Megawatts and Margins
George Crocker, who heads a small but active Twin Cities-based environmental nonprofit called the North American Water Office, is accustomed to trading barbs with Northern States Power Company. For more than two decades, Crocker has scrapped with the utility, most notably in the contentious wrangling over the storage of radioactive waste at NSP's twin reactors at Prairie Island. But now Crocker and his fellow anti-nuke activists may have to get used to firing off some of their poison-pen missives to a different entity: the newly formed Nuclear Management Company (NMC).
That's because the Nuclear Regulatory Commission--the federal agency in charge of overseeing the nuclear power industry--last month gave NSP tentative approval to "outsource" the operation of its reactors at Prairie Island and Monticello. Under the plan, the Nuclear Management Company, owned equally by NSP and three other utilities in Wisconsin and Iowa, will take over management of NSP's two Minnesota plants along with three out-of-state plants owned by NSP's partner utilities.
NSP, its counterparts in Iowa and Wisconsin, and the new management company have cast the joint operation as a benign, "synergistic" business plan that could save as much as $12 million a year per plant. The idea has drawn plaudits from industry analysts who say it will help return the sagging nuclear power industry to profitability.
It's not the issue of profits, however, that has critics worried. As reactors age, Crocker explains, their liabilities increase--particularly in terms of the deterioration of their equipment, the looming expiration of their operating licenses, and, most significant, the absence of any long-term solution for what to do with the radioactive waste. This has prompted NSP and other electric-utility companies around the nation to sell off old or poorly performing nuclear plants for pennies on the dollar.
The buyers are brand-new behemoths owned by people who are betting that they will be able to cash out ahead when it comes time to shutter the plants. Over the years, electric companies have collected huge funds from customers--"ratepayers," in utility parlance--to defray the costs of "decommissioning," or closing, the facilities. And, critics assert, until that day comes, the companies are paring back their work forces in an effort to maximize profits. AmerGen, a joint venture of British Energy and Philadelphia-based Peco Energy, is one such venture: It expects to purchase nearly 20 percent of the United States' 103 reactors in the next five years.
Mike Wadley, the president of NSP's nuclear-generation division and now NMC's chief nuclear officer, acknowledges that the survivors in the industry will need to be big to compete. But, he adds, that doesn't suggest that NSP and its partners are looking to get rid of the plants anytime soon. "There are no buy or sell provisions here. We're looking at joint operation, not joint ownership," Wadley says. "There are economies of scale and synergy that can be achieved by combining our operations. And that's our short-term focus: to improve our operations. And if we improve our performance, then our parent corporations won't want to sell."
Still, the pressure to become more efficient--and profitable--couldn't come at a worse time for the nuclear industry, according to Paul Gunter, director of the Reactor Watchdog Project at the Washington, D.C.-based Nuclear Information Resource Service. "It's predictable," Gunter says. "This is the scenario that precipitates downsizing, which raises the risk of human error. And meanwhile, the utilities have to run the reactors longer and 'hotter' if they are going to compete in a deregulated market, which also reduces the margin of safety. And, of course, the reactors are getting older, which means that they should be inspected more and run less." (Wadley responds that some management positions may be eliminated, but says NMC doesn't anticipate any major change in staffing at any of the plants.)
Crocker and other local NSP-watchers are also concerned that the move will make it easier for the power company to get out from under the liability issues caused by aging nuclear reactors. "In this day and age it's easy for parent corporations to spin off their subsidiaries, for shell corporations to be cut loose and left on their own," he contends. And, he points out, NSP's pending merger with the Denver-based utility New Century Energy, which has no nuclear holdings, may create an incentive for the utility to work toward divesting itself of ownership of the plants. "I don't think New Century and its officers and shareholders want to subject themselves to those sorts of liabilities," Crocker adds, "especially now, when we're moving into the brave new world of competition and deregulation in the energy market."
Wadley says this fear is also misplaced: Ultimate responsibility for Prairie Island and Monticello will still rest with NSP.
Last month Crocker complained to the federal agency that's supposed to sort through these concerns, the Nuclear Regulatory Commission. He reiterated his concerns about the proposed changes, but also charged that the federal agency's staff dropped the ball. "There are intense pressures in the industry to get more efficient, to be leaner and meaner," he complains. "And now federal regulators are going to issue a license to what amounts to a shell corporation. This is just not tracking the right way." The watchdog agency, he says, failed to examine NMC's finances.
Crocker is not alone in his concerns. In March the Prairie Island Indian Community, whose reservation abuts NSP's Prairie Island plant, also requested that federal regulators re-examine the matter. "All NSP has demonstrated is that it wishes to outsource all of its nuclear operations to a newly formed company with no history, virtually no current employees and no record of performance on which it can be judged," the Prairie Island Indian Community petition states. "As for the financial considerations, the community and the commission are told they are not relevant, with no discussion of the impact of divorcing financial responsibility from operational responsibility."
The Nuclear Regulatory Commission has not yet acted on either of the petitions, nor on a third filed by environmental attorney Carol Overland. According to Jan Strasma, a spokesman at the commission's regional headquarters in Chicago, the matter is now under review by the commission's legal arm. The commission staff, however, has already come to its own conclusion in a report released last month recommending the license transfer: NMC "need not be reviewed concerning financial qualifications" because the liabilities for the plant remain with its owner, NSP.
That doesn't do much to satisfy the critics, however. "Do I believe that when [NSP] says 'We're not going to try to shift the liability to this assetless corporation and we're going to keep it ourselves?'" asks state Rep. John Marty (DFL-Roseville). "I wish I had confidence in that. But no, I don't. I think they're in the driver's seat and they're controlling every step of the process."
The Reactor Watchdog Project's Paul Gunter contends the Nuclear Regulatory Commission has been quick to "rubber stamp" these transactions in an effort to keep the troubled industry afloat. "This is all a sleight of hand, we believe, to move liabilities around, and milk the ratepayers in the process," he says. "This is just the first move. There are many moves left, as the utilities work hand in hand with the regulators to develop their exit strategies. But it's easy to be lost in all the smoke and mirrors."
"I think we're going to have to keep our eye on the pea in this shell game that's being played out on the nation's utility grid," he adds.
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