nuclear-news

Iowa Utilities Board warns on nuclear power cost burden on ratepayers

IUB staff raises red flags about nuclear power plant legislation, Bettendorf.com, January 25, 2012   The Iowa Utilities Board (IUB) staff has raised several warning flags about legislation sought by MidAmerican Energy to shift the risk of building a new nuclear power plant to utility ratepayers.

In a memo sent to the IUB and state legislators in December, the IUB staff warns that “some of these (bill) provisions could create incentives for the company to engage in behavior that could be contrary to the public interest in certain situations.”

To illustrate what might happen, the staff report gives this possible scenario:

“For example, imagine that at some point a few years into the project the utility has spent $1 billion on the proposed plant, all of which was determined to be prudent during the annual review proceedings. That year, the company makes a mistake during construction that is entirely the company’s responsibility and will cost $50 million to correct. Normally, that cost correction would most likely be paid by the company and its shareholders. However, with this provision (plant abandonment) the company could come to the board for pre-approval of recovery of the cost of the correction. The company would be guaranteed a profit on all spending up to that point. This could create a stronger incentive to walk away from the plant than to complete it.
Given that knowledge, the Board (IUB) would be faced with the choice of (a) making customers pay for the utility’s mistake (in order to receive the future benefit of a plant for which customers have already been committed to the tune of $1 billion, or (b) making retail customers pay $1 billion (plus profits) to the utility for a plant that will abandoned. Under the circumstances, this would likely cause the Board to approve recovery of the $50 million cost of correction, even though it is entirely a result of the company’s own error in this hypothetical example.”…
In addition to concerns on shifting of risks to customers, the IUB staff believes that “some provisions of HF 561 may go beyond leveling the playing field and could give a nuclear power plant unintended advantages over alternative sources of electric power.”……
MidAmerican Energy last October began charging customers for a 3-year $15-million study on the feasibility of building a nuclear power plant in the state.

The surcharge for the nuclear plant feasibility study was approved by the legislature and not through the normal rate-making process of the IUB.

CLICK HERE to download a copy of the full staff report to Iowa Utilities Board.   http://www.bettendorf.com/node/1297

January 26, 2012 - Posted by Christina Macpherson | business and costs, USA