Now you see what happens when we don’t manage to take the lege back from the representatives of the greedy: we get Senator Delbert Scott introducing SB228 to repeal what the voters, as a result of a petition initiative, OK’d by a two to one margin in 1976, namely that utilities can’t charge us for the building of facilities that aren’t yet in operation. That decades old but still sensible piece of legislation–called anti-CWIP (for construction work in progress)–was a stellar idea, but now AmerenUE, having paid its dues to Republican candidates in the last election cycle, is trying to undo it. How dare the hog-the-money party and its corporate cohorts decide to reverse the will of Missourians.
Ameren wants to build a second nuclear reactor, Callaway II, and it wants its customers to pay as the work is in progress for a reactor that might not come online for ten years. The argument put forth for making us pay in advance is that it will save billions of dollars. What might otherwise cost nine billion dollars will supposedly get done for a mere six. Oh. Well. That’s okay then.
Hold on a second, though, while I explain how the “savings” will occur. Concrete, steel and labor will not be cheaper as a result of the ratepayers being charged in advance. A bill favoring CWIP doesn’t make building the plant any cheaper. What it does save on is interest rates. And, whoa, you might say, nine billion instead of six would be an effective rate of fifty percent. Pretty steep.
That’s because loans are expensive for this kind of venture. It’s risky. Speaking at a forum sponsored by the Missouri Coalition for the Environment last Monday evening, Peter Bradford, an expert on the topic of financing nuclear reactors, pointed out that in the heyday of building such plants, back in the seventies and eighties, half of the plants that got permits to build were canceled. Few lenders want to take on that risk. Hence, the nationwide push by utilities to make the consumer shoulder the burden. In Florida, Bradford pointed out, utility rates are up 10.2 percent for a plant that isn’t due to come online until 2016. By the way, the current bill would allow Ameren to raise its rates every three months.
For the utility company to try to force its customers to take on the risk is simply not fair. Back in 1975, when Union Electric tried the same gambit its successor is now using, American Public Power Association objected:
“[CWIP] abandons the traditional practice that the capital market furnish capital for the construction of new plants. Instead, the Commission desires consumers to supply money for the growth of a private business, and the consumer receives no financial return for a company’s use of his capital…The proposal removes incentive for utility management to curb costs. If a utility is guaranteed revenues for all costs incurred during construction, e.g. labor, equipment, property, engineering studies, etc., some incentive is removed for utility management to operate efficiently and be conscious of costs, because the consumer is supplying the capital, and the risk to management and to the investor is diminished.” (Comments filed with the Federal Power Commission, 4/15/75, pp. 12, 13)
Not only would we the ratepayers be on the hook for any foolish spending the company
might will surely engage in once it has carte blanche, we will also run the risk of paying for mistakes, delays, strikes, or material or labor shortages.
Those mistakes that might occur can be humdingers, too. In 1981, at the Diablo Canyon reactor in California, a mirror image reversal in the seismic blueprints was discovered. The builder, PG&E, was forced to spend an additional three billion dollars and three years of repairs before opening. The plant, which had been slated to cost $300 million ended up with a $5.8 billion price tag, not to mention another $7 billion in finance costs.
Building a nuclear power plant is a risky venture. And for taking that risk, what do we Ameren’s customers get? Nothing. Not one extra kilowatt of electricity.
The ratepayers should not be bearing the brunt of the risk. That’s the job of Ameren’s shareholders. The company gets a monopoly with a guaranteed healthy profit margin. The deal on investments in capitalism is supposed to be “high risk, high rate of return, low risk, low rate of return.” But Ameren wants to have its cake and eat it too–guaranteed profits and no risk. It’s corporate welfare.
In fact, the company does not need this welfare because it does not need to build another nuclear reactor. More on that topic tomorrow.