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The top brass from MidAmerican Energy came in to tell us why it’s a good idea for their customers to underwrite the construction, licensing and permit costs of a nuclear power plant that may or may not be built and to start paying for it in their utility bills even before there’s an approved design, not to mention power being produced.
The idea isn’t going over too well with Iowans: A new Iowa Poll finds 77 percent are opposed.
That’s a lot of risk to dump into the laps of consumers. MidAmerican estimates the plant will cost around $1 billion, but major cost overruns are common for nuclear power plant construction, often double or triple the estimates. Consumers, not the utility’s owners, would be left holding the bag if the plant never gets running. While we get no refund, MidAmerican still would be guaranteed its profits.
The bill passed the Iowa House last year and is slated to be considered by the Senate Commerce Committee.
MidAmerican President William Fehrman doesn’t want it to be viewed as prepayment by customers. “Customers are being asked to pay a little bit upfront to dramatically reduce costs at the end,” he said. Based on its estimated $1 billion cost, it expects customers would be charged 9 cents extra a month at first, rising to $3.95 a month in year six. Power would begin to be generated in the ninth or tenth year, and by the end of year 12, customers would pick up about 35 percent of the costs.
Fehrman calls the legislation necessary “to lock in the uncertainty.” He explained: “For nuclear projects, there is a need to have political agency. If there’s not some level of certainty around how the investment would be handled, then it’s not a good idea for me to go forward.”
He also said if lawmakers won’t support this, “then that tells me my next plan is going to be gas.”
Lawmakers could support the idea of nuclear power without supporting such a dramatic change in the rules of paying for. But that’s a different conversation.
“They say it’s a way to show Iowa means business, is interested,” said Anthony Carroll, who heads advocacy for AARP of Iowa, about MidAmerican’s position. “That’s a nice way way of saying their shareholders and investors don’t want to front the costs.”
That’s because it’s a risky investment, as Florida has learned. Its legislature in 2006 approved a similar law that was presented as a way to speed up construction and save money on financing of the plants. But the costs estimated by the utility, Progress Energy, have shot up from $4 billion to $22 billion (the plan changed from one to two reactors) and the start date for producing energy has been pushed back from 2016 to 2021. Now the utility may cancel the contract, which would leave customers, who have already spent $545 million, paying the remaining $555 million.
Iowa lawmakers should learn from Florida. They should listen to Iowa Utilities Board staff, who have warned that the financing model, with profits guaranteed no matter what, could create incentives for the utility to walk away from the plant rather than complete it if, for example, it makes a mistake that would multiply the cost of completion. There would also be less incentive to negotiate with vendors because customers were underwriting the risk.
You can see why opponents accuse this proposal of “socializing the costs and privatizing the profits.” The Iowa Public Interest Research Group put out a report showing that half of the 253 nuclear reactors approved in the United States were ever completed. The smaller modular plant that MidAmerican hopes to build has less risk of cost overruns, says the IUB staff. But it has never before been built nor even approved by the Nuclear Regulatory Commission.
Almost everyone uses electricity, so we’d have no way to opt out of paying for this risky venture. MidAmerican already got permission from the Legislature two years ago to charge customers $15 million for a three-year study of whether to build a nuclear plant.
Shouldn’t the Legislature at least wait to see what that says before considering this bill? In fact, wouldn’t it make more sense for it to take a hard look at all the alternatives for Iowa’s energy future and come up with an energy policy rather than letting the tail (MidAmerican) wag the dog (the Iowa public) with this proposal?
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