New nuclear energy anything but cheap

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Opponents line up against Duke Energy nuclear construction financial scheme while FERC still stands in way of merger with Progress Energy

The Charlotte Observer reports Duke Energy, a Charlotte-based utility, wants lawmakers to allow it to recoup nuclear pre-construction costs faster.  Duke Energy wants to adjust electric rates annually to recover those proposed nuclear plant costs, and says the change would avoid sharp rate increases once nuclear plants are completed.

A large group of advocates and a coalition of 12 groups including AARP North Carolina and the North Carolina Housing Coalition have vowed to fight the potential law change.

The push for early cost recovery (sometimes called advanced cost recovery or construction work in progress, CWIP) for construction of nuclear reactors is driven by the same basic truth which has always prevented free markets from being proponents of new nuclear reactors.  They are totally uneconomic.

The financial scheme of adjusting rates according to construction work in progress allows utilities to charge ratepayers today for financing costs (plus profit), while critics say the practice shifts risks to building a plant onto consumers before it starts generating power and even if the project gets canceled.

“You shift all construction risks to the consumer,” Mark Cooper, a Vermont Law School economist, was quoted as saying in the Charlotte Observer. “Making an interest-free loan to a utility is not what most people would want to do with their money.”

Cooper argues that the practice called simplified cost recovery encourages utilities to invest in the most expensive power plants and erases incentives to cut costs.  A recent survey of 500 likely N.C. voters by Raleigh’s Public Policy Polling that found broad opposition to rate increases to build nuclear reactors.

CEO Jim Rogers told shareholders at their annual meeting May 3 that Duke is “firmly committed” to keeping the option of expanding its nuclear capacity.

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