STATE OF NORTH CAROLINA
DOCKET NO. E-7, SUB 819
In the Matter of
Application of Duke Power Company LLC d/b/a Duke Energy Carolinas, LLC, for Authority to Recover Necessary Nuclear Generation
COMMENTS OF THE PUBLIC ADVOCACY GROUPS
Development Expenses and Request for Expedited Treatment
PURSUANT TO NCUC Rule R1-19, now comes the N.C. Waste Awareness and Reduction Network, Public Citizen, the N.C. Public Interest Research Group, the Nuclear Information and Resource Service, Common Sense at the Nuclear Crossroads, Clean Water for N.C. and the Blue Ridge Environmental Defense League (the “Public Advocacy Groups”), through the undersigned attorney, with comments opposing Duke Power’s request to recover expenses for the development of nuclear generating units. In support of their opposition is the following:
1. As stated in their motion to intervene the Public Advocacy Groups represent customers and ratepayers across North Carolina. The members of the Public Advocacy Groups are concerned that the impacts and costs of construction of the proposed nuclear power plants may adversely affect their health, welfare and economic well-being. The groups further wish to prevent Duke Energy from passing down unnecessary rate hikes to North Carolina consumers without first determining if the generating units are both necessary and in the public interest.
2. Duke Power is requesting in the present docket that it is allowed to recover the costs for developing the applications for the nuclear power plants proposed for Cherokee County, South Carolina, without obtaining a Certificate of Public Convenience and Necessity (“Certificate”) pursuant to G.S. 62-110.1 or going through a rate hearing to recover the costs pursuant to G.S. 62-133. Duke Energy attempts to disguise the request by declaring that the funds will be used to study whether these nuclear units are the “least cost” options, but it is clear that these funds are earmarked for developing the various applications for the nuclear units. Preparing the applications is part of the construction process.
3. The decision to construct the nuclear power plants has already been made, although there will be several points in the time line that Duke Energy can reverse or delay the decision. The requested funds will be used in part to prepare for the application for the Certificate or used in the 2007 or 2008 IRP proceedings to justify the construction of the plants.1 As evidenced in the Duke Energy Carolinas Annual Plan, September 1, 2006, filed in the 2006 Integrated Resource Plan (“IRPs”), Docket E-100, Sub 109, at page 38, Duke Energy calls for the nuclear plants to come on line in 2016 and 2017. Duke Energy states that “Duke Energy Carolinas has announced it has entered into an agreement with Southern Company to evaluate potential nuclear power plant construction at the jointly owned Cherokee Count, S.C. location.” At paragraph 10 on page 7 of Duke Energy’s request in this docket, it summarizes the action steps it will take to bring the plants online.
4. It is in the IRP proceedings that the Commission determines whether additional baseload capacity is need and in Certificate proceeding that the Commission determines in advance whether a particular generating plant is necessary and in the public interest. The Certificate proceeding looks at the cost and efficiency of the proposed generating plant, whether it is needed given the forecasted growth, and whether there are other alternatives having lower costs. The purpose of the Certificate proceeding is to help curb overexpansion of costly generating facilities. State ex. re. Utils. Comm’n v. High Rock Lake Ass’n, 37 N.C. App. 138, 245 S.E.2d 787, cert. denied, 295 N.C. 646, 248 S.E.2d 257 (1978). The request for $125 million is to begin the process to construct the costly nuclear power plants.2
5. The ability for the Commission to allow funds to develop a generating plant was severely restricted by the General Assembly. Rates are required to be fair to both the public utilities and to the consumer. G.S. 62-133(a). It was determined that funding “construction work in progress” or “CWIP” was not in the best interest of the consumers as it encouraged the construction of new power plants and did little to control the costs of construction. G.S. 62-113(b)(4a) states that
(b) In fixing such rate, the Commission shall: (4a) Require each public utility to discontinue capitalization of the composite carrying cost of capital funds used to finance construction (allowance for funds) on the construction work in progress included in its rate based upon the effective date of the first and each subsequent general rate order issued with respect to it after the effective date of this subsection; allowance for funds may be capitalized with respect to expenditures for construction work in progress not included in the utility’s property upon which the rates were fixed. In determining net operating income for return, the Commission shall not include any capitalized allowance for fund used during construction on the construction work in progress included in the utility’s rate base.
6. In its application in this docket Duke Energy refers to the public policy of the Public Utilities Act, at G.S. 62-2, as support for approval of this request, but does not address the bar on adding CWIP into the rate base. It is important to note hat Duke Energy in paragraph 12 on page 8 describes the pre-application funds applied for in this docket as “used and useful,” the language used in determining whether costs are included in the rate base. Even under the “allowance for funds used during construction” or “AFUDC,” the funds are only included in a general rate case, not as a special proceeding without any justification.
