1980 added millions of dollars to the costs of the program. Even a light dusting of ash from the volcanic eruption of Mt. St. Helens that month held up construction.
While many of the delays were beyond the agency's control, WPPSS admits that mismanagement was the chief factor behind runaway cost increases.
A year ago, the agency's administrator was fired and replaced by Robert Ferguson, the Department of Energy's No. 2 man in charge of nuclear power programs. Ferguson is widely credited for taking steps needed to rebuild confidence in the troubled nuclear power program. A bottoms-up budget review unearthed $2.9 billion in "unidentified costs" omitted in previous budgets. The new administration rewrote construction contracts so contractors would have an incentive to finish their work on schedule.
Ferguson also replaced a "co-mingled" management setup between WPPSS and its contractors with a hierarchical chain of command. And, under orders from the Washington State legislature, WPPSS will add four directors to its board this fall. The board has been criticized for a lack of expertise, so the search is on for energy professionals who should give WPPSS more the look of a private corporation.
While WPPSS tries to put its house in order, another nightmare looms. The public, confused and angered over spiraling electric rates and suspicions over government and business control over the region's electric supply system, is taking the matter into its own hands. Initiative 394 is headed for the November ballot. If passed, it would require public agencies to get voter approval each time they want to float bonds to finance major power programs