DUKE-PROGRESS NUCLEAR MEGA-MERGER

Nuclear goals stoked by Duke-Progress merger
John Murawski and Bruce Henderson, January 17, 2011 (The News & Observer)

"The merger between Duke Energy and Progress Energy [into a new Duke Energy that will be the country's largest utility] makes it likelier that a new nuclear reactor would be built in the Carolinas in the next 10 years. It also means that customers could pay higher bills almost immediately to get a reactor built.

"But the corporate financing advantages that come with sheer size don't minimize the risks and challenges ahead. The merger is still at least a year from being finalized, but [Duke CEO Jim Rogers and Progress CEO Bill Johnson] have already agreed to work together to change North Carolina's laws to allow a power company to raise rates without having to go through lengthy proceedings…[They] readily acknowledge that any future nuclear project will be daunting, even to a company as large as the new Duke will be. But they also say they have no choice but to take that risk…"

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"The first obstacle facing nuclear expansion is North Carolina's law. Currently, utilities can request a rate increase to pay for a plant each year while the plant is being built, but these requests lead to [contention]…The other option is to recover the costs after the plant is built, but…[10 years or more of] interest payments add hundreds of millions of dollars to the project…Recovering the money annually would ultimately benefit customers, because interest payments would be lower. But critics say that changing the law would have another effect: It would encourage power companies to gamble on nuclear plants and take unnecessary risks with their customers' money…The costs to customers could be substantial…

"But a change in North Carolina's law is just the first step. A nuclear budget is so enormous that Duke would have to bring in an outside partner to help finance the undertaking, which is expected to cost more than $20 billion for a pair of reactors.
Already, Duke expects to spend $459 million in pre-construction costs for the William Lee site by 2013, when it expects to get a federal operating license. Progress has spent $48.9 million on the federal license application for new reactors at Shearon Harris."

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"Further complicating the nuclear equation is the uncertainty of future demand for electricity. In past years, the power industry has overestimated future needs. In the past several years, demand has slacked off, making it harder to justify the expense of nuclear plants to Wall Street investors and to state regulators who would have to approve the project…Johnson and Rogers see nuclear expansion as the only viable option to meet North Carolina's future energy demand, even if demand projections are off. That's because the nation will have to start replacing dozens of aging coal-burning power plants and older nuclear plants, which are slated for retirement in the coming decades…

"Since coal-burning power plants stand little chance of public acceptance, given concerns about pollution and climate change, the only remaining option for round-the-clock electricity generation is nuclear power, which generates no greenhouse gases and no air emissions, utilities say…[I]ncreasing the size of a utility improves its financial prospects. Mergers are almost always seen as positive developments that will help utilities finance new nuclear plants, digital power grids, transmission system upgrades, routine maintenance and other projects…For nuclear watchdogs, it makes little difference whether a nuclear plant belongs to Progress alone or a Duke-Progress combination. Both companies have had average performance, said David Lochbaum, director of the nuclear safety project at the Union of Concerned Scientists…"