San Antonio Express-News - 15 Dec 09 09

Prof. Robert B. Laughlin
Department of Physics
Stanford University, Stanford, CA 94305
(Copied 16 Dec 09)

Nuclear Could Still Edge Out Gas

By Anton Caputo
December 15, 2009

If CPS Energy can build its proposed nuclear expansion project for less than $13.9 billion before financing, it would be more cost-effective than natural gas in the long run, utility executives said Monday.

That figure, revealed at a board meeting, is the break-even point between natural gas and nuclear, according to a new analysis.

It's a number the utility has kept under wraps for months as it negotiated the nuclear deal with contactor Toshiba Inc. But utility officials rolled out the comparison in the wake of a recent debacle on a nuclear cost estimate that has put the project on life support.

The comparison looks at the two power choices over decades. It factors in the cost of building a plant as well as the projected price of fuel and a potential federal tax on the global warming gas carbon dioxide.

But even if nuclear is less than the $13.9 billion when CPS announces a new cost estimate next month, that is no guarantee the project can be built and still allow the utility to meet its affordability pledge to the community, Chief Financial Officer Paula Gold-Williams said.

That pledge is for bill increases of no more than 5 percent every other year.

That promise, which the utility made at community meetings this summer, assumed a much lower nuclear price tag of about $10 billion before financing. Financing costs add roughly $3 billion to the project, which CPS is working on with New Jersey-based partner NRG Energy.

The utility is recalculating the rate impacts of all proposed power projects, Gold-Williams said, but keeping the pledge while building a nuclear project for anything near $13.9 billion, plus financing, would be "challenging."

Those billions would build two more reactors of roughly 1,350 megawatts each at the nuclear South Texas Project outside Bay City. A 593-megawatt natural gas plant, by comparison, would cost $619 million.

"I definitely feel it's a valuable project," Gold-Williams said of the proposed nuclear deal. "Whether or not it's right for us is another question."

CPS made the break-even point between nuclear and natural gas public about a month before its board of trustees and the City Council are supposed to decide whether to go ahead with the nuclear project.

The other option is to pull the plug after spending roughly $375 million on planning and engineering. CPS has already filed a lawsuit against partner NRG to prepare for this possibility.

The natural gas-nuclear comparison was one of several pieces of news delivered to the utility's board Monday as CPS tries to shake off the bad headlines and high-level resignations of the cost estimate fiasco.

Sustainability Officer Cris Eugster unveiled a new forecast that shows the city won't need a new power plant until 2023, which is three years later than was previously thought.

The update incorporates CPS' energy-efficiency plans and new energy-efficiency building standards instituted by the city and the federal government.

"It has really given us another three years to make this decision," Eugster said. "It is very significant."

The extra years before the community has to commit to another large power project could help CPS meet more of the city's future needs with renewable energy such as wind and solar, Eugster said. The added years, he said, will give those technologies more time to mature and become more cost-effective.

Structurally, Eugster said, natural gas plants are a better fit than nuclear to partner with renewable energy. That's because they can be built much quicker, in three to five years, if renewable plans don't pan out. And once built, they are capable of powering on and off much quicker, to provide energy when wind and solar can't.

The new forecast also means that CPS has to make good on its much-vaunted energy-efficiency goals, Eugster said.

CPS has committed roughly $900 million to save 771 megawatts of energy by 2020 through its Save For Tomorrow Energy Plan, or STEP.

Without STEP, CPS would need a new power plant in 2018, Eugster said.

Also at the meeting, board chairwoman Aurora Geis confirmed she will step down next month, as she sought to publicize the vacancy.

"We're launching our search today," she said.

Mayor Julián Castro has been reaching out to high-profile potential candidates for the past several days. The right person for the job doesn't necessarily need to be a household name, as some have suggested, the mayor said.

"Above all, we need a strong leader, someone with strong business skills and someone with the time to commit to the job," he said.

That's been the sticking point for many of those whose names have been floated. On Monday, AT&T executive John Montford, who last week expressed interest in the job, asked that his name be taken out of consideration.

The board will take applications for the position for the next 10 days or so, Geis said.

Castro said he hopes the board will be able to interview qualified candidates in time to make a nomination Jan. 4.

Staff Writer Tracy Idell Hamilton contributed to this report.