Utilities launch nuclear management strategy

Pam Boschee

Associate Editor

The nuclear industry hopes restructuring of nuclear operations will upgrade its prognosis for long-term survival. Four utilities in Minnesota and Wisconsin embraced this strategy and formed a nuclear management company, described by Michael B. Sellman, the new company`s president, as “a company to provide services up to and including operational management-short of a generating company. We`re not talking about a company that owns nuclear capacity.”

Sellman, currently also senior vice president and chief nuclear officer at Wisconsin Electric, said the management company (which does not yet have a name) will establish a senior management team to focus on consolidating the expertise and talents of employees, tapping the best practices at each site, controlling costs of commonly used services, and integrating the resources of the seven nuclear units.

The utilities and their associated nuclear plants are:

– Alliant Energy: Duane Arnold Nuclear Plant, Palo, Iowa. One unit (535 MW), boiling water.

– Northern States Power (NSP): Monticello Nuclear Plant,

Monticello, Minn. One unit (600 MW), boiling water. Prairie Island Nuclear Plant, Red Wing, Minn. Two units (1,070 MW), pressurized water.

– Wisconsin Electric: Point Beach Nuclear Plant, Two Creeks, Wis. Two units (1,025 MW), pressurized water.

– Wisconsin Public Service: Kewaunee Nuclear Plant, Carlton, Wis. One unit (530 MW), pressurized water.

The management company evolved from cooperative alliance teams formed by the utilities in August 1998 to address fuel management, Y2K initiatives, inventory management, information exchange and self-assessment programs. The alliance work led to the conclusion that, in some areas of technical expertise, greater benefit could be gained in a more formal, integrated structure.

Transition period

Sellman said each utility will obtain required state or federal regulatory approvals over the next year prior to its participation in the management company Also, Nuclear Regulatory Commission approval is required if a utility chooses to transfer its operating license to the new company. Kewaunee is the only plant doing so at this point in time.

Previous nuclear management companies have been successful, said Sellman. He cited Entergy`s 1989 consolidation of three nuclear units in Arkansas, Mississippi and Louisiana, and Southern Company`s consolidation of two plants in Georgia and one in Alabama. He added, “This is a little different situation than those” because single companies were responsible for oversight compared to four utilities involved in this new management company.

Transition business plans are now being developed. Sellman said, “Total formative costs are in the $15 million to $20 million range in other situations over 1.5 to two years, but savings offset that quickly.” He said questions about savings to ratepayers and the ability of the nuclear plants to compete with combined-cycle plants could be addressed with “better quantification in three to four months.”

Sellman estimated the current average production cost (O&M and fuel costs) for the units at “a little under $20 per MW.” He said reduction “down to $15 per MW is looked at as achievable.”

The utilities will continue to own their plants, be entitled to the energy generated at the plants, and retain financial obligations for their safe operation, maintenance, decommissioning, and nuclear waste disposal. “We`re still all subject to storing waste on our own sites, and the government has an obligation to take it but it will be a while. We`re not looking at transfer of waste from one site to another. It`s not legal to do,” said Sellman.

The management company is a joint venture with 25 percent ownership by each utility. The board of directors will consist of one director from each utility.

Utilities retain their own transmission planning

Although Alliant has expressed interest in NSP`s proposed Independent Transmission