October 11, 2006
Public Interest Groups Warn of “Power Bill Tax” That Could Exceed $20 Billion
DURHAM, NC – Electricity customers could be saddled with billions of dollars in risky investments if Duke Energy succeeds in passing along uncapped “construction work in process” (CWIP) costs of new power plants. An alliance of public advocacy groups* warned today that both Duke and Progress Energy will try to muscle the NC legislature into reversing CWIP rules it abolished 20 years ago – without having to first prove new coal-fired and nuclear power plants are needed, safe or economical. The groups say CWIP would eliminate any incentives to contain the costs of new plants, sticking ratepayers with billions in pork-barrel payouts to a multitude of contractors and the utilities themselves.
Duke Energy has asked the NC Utilities Commission for “expedited approval” of a $125 million rate increase to fund pre-application work for new nuclear reactors in Cherokee County, SC. The advocacy groups today called on the Commission to reject the scheme as a disguised attempt to begin the costly construction process for new plants. In the mid-1980s the legislature abolished CWIP – the utility practice of gaining rate increases to fund plant construction – after Duke and Progress (then called CP&L) left customers with billions of dollars in stranded costs by cancelling 10 large power plants in midstream. Legislators found that CWIP encouraged plant construction and removed incentives to control costs.
The groups insist Duke’s maneuver is the “foot in the door” to reinstate CWIP, and that the $125 million is only a first – and uncapped – estimate of the utility’s request. In its legal brief filed today, the seven regional, state and national consumer and environmental groups claim that since the Commission does not have authority to grant the rate hike, the utilities are undoubtedly seeking to drive the issue into the legislature, where their influence is almost legendary. For the first time in decades, Duke and Progress hope to build large nuclear and coal-fired plants – at least six in the Carolinas, which could easily exceed $20 billion in planning and construction costs.
“This is an outrageous corporate money-grab,” said Rob Thompson of the NC Public Interest Research Group. “The public could get soaked – just like in the 1980s – if the utilities succeed in making us pay for their plants without cost constraints and without any assurance they would ever become operational.”
Duke claims to need the $125 million to study nuclear power as a “least cost” option, but the corporation is spending almost nothing to investigate energy efficiency options, according to the legal brief. Despite Duke’s public relations offensive claiming support for efficiency, the groups say the company is plowing ahead with plans for new coal and nuclear plants without regard to the social and economic hazards posed by rapidly increasing climate change. They say pursuing large plants is squandering the time and resources needed to cut greenhouse gases through efficiency and clean energy sources.
The CWIP deal, if successful, could eliminate a primary hurdle against new nuclear plants: lendors’ anxiety about financing a new generation of nuclear plants using altered designs that haven’t been shown
they could be built economically or safely.
But the legal brief includes a long list of factors that make nuclear plants financially risky, and attaches an analysis that energy experts presented to the New York Society of Security Analysts in June. Among the risks are: additional nuclear accidents, terrorism, lack of a waste solution, and construction delays that could cause the cash flow to dry up before government subsidies (currently unappropriated) kick in.
“A nuclear plant construction project lasting many years could fail for a host of reasons,” Mary Olsen of the Nuclear Information & Resource Service office in Asheville. “North Carolinians could be stuck with high power bills, high greenhouse gases, a damaged economy and a lack of energy security.”
From the legal brief: “Duke Energy has not addressed any of these substantive issues about the costs, nor shown any of its analysis to support its bald statement that nuclear power plants are the least-cost option.”
* Clean Water for North Carolina: 919-401-9600
Common Sense at the Nuclear Crossroads Public Citizen: 202-454-5191
Blue Ridge Environmental Defense League: 336-982-2691
Nuclear Information and Resource Service: 828-675-1792
NC Public Interest Research Group: 919-833-2070
NC Waste Awareness & Reduction Network: 919-416-5077