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INDIANAPOLIS – As the nuclear industry prepares to ramp up construction nationwide, Indiana legislators considered Tuesday whether to allow utilities to recoup some project costs from customers years before a reactor is in operation.
House and Senate members heard testimony about an incentive known as “construction work in progress,” whereby utilities can charge ratepayers for interest costs on the overall project from the beginning.
When a plant is up and running, the utility can start recovering the actual construction costs though the existing regulatory structure.
In Indiana, charging ratepayers for construction work in progress is allowed only for “clean coal” power plants that release less carbon dioxide than conventional plants.
Rep. Win Moses, D-Fort Wayne, and Sen. Jim Merritt, R-Indianapolis, co-chaired the Tuesday meeting of the Regulatory Flexibility Committee. Moses opposes the measure; Merritt supports it. They said there are no formal applications to build a nuclear power plant in Indiana but that American Electric Power might have interest in adding to its Cook Nuclear Plant along Lake Michigan’s eastern shoreline.
That plant currently provides power to some South Bend and Fort Wayne customers, and any expansion would affect those ratepayers.
There are 104 nuclear power plants operating in the United States, supplying about 20 percent of the nation’s electricity.
Leslie Kass, director of policy and programs for the Nuclear Energy Institute, said 16 proposals for 25 new nuclear reactors are under review by the Nuclear Regulatory Commission.
The first wave of four to eight new plants could be online by 2016. Only three plants have started site preparation, and none has begun construction, which takes about five years.
Kass argued that allowing utilities to charge up front for interest costs lowers the overall cost of the project in the long run because not as much interest is compounded into the total cost.
Sen. Lonnie Randolph, D-East Chicago, questioned the immediate benefits for customers.
Kass responded by talking about the jobs created at the facility, but she conceded that rates would be higher in the beginning.
“You have to take a longer-range view for the consumer,” she said, noting a nuclear power plant has a 60-year life span that flattens out rate fluctuations over time and provides lower-cost energy in later decades.
But Mark Cooper, director of research for the Consumer Federation of America in Washington D.C., said utilities are simply asking ratepayers to take a risk that the free market isn’t willing to.
He likened it to customers making interest-free loans to the utility. And he said the irony is that the more the industry needs construction work in progress to build the plants, “the worse the investment is, the more dangerous to the ratepayer.”
And Kerwin Olson, program director for the non-profit watchdog group Citizens Action Coalition, reminded the committee about the history of the industry in the 1970s and ’80s, when it abandoned projects that had ballooned in cost.
Two such projects were canceled in Indiana after billions of dollars were spent.