7. Duke Power’s indirect request in paragraph 18 on page 11 that the Commission goes with it to the General Assembly to “seek a legislative remedy” is an admission that the Commission does not have the authority to allow the pre-application expenses. After decades of CWIP being disallowed, such a “remedy” would be a major change in public policy and utility funding. It would remove the Commission’s authority to determine if a plant was convenient and necessary and would greatly reduce the Commission’s authority over regulating the costs of these plants.3
8. The request for $125 million to study nuclear power as a “least cost” option is grossly disproportionate to the amount Duke Energy is spending to investigate its demand-side management (“DSM”) and energy efficiency options. In the proceeding on the 2005 IRPs (Docket E-100, Sub 103) and more recently in Duke Energy’s application for a Certificate of Public Convenience and Necessity for the proposed Cliffside coal units (Docket E-7, Sub-790), Duke Energy witnesses presented its reliance on a collaborative process, supported by a small group within Duke Energy, to develop DSM programs. This effort is not based on a study of the availability of DSM and energy efficiency in the Duke Energy service area or the analysis of the costs and benefits of the various options it currently has before it. Duke Energy apparently is not developing a budget for DSM and efficiency programs, let alone one in the order of magnitude as the funds requested herein. The Public Advocacy Groups maintain that $125 million could go a long way in developing a solid DSM and energy efficiency program as well as fund it for significant time period.
9. On the other hand, nuclear generation is a highly risky venture. A number of relevant financial and environmental issues are summarized in the attached synopsis, “Why a Future for the Nuclear Industry is Risky,” by Peter Bradford4 and David Schlissel,5 presented to the New York Society of Security Analysts in June 2006. Some of those risks include:
- The present cost estimates for nuclear power plants range from $2 – 4 billion per unit and historically nuclear plants have had significant cost overruns.
- The dates for bringing nuclear power plants online have been significantly delayed.
- Wall Street investors have expressed serious concerns about the credit worthiness of companies that pursue new nuclear plants.
- Nuclear power plants are stated terrorist targets.
- There is a litany of safety and environmental concerns, including the risk of the release of radioactive material and accidents, that has made the public dubious about nuclear power as an option.
- The storage of used nuclear fuel and high level radioactive waste remains unresolved.
- Transportation of used nuclear fuel and radioactive waste spreads the risk.
- Nuclear power plants use considerable amounts of water.
- The cost of nuclear power plants precludes the use of less risky energy efficiency and renewable energy sources.
In its filing in the present docket, 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.
10. It is not prudent to increase customer rates to begin construction of costly nuclear plants without a determination that they are convenient and necessary. It is not prudent to construct nuclear power plants without a full and fair analysis of the financial and societal costs associated with them. It is not prudent to expend $125 million on pre-application activities for nuclear plants without even a minimal expenditure into the less costly alternatives available in DSM and energy efficiency programs.
11. If the Commission concludes that it has the authority to grant Duke Energy’s request for the pre-application expenses for the nuclear plants, then the Public Advocacy Groups urge the Commission to hold a series of public and evidentiary hearings on the prudency of the request and the risks involved in the nuclear industry in general, and Duke Energy’s proposed plants in particular.
THEREFORE, the Public Advocacy Groups pray that the Commission deny Duke Energy’s request or in the alternative that they are allowed public and evidentiary hearings on the merits of the request.
Respectfully submitted, this the _____ day of October, 2006.
John D. Runkle
Attorney at Law
P.O. Box 3793
Chapel Hill, N.C. 27515
CERTIFICATE OF SERVICE
I hereby certify that the following persons on the docket mailing list have been served this MOTION TO ALLOW INTERVENTION BY THE PUBLIC ADVOCACY GROUPS and COMMENTS OF THE PUBLIC ADVOCACY GROUPS (E-7, Sub 819) by deposit in the U.S. Mail, postage prepaid:
Attorney at Law
225 Hillsborough Street
Raleigh, NC 27603
Lead Regulatory Counsel
Lawrence B. Somers
Assistant General Counsel
Duke Energy Corp
PO Box 1006
Charlotte, NC 28201-1006
Kevin C. Greene
Brandon F. Marzo
Troutman Sanders, LLP
Bank of America Plaza, Ste 5200
600 Peachtree St.
Atlanta, GA 30308-2216
Leonard G. Green
Assistant Attorney General
Department of Justice
PO Box 629
Raleigh, NC 27602-0629
James P. West
West Law Offices, PC
Ste 2325, Two Hannover Square
434 Fayetteville St.
Raleigh, NC 27601
This is the ______ day of October, 2006.
Attorney at Law
1 The pre-application expenses would also presumably be used to develop an application for a operating license from the U.S. Nuclear Regulatory Commission.
2 It should be noted that Duke Energy’s request does not have a cap on it of $125 million, only that that is the present estimate.
3 South Carolina law does not allow these kinds of construction expenses to be included in rates.
4 Former Chair of the New York State Public Service Commission and Maine Public Utilities Commission, Former Commissioner of the U.S. Nuclear Regulatory Commission.
5 Researcher at Synapse Energy Economics, Inc. Mr. Schlissel recently testified before the Commission in Docket E-7, Sub 790.