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OPPD's Fort Calhoun nuclear plant has become too expensive to run, company says

OPPD's Fort Calhoun nuclear plant has become too expensive to run, company says

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The nuclear plant at Fort Calhoun is simply too expensive to run when compared to other, cheaper forms of power, the Omaha Public Power District’s chief executive said Thursday. So it needs to shut down by the end of the year, he said.

OPPD President and Chief Executive Tim Burke told the utility’s board of directors that it no longer makes financial sense to continue operations at Fort Calhoun, which is the smallest nuclear power plant in the United States. The site for the plant was purchased in 1965.

The board will reconvene on June 16 to make a decision on Burke’s recommendation.

Closing the plant would mean lower overhead costs when it comes to complying with federal nuclear regulations and other expenses — including the $20 million a year OPPD pays an outside firm to run the plant. That firm, Exelon, has run Fort Calhoun since 2013 after OPPD was rapped hard by federal regulators for serious safety lapses; the plant was shut from mid-2011 until December 2013 as the utility dealt with Missouri River flooding and correcting violations of federal nuclear safety rules.

Shutting the plant permanently would move the utility away from relatively expensive-to-generate nuclear energy in an era of low-priced natural gas and an increasing reliance on wind power.

The recommendation to shut the plant comes with a guarantee, Burke said: Ratepayers won’t see a general rate increase until at least 2022 because of the savings from shuttering Fort Calhoun.

“You have to say enough is enough and curb the costs,” OPPD board member Tom Barrett said. “That’s the cold, hard facts of this business.”

The costs of nuclear generation put it at a disadvantage to wind and natural gas, according to the federal Energy Information Administration. The EIA in June of last year reported the total costs per megawatt-hour for a new nuclear plant to be about $95. In comparison, the cheapest natural gas-fired generation is about $75 or less per megawatt-hour and wind generation is about $74 per megawatt-hour.

The average U.S. residential utility customer in 2014 used about 11,000 kilowatt-hours of energy.

Still, board Chairman Mick Mines said there’s no doubt that the recommendation would significantly affect the livelihood of plant employees. But the board has a responsibility to act in the best interest of ratepayers of the publicly owned utility, he said. “You can’t ignore the money,” Mines said.

If the board decides to close the plant, job losses would still be at least a year or two away because a nuclear plant can’t just be switched off. Ongoing licensing requirements and procedures mandated by the federal Nuclear Regulatory Commission mean a process of at least 18 months — and monitoring for longer — to power down the plant.

The utility’s nuclear operation consists of almost 700 employees, most of whom are at the plant about 15 miles north of downtown Omaha on the Missouri River.

In an interview, Burke told The World-Herald on Wednesday that regulatory pressure to reduce carbon emissions, a goal to make rates more competitive and depressed prices on the wholesale electricity market influenced management’s recommendation to shut down the plant.

From September 1973 through March 2012, Fort Calhoun accounted for more than 34 percent of OPPD’s annual electricity generation.

The plant in recent years has been under the microscope of U.S. regulators: Problems at Fort Calhoun came to a head when the plant was taken offline for refueling in April 2011, then suffered a fire and reeled from troubles related to the historic flooding of the Missouri River that year.

Soon after that, federal regulators found dozens of safety deficiencies and put the plant in an intense oversight program to address “significant performance and/or operational concerns.”

After power production ceased in April 2011 and regulators ratcheted up oversight, OPPD in 2012 entered the 20-year, $400 million contract with Exelon; that Chicago-based nuclear company is the largest of its kind in the United States and now runs the Fort Calhoun plant for OPPD, which continues to own the plant and has its own staff connected to the plant’s operation.

Many of OPPD nuclear plant workers would lose their jobs if they aren’t placed elsewhere in the company. Burke said the impact that closing the plant would have on the personnel involved was the toughest part of the decision to make the recommendation.

“To see the way those men and women worked, to see them put their lives and souls into keeping the plant safe during the flood and the manner in which they restored the plant ... they started the plant back up and have made continued improvements and performed their jobs,” Burke said in the interview, his voice cracking. During Thursday’s presentation to the board, OPPD senior managers also fought back tears.

“We’re not recommending to cease this because of performance, because we’ve seen performance as high as it’s been in years, by all measures,” he said.

The plant restarted in December 2013 and has operated under a normal level of federal regulatory oversight since April of last year.

Now, board member Anne McGuire said, the plant’s performance is “the best it’s been since before the flood.”

The plant’s now-rectified regulatory problems aren’t the reason for the recommendation to power down, though. It’s simply become too expensive from a cost-benefit perspective to operate the country’s smallest nuclear plant, Burke said.

The utility spends $250 million each year to produce energy and maintain facilities at Fort Calhoun.

That’s a hurdle, Burke says, when it comes to achieving its goal of taking rates from about 7 percent below the regional average to 20 percent below that average.

And the utility’s revenues have been falling. First, there is lower demand for electricity as customers move toward energy efficiency. Second, the utility is getting less money for the excess power it generates that it sells on the open market.

Recently, an oversupply of natural gas and increased regional wind energy production have made it increasingly difficult for OPPD to make up for revenue shortfalls associated with flat or falling demand for electricity, Burke said.

Even though the utility in 2015 sold more energy to off-system customers than it did in 2014, year-over-year revenues from those sales were down 12 percent.

