NC WARN:  Waste Awareness & Reduction Network

NEWS RELEASE                                                                   Contact:  Jim Warren
January 10, 2007                                                                                     919-416-5077

Hearing Laced With Uncertainties over Nuke Plant Costs

Duke Energy seeks positive “perception” for lenders by shifting financial risk to customers

DURHAM, NC – Peppered by skepticism from utilities commissioners and customer groups, Duke Energy lawyers admitted yesterday they don’t know how many billions it would cost to build new nuclear plants.  But the company is pushing hard to open a door that would force ratepayers to bear the financial risks – including $125 million in development costs this year alone – even if plants were cancelled during construction.  Gaining approval for “early recovery” of costs from ratepayers, Duke says, would reduce uncertainty among potential lenders for plant costs, which could exceed ten billion dollars.

In a hearing Tuesday in Raleigh, the Charlotte-based utility asked the NC Utilities Commission to approve in advance all “prudent” up-front costs – along with a guaranteed mark-up – for a pair of new reactors it hopes to build in Cherokee County, South Carolina. 

The corporation projects it will need $125 million for unspecified “Development Activities” in 2007 to help determine whether to build the new reactors.  Commissioner Jim Kerr pressed Duke as to why it had not specified the activities to be included, but was seeking approval based on vague, unidentified cost categories.  Kerr finally complained to Duke, “I’m sure you have an actual list of cost activities.  Why aren’t they shown in your request?”  He said Duke’s vagueness is “very concerning” and that it “hampers legitimacy.”

NC WARN’s attorney, John Runkle, pointed out that Duke Energy has not disclosed what the new South Carolina plants would cost.  In recent hearings, senior Duke officials provided conflicting testimonies; one called the price tag $3 billion for two reactors, while Duke President Ellen Ruff noted $5 to $6 billion in her testimony.  “Duke would be lucky to build two reactors for eight to ten billion dollars,” Runkle told the Commission. 

The last plant built in the Carolinas, Shearon Harris, cost over $4 billion for one reactor in 1986 dollars.

Doubts about Duke’s expertise in estimating costs were boosted last month after the company admitted that a coal-fired plant it wants to build would cost $1 billion, or 50%, more than projections in September.

NC WARN argued that changing North Carolina law to force customers to fund expenses before plants are completed would be the “Camel’s nose under the tent.”  Runkle said there are many costs and risks that haven’t even been discovered yet, and urged the Commission to conduct an evidentiary hearing to determine the costs of the proposed plants.  “Duke doesn’t even know what the whole camel looks like.” 

It is widely accepted that Duke and Progress will press the legislature to make customers pay up front for new coal and nuclear plants.  The gross uncertainty in the total price tag was a common theme throughout the hearing, with a Duke lawyer pointing out that “this technology has not been built – or even tested – in 20 years.”

Yesterday, Commissioner Jim Ervin recalled rate cases of the 1980s, when both Duke and CP&L (now named Progress Energy) charged ratepayers hundreds of millions in costs after cancelling nine reactors.  Nevertheless, Duke lawyer Kodwo Chartey-Tagoe emphasized during yesterday’s hearing that Duke wants its costs – and a guaranteed profit – borne by ratepayers even if it cancels construction.  “Sunk costs plus a return on sunk costs,” he said, after earlier insisting that “nuclear plant costs are riskier than anything else.”

“The Commission should not get into the business of managing the utilities risks for them,” argued Jamie West, attorney for an industrial customers group.  “We suspect this would be only the first of many proceedings” (if the commission grants Duke’s request).

NC WARN Executive Director Jim Warren said today, “These big power companies have generally had their way with the Commission and the legislature over the years.  It is vitally important that the commissioners not sell the people of North Carolina down this river by giving the utilities an invitation for open-ended, unaccountable spending of our money.”

NC WARN is part of a statewide coalition pressing for a transition to energy efficiency, renewables and cogeneration, which would reduce power bills and greenhouse gases, and are less financially risky than allowing the utilities to build new coal and nuclear plants.

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 NOTE:  A transcript of the hearing should be available within ten days.