US Duke Energy cancels Lee NPP and pulls out of Vogtle project

28 August 2017

US utility Duke Energy on 25 August announced plans to abandon the William States Lee III Nuclear Generating Station in Cherokee County, South Caroline, and raise rates to recover money already spent on the project. The company had planned to build two AP1000 reactors designed by Westinghouse Electric Co at the site but is seeking approval from the Utility Commission to cancel the development, citing Westinghouse’s recent bankruptcy. Although construction had not started at the Lee site, Duke said it had already spent $542m on securing a licence from the federal government, engineering and site acquisition. The company said it would file with state regulators to pass these costs on to electricity customers. North Carolina utility regulators should require customers of the company’s Duke Energy Carolinas unit to pay $353m of the pre-construction costs spent on the Lee plant over the next dozen years, Duke said in a state filing.

Duke spokesman Ryan Mosier noted: “As recent developments in the industry have shown, like the Westinghouse bankruptcy, the construction of new nuclear plants faces a number of challenges never envisioned when the Lee project was first announced. Nuclear energy continues to be an important part of Duke Energy’s diverse energy mix that reliably serves customers every day. While we are cancelling the development of the Lee nuclear project, the licence and other investments remain an important asset.” He added: “Investment in the development of new generation is a cost typically paid for by customers, but Duke Energy is not yet seeking cost recovery in South Carolina. That will happen in a future rate request proceeding in South Carolina, but not this year.”

The decision was influenced by large cost overruns to build other Westinghouse AP1000 nuclear reactors. Late last month, Scana Corporation decided to abandon work on a half-built AP1000 at the VC Summer NPP as costs rose from $14bn to a projected $25.7bn.

"The risks and uncertainties to initiating construction on the Lee nuclear project have become too great, and cancellation of the project is the best option for customers," Duke spokesman Neil Nissan said. Duke said later that it would also not support restarting construction at the Summer NPP. Duke is South Carolina’s largest electric provider, and it was one of three primary utilities Governor. Henry McMaster had contacted about buying a stake in the project. "We looked at this from every angle, and we concluded that it is not feasible for us to take on," Mosier said in an email. McMaster also contacted Virginia-based Dominion Energy and Atlanta-based Southern Company to support Summer, but both have declined to comment.

Southern Company’s Georgia Power is already struggling with rising costs of two AP1000 units under construction at the Vogtle NPP in Georgia which is years behind schedule and billions over budget. Work has continued at the site, but majority owner Georgia Power (45.7%) is still evaluating its options. Oglethorpe Power Corp, the second-largest partner in Georgia Power's project, with a 30% holding, has asked the Department of Energy (DOE) for  $1.6bn in additional support to help finish the reactors, utility executives said on 24 August. Oglethorpe already has a $3bn DOE loan guarantee from which it  has drawn $1.7bn.  Stakeholders are now waiting for Georgia Power to reveal its   final analysis of how much it would cost to finish the reactors or to cancel them.

Oglethorpe will need to increase its original $5bn budget to between $6.5bn and $7.3bn, including a contingency amount to cover construction and financing costs, according to a Securities and Exchange Commission filing. Southern Cohas given a range of $6.7bn to $7.4bn in capital costs alone. These figures are partly offset a maximum of $3.68bn that Westinghouse's parent, Toshiba Corp, has agreed to pay to underwrite Vogtle. Without that contribution, Georgia Power's capital costs for Vogtle woluld increase to $8.4bn to $9.1bn. DOE has already agreed to back $8.3bn in loans to Vogtle and Georgia Power is working to further increase federal support.

The utilities negotiated a new working arrangement with Westinghouse that includes making Southern's nuclear unit and Georgia Power the main contractors at Vogtle. DOE approved the arrangement in July and amended the loan terms accordingly. This includes suspending any advances until the utilities have finished their cost assessments.

The planned construction of two AP1000 units at the Turkey Point NPP in Floorida is also on hold. Florida Power & Light Co’s (FPL’s) NextEra Energy has decided to “pause” construction but is still seeking approval to obtain and then maintain a federal licence for the two reactors.

Halting its quest to obtain the licence would be like abandoning the project at the “two-yard line,” an FPL official told the Florida Public Service Commission earlier in August. FPL is asking the PSC to allow it to continue spending millions of dollars on the licence without submitting a required annual report on whether the project, which could cost up to $21.87bn makes economic sense. FPL last filed such a report in May 2015.



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