That’s due in part to the added expense and overhead that accompanies nuclear power generation; utilities competing with OPPD in the open market that generate excess power via natural gas, for example, have a leg up on the local utility because their fuel is cheaper and they don’t have the increased regulatory scrutiny or nuclear infrastructure driving up prices.

The added overhead of operating the nuclear plant has made OPPD’s excess energy less competitively priced in the marketplace, said Tim Gay, vice chairman of the OPPD board.

And despite a pending court challenge that has left in limbo President Barack Obama’s plan that sought to restrict carbon emissions from power plants, OPPD is determined to proceed with a power-generation plan that reduces greenhouse gas emissions from its own facilities, Burke said. The so-called federal Clean Power Plan offers utilities no incentive for existing nuclear power, which is emission-free, despite a preliminary proposal that would have included some nuclear generation offsets in emissions calculations.

Despite having adopted a new generating portfolio plan in 2014, Burke said, “now we’re back two years later with complete market changes, complete technology changes and more clarity around some of the regulations.”

Since then, the value proposition for maintaining operations at OPPD’s sole nuclear power plant hasn’t gotten any better; Burke said that even if the federal emissions plan credited nuclear operators for reducing emissions, the impact to the local utility would be negligible.

John Keeley, a spokesman for the Washington, D.C.-based Nuclear Energy Institute, an industry advocate, said the Fort Calhoun situation is an example of the vulnerability of similar nuclear plants to market conditions — mainly, the sources of energy that, at the moment, can produce electricity more cheaply, like natural gas and wind. (Five nuclear plants have closed in the past few years; two others are set to close.)

Furthermore, Keeley said, nuclear power isn’t given enough credit by federal policy for the emissions-free energy that it produces.

“There is an urgent need to develop policies that will prevent additional, premature nuclear plant retirements,” Keeley said, “because the economic and environmental consequences are enormously negative.”

Part of OPPD Chief Executive Burke’s recommendation to the board includes replacing some of Fort Calhoun’s 478.1-megawatt capacity with wind energy and natural gas. Burke said not all of the nuclear plant’s capacity must be replaced because demand isn’t forecast to rise as consumers’ homes and businesses become increasingly energy-efficient.

OPPD ratepayer Mark Welsch, who attended Thursday’s meeting, commended the utility’s management team and board for taking up the issue. Welsch is the head of the Omaha chapter of the advocacy group Nebraskans for Peace. He said the utility should be tilting toward renewable sources of energy, like wind.

“I’m very proud to be a customer-owner of OPPD right now,” he said. “The board is taking a hard look at a very hard potential decision it will have to make.”

If the board follows through on the recommendation, OPPD’s wind and renewable generation will make up 49 percent of its energy portfolio by 2020, up from 38 percent that is currently forecast.

OPPD’s relationship with renewables grew in 2014 when the utility approved a long-term generation plan that included the phase-out some of its coal-burning units, conversion of others to natural gas and the addition of 400 megawatts of wind power from a massive wind farm near O’Neill, Nebraska.

Under the plan presented Thursday, those plans would remain intact, but Burke said the most economically viable course is one that does not include nuclear power and effectively ends more than 40 years of nuclear generation.

Contractors broke ground on Fort Calhoun Station on Feb. 9, 1968, and the plant’s first sustained nuclear reaction was at 5:47 p.m. on Aug. 5, 1973.

Burke said he expects the plant to enter a “cold shutdown” in October of this year, if the board proceeds with the recommendation. In a cold shutdown, pressure and temperature conditions within the plant’s nuclear reactor are lowered to a level that prevents a nuclear chain reaction from occurring.

From there, the utility would proceed with various regulatory applications required to decommission the plant. That process includes dismantling the facility, decontaminating it and safely storing or disposing of radioactive materials.

Burke said spent fuel rods probably would remain at the site — there is nowhere else to take them because a proposed radioactive waste repository at Yucca Mountain in south-central Nevada is still in limbo. For now, radioactive waste from nuclear power plants is stored on-site in concrete casks.

Decommissioning can take 10 years under a process known as Decon, under which a plant is dismantled and contaminated materials are either decontaminated or removed. In a deferred dismantling process known as Safstor, facilities are maintained for a period of up to 60 years and radioactivity decays to a safe level.

OPPD in its 2015 annual report estimated that the costs to decommission Fort Calhoun would be about $884 million. The utility has socked away about $373 million for those costs.

The board will take 30 days to consider management’s proposal, during which time it will field concerns and suggestions from stakeholders and ratepayers.

The state’s other nuclear power plant, the Nebraska Public Power District’s Cooper Station at Brownville, “continues to be an important part of NPPD’s long-term strategy for a diverse energy mix,” a company spokesman said.

He said there has been “no similar discussion” by board members of NPPD, which is based in Columbus. That plant, which NPPD operates — unlike the OPPD plant, which is operated by the contractor — can generate 810 megawatts compared to Fort Calhoun’s 478.1.

Contact the writer: 402-444-1534,

* * *

By the numbers

$178,300,000 construction cost

478.6 megawatts of generation capacity

119,370,005,130 total amount generated kilowatt hours*

378,985,700 highest monthly generation of kilowatt hours (Jan. 2007)

34.1 percent percentage of OPPD generation since Sept. 1973

$250 million annual operation, maintenance and investment cost

694 employees connected to plant

*as of March 2012

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