Nuclear energy: Don’t believe the sticker price

I have an op-ed column out today that attacks the threat of a nuclear power plant in Maryland by looking at recent fruitless attempts to build plants, and the cost born by ratepayers.

By Matt Dernoga

A common perception of nuclear power is that it’s an affordable, carbon-free energy source that could meet a lot of America’s demand for electricity, if only those darn environmentalists would get out of the way. Unfortunately for nuclear power advocates and Maryland ratepayers, this statement crumbles upon contact with reality.

The average cost of electricity for all of Maryland’s sectors is 13.45 cents per kilowatt-hour. There’s a growing possibility some of us will have the pleasure of paying double that thanks to the pending merger between Constellation Energy and French electric giant EDF Energy, which is supposed to pave the way for construction of a new nuclear power plant at Calvert Cliffs. Doubling rates is fairly easy to predict with a trip down memory lane.

Ontario was slated to build a new nuclear plant until this summer, when a 2007 estimated price tag of $7 billion turned into $26 billion, which would’ve wiped out their 20-year budget. Turkey became a “turkey” when the only bidder for their new nuclear power plant offered a price for ratepayers of 21.16 cents a kilowatt-hour. Turkey’s wholesale energy prices average 7.9 cents a kilowatt-hour. The new bid for France’s plant also soared past expectations, settling at a cool $23.6 billion.  Finland’s new nuclear power plant has seen four years of delay and cost overruns from 3 billion euros up 50 percent to 4.5 billion euros. That nicely works out to $6.74 billion in U.S. dollars and climbing.

It’s happening here too. Progress Energy revealed in 2008 to Florida that its tab for twin nuclear reactors would actually be $17 billion dollars, tripling the estimates the utility offered the year prior. This was before they delayed construction by 20 months and got the Florida Public Service Commission to hike ratepayers’ electric bills by 25 percent to cover the costs. This was also before San Antonio discovered in October their two newly proposed nuclear reactors would cost as much as $17 billion instead of $13 billion, causing at least a delay, likely to be followed by a rate increase to cover costs.

And all this was before the Maryland Public Service Commission approved the Constellation and EDF deal so we could have a new $9 billion (initial cost estimate) Calvert Cliffs reactor. It’s hard to hide from history when it lives so close.

In case you were wondering, ratepayers tend to foot the bulk of the cost overruns and delays you get with a new generation nuclear power plant, even if it never gets built. If it’s any consolation, Gov. Martin O’Malley got $100 checks sent to all BGE customers as part of the merger.

The reason we get all of these delays and cost overruns is because the nuclear power industry fudges the numbers to justify new plant construction. One of the most detailed and transparent studies by a certified public accountant named Craig Severance found that electricity from new nuclear reactors will cost in the range of 25 to 30 cents a kilowatt-hour, largely thanks to the construction delays and cost overruns that I illustrated above.

If I were a state ratepayer, I would hold on really tight to that $100 check that’s supposed to buy my vote in 2010. You’re gonna need it unless someone in Annapolis finds their common sense.

Matt Dernoga is a senior government and politics major. He can be reached at dernoga at umdbk dot com

ICC Debt Burdens Maryland Transit Authority

Well, I guess now we don’t need any projections about how building the Intercounty Connector was going to screw the Maryland state budget, never mind the environment .  This article in the Baltimore Sun is probably one of the most damaging stories I’ve ever seen.

“As the Maryland Transportation Authority’s revenues have declined this year, its costs for construction of the Intercounty Connector have risen to the point where the project now accounts for 53 percent of the agency’s budget – forcing delays in other road maintenance projects and making a substantial increase in tolls at some facilities a near certainty after the 2010 gubernatorial election.

According to the state Department of Legislative Services, the independent toll authority is facing the same type of recession-related squeeze that has forced the Maryland Department of Transportation to defer about $2.2 billion in projects.”

“Some increase in tolls is likely because the authority’s heavy borrowing to finance the ICC and a widening of Interstate 95 might put it close to its statutory debt limit in about five years.

“State projections show the authority’s outstanding debt – under $500 million as recently as the 2007 budget year – stands at $1.1 billion now and will approach its legal limit of $3 billion by the middle of the next decade. The authority would need authorization from the General Assembly to exceed that amount”

Much of the agency’s debt has been piled up to pay for the ICC, a $2.6 billion project that will cost $736.8 million in authority funds in the current budget year alone. That is more than all other capital, operating and debt service spending in the agency’s budget.

Freeland said the authority long anticipated that the ICC would take up a large percentage of its budget this year and the next two, tailing off after 2012.

According to legislative analysts, the authority will have to impose “substantial” toll increases in the 2012 and 2014 budget years to maintain its minimum ratios of revenue to debt. The formula is important in keeping the authority’s AA bond rating that guarantees it can borrow at favorable rates.

The authority is forecasting a 2012 toll increase that would bring in $161.4 million. According to analysts, that would amount to an increase of $1.35 in the average toll of about $3.”

“Asked to sum up the condition of his agency, Freeland chose his words carefully.

“The financial future of the transportation authority will be constrained but manageable,” he said.”