Public utilities desperate to recoup money invested in nuclear power
The company that owns the biggest chunk of Seabrook nuclear power plant is on the brink of bankruptcy. If it goes over the edge, Public Service of New Hampshire (PSNH) will become the first major privately owned electric company in the United States to go broke since 1947.
But Seabrook is only the worst in a long list of financially distressed nuclear plants. Once considered the technology of the future, nuclear power has become a liability for many of the nation's utilities. Slumping demand for electricity coupled with skyrocketing construction costs have destroyed what used to be a vibrant market.
``The fundamental problem for nuclear power isn't public relations or politics - it's economics,'' says Amory Lovins, a noted energy analyst and opponent of nuclear power.
The plants are increasingly the target of public opposition - from disgruntled consumers as well as antinuclear activists. In Maine, a referendum today will decide whether that state keeps its only nuclear plant open.
Analysts say nuclear power was a good investment for firms that finished plants in the early years. As long as electricity demand was growing rapidly - as it did through the mid-1970s - bringing new plants on line was a cinch.
But in the aftermath of the oil shocks of the 1970s, conservation measures were put in place that cooled the growth in consumption. The economic recession also contributed to the slowdown, while accidents at Three Mile Island and Chernobyl prompted safety reviews that often delayed construction and added to the cost.
Now, plants ordered more than a decade ago are being finished, but nobody wants them.
``You have companies that are struggling to bring [nuclear] plants into service and get the rate increases they need to pay for them,'' says John Kellenyi, a managing director for the New York investment firm Drexel Burnham Lambert. Companies borrow to cover the costs of constructing a power plant. The investment is later recouped through rate hikes that must be approved by state utility commissions.
The utilities argue that they are being treated unfairly. The new plants were initially approved by the utility commissions, so the companies say they should not be forced to carry the burden alone. Furthermore, they argue the plants will be needed in the 1990s - so it's short-sighted to abandon them now.
But slower growth in demand for electricity is not the only problem. Many consumer groups are upset with runaway construction costs.
Many states do not allow utilities to charge customers for ``imprudent investments'' - a measure often used against nuclear plants. In California, for example, state regulators are wrangling over what portion of the Diablo Canyon nuclear plant should be paid for by consumers. The state utility commission has suggested that pouring money into the project after a geological fault was discovered nearby was imprudent. As a result, the utility may be asked to swallow a $4 billion loss.
``It's that kind of hindsight prudence review that makes utilities hesitant to commit to building new power plants,'' says Harry Finger, president of the pronuclear US Council for Energy Awareness.
In the case of Seabrook, the stumbling block has been the refusal of state and local officials to cooperate in developing emergency evacuation plans for nearby communities. But even if this muddle is cleared away, it's hard to imagine how the company could ever get its money back. The plant has cost $5 billion, despite the fact that a second planned reactor was never finished.
PSNH skipped interest and principal payments due on $800 million of its bonds in mid-October. The company is now scrambling to restructure its loans, but it could be forced into bankruptcy before the end of the month. Each day the plant sits idle it racks up an additional $1 million in costs.
The industry is pulling out the stops to get the last few nuclear plants licensed. There are 108 licensed reactors in the US, with another 16 under construction or waiting to be licensed. There has not been a new order for a plant, which was not subsequently canceled, since 1973.
Still, reactor manufacturers are pushing forward with research and development aimed at creating the next generation of nuclear power plants. This has stirred debate among energy experts over whether the future of nuclear power is as bleak as it appears.
John Ahearne, vice-president of the Washington-based Resources for the Future and a former chairman of the Nuclear Regulatory Commission, says: ``Many people, including myself, have been saying the nuclear industry is dead.'' And yet, there does not appear to be any move by reactor manufacturers to abandon the business.
Three of the four US manufacturers have orders this year for new reactors, all from foreign buyers.
Size is one factor limiting the options for US utilities. The smallest US-built nuclear reactors being offered today generate more than 600 megawatts, while most utilities are unwilling to commit to more than 300-megawatt facilities.
Meanwhile, consumer advocates are beginning to take a closer look at many of the nation's existing nuclear power plants. The Fort St. Vrain nuclear plant near Denver recently became the first plant in the nation to be taken off of a utility's rate base while still licensed.
The plant, an experimental design, has suffered from a series of technical problems since it began generating commercial electricity in 1979. Consumer groups have long griped about paying for the plant since it seldom produced power. Last year, the utility agreed to pull the plant out of its rate base and refund $73 million to consumers.