Nuclear Power: caught between cash crunch and tide of public opinion
The Boston Edison Company's recent decision to scrap plans to build the Pilgrim 2 reactor in Plymouth, Mass., illustrates a major problem confronting the nuclear power industry in the United States: how to withstand inflation, high interest rates, and public pressure.
The decision also raises the question of who will pay for the $291 million already sunk into the design and engineering of the proposed 1,150-megawatt unit Edison canceled.
No new orders for nuclear power plants have been placed since 1978. Yet a total of 37 plants, either in the planning stage or partly under construction, have been canceled since that time. Since 1972, six operating plants have been retired or "indefinately shut down" (the latter includes Three Mile Island 1 and 2).
Financial questions, not the more emotion -- charged issues such as safety and the threat of nuclear proliferation, seem to be taking center stage in the nuclear power dispute.
Unpredictable interest rates and construction costs are combining to make investment in new plants an unsound venture, say some critics. Only a year ago it was thought that Pilgrim 2 would save Boston Edison customers $44 million in the first year of operation (the utility plans to cut its costly oil dependence from 70 to 20 percent by 1990). But when expenses were tallied last week, it was found the plant would costm customers $60 million in its first year, according to John Stevens, Edison vice-president for corporate affairs.
Yet utilities continue to pour billions into such projects, with one ace-in-the-hole: If the plant doesn't pan out, the massive losses probably can be passed on to the utility's customers.So says Charles Donaldson, of the Massachusetts Public Interest Research Group.
Mr. donaldson suggests companies are not as prudent as they would be if losses had to be passed on the shareholders instead. In only four of the dozens of plant cancellations have utility customers not assumed the entire losses. Boston Edison says it will ask the Massachusetts Department of Public Utilities (MDPU) to grant it a $1.70 a month average rate increase for the next 10 years to recover the $291 million loss from Pilgrim 2.
If Pilgrim 2 had been a great success, customers would have expected the profits to be passed along in rate decreases, explains Edison's Mr. Stevens. Accordingly, customers -- not Boston Edison shareholders -- should have to make up any losses, he reasons.
"It's a low-risk or no-risk investment" for utilities, says Donaldson. Not so, according to Stevens. "That's why we're a regulated utility," he says -- to provide a checks on its investment practices.
But the regulating body, the MDPU, gave its approval to Pilgrim 2 (after a four-year delay), only two days before Boston Edison decided it was a bad investment. MDPU chairman Jon Bonsall says the agency is conducting an in-house review to see why the two analyses conflicted.
Stevens blames the failure of Pilgrim 2 on the four-year delay by the MDPU. Donaldson disagrees. "Regulatory delay is the excuse for everything from the medfly . . . to why the [New England] Patriots do poorly," he says, countering that conservation by consumers will eliminate the need for further investment in nuclear power. Consumer demand for electricity now is at an estimated 3 percent growth rate, instead of the 7 or 8 percent predicted a decade ago.
Meanwhile, many reactors are shut down after one-third or one-fourth of their predicted life span, according to Alden Mayer of the Washington-based Environmental Action Foundation. "We can't afford to build a reactor with a 10 -to-12-year useful life," he says.
Nevertheless, nuclear power still promises to play in a part in New England's energy needs in this century. Boston Edison now is considering investment in the embattled Seabrook 1 nuclear power plant in New Hampshire, as well as the Millstone plant in Connecticut.
The company already has committed funds for power lines that will carry 600 megawatts of hydroelectric power from Quebec. "But even if we're at zero growth [in electricity demand], . . . what will we replace the old oil-burning plants with?" Stevens asks.
"Coal has its problems, nuclear has its problems," he says. "New England has the capacity to last into the late 1990s. That's enough time to straighten out the regulatory hassles [in the nuclear power industry] and begin new construction."