by James A. Bacon
Foes of a third nuclear power plan at Dominion Virginia Power’s North Anna Power Station have taken their case to the shareholders of parent company Dominion Resources, which is holding its annual shareholders meeting in Columbia, S.C., today.
Dominion is racking up billions of dollars of potential liabilities on the nuclear unit (NA3) that it may never recover, argues a shareholder resolution filed by Ruth McElroy Amundsen. State regulators may balk at paying for a project that, according to a Dominion estimate filed with the State Corporation Commission, would cost approximately $14.8 billion and, according to an expert witness for the Office of the Attorney General, would cost $19.3 billion,
Amundsen’s shareholder resolution (page 54) calls for Dominion to prepare and make public “a financial analysis” by November 30 reporting on “potential impact on earnings, share price and dividends should the State Corporation Commission deny a certificate for the development of North Anna 3 and further deny the recover of $1.87 billion in costs associated with the North Anna 3 nuclear reactor.”
“The massive $19 billion cost for the North Anna 3 nuclear reactor project makes it the biggest single threat posed today to the pocketbooks of Virginia consumers,” said Irene Leech, president of the Virginia Citizens Consumer Council. “The ever-escalating cost of this project and the fact that it is at least twice as expensive as other alternatives, including energy efficiency and renewables, makes this a situation that cries out for responsible shareholders to speak up and be heard.”
Dominion responded in its 2016 shareholders proxy statement that the company faces immense regulatory uncertainty. Federal courts must rule on the constitutionality of the Clean Power Plan and then, if the plan is deemed constitutional, the commonwealth of Virginia must select one of four broad regulatory strategies to meet the goals of the plan, which is designed to combat climate change by reducing utility carbon-dioxide emissions.
“The analysis and report … [would] require hypothesizing a number of unrelated factors and contingencies,” stated the board of directors in recommending against the shareholder proposal. “The potential outcomes of these issues, each of which would depend, in part, on subjective determinations by regulators, would need to be taken into account if we were to prepare the requested report. The complexity of any cost-recovery analysis is further compounded by the fact that the legislative process can, at times, alter the regulatory landscape.”
Amundsen’s resolution, which echoes the arguments made by consumer and environmental groups, focuses on the risk that the nuclear plant might never get built and that the company may not recover the significant investments it is making before receiving regulatory approval. Virginia Office of Attorney General has raised concerns with the SCC whether the expenditure of $19.3 billion developing NA3, which could translate into an average rate increase of 25.7% over current Virginia retail rates, is “reasonable and in the public interest.”
The total delivered cost of power from NA3 would amount to 19 cents per kilowatt/hour, which compares to the average wholesale price of electricity in the PJM interconnection region of 5.3 cents per kilowatt/hour in 2014, stated a supporting document for the shareholder proposal. And that doesn’t take into account the prospect of more cost increases if the project runs behind schedule and over budget.
Even if Dominion never builds the nuclear facility, it has been spending hundreds of millions of dollars on engineering and regulatory work to keep the nuclear option open. As of Sept. 30, 2015, the company had incurred $580 million in development costs, and Dominion expects to have spent $4.7 billion in development by the end of 2020, states the supporting document. “By the time the SCC is allowed to review this spending, more than one-quarter of the total cost will have been spent.”
Amundsen’s bottom line: “Dominion is incurring its North Anna 3 costs purely at its stockholders’ risk.”
Dominion’s recently published 2016 Integrated Resources Plan lays out four potential regulatory strategies for Virginia if the Clean Power Plan is approved. One of those scenarios, a “mass-based” approach that sets caps on CO2 emissions for existing and new power plants, would restrict coal- and gas-based electric generation so drastically that the company would have little choice but to shift to solar and nuclear power, the company has argued.
While the Sierra Club Virginia Chapter argues that “the company can substantially reduce carbon pollution with renewable energy like solar and wind power,” Dominion says that the intermittent nature of wind and solar production forces the company to maintain backup capacity it can rely upon. The low-cost option for “dispatchable” power is natural gas. But the regulatory scenario preferred by environmental groups effectively precludes gas and coal, leaving nuclear as the only option. The company also contends that neither energy-efficiency initiatives nor purchases of wholesale power from the PJM system can make up the difference.
In effect, Dominion regards its expenditures on the NA3 nuclear unit as an insurance policy should Virginia adopt the most carbon-restrictive Clean Power Plan regulatory option.
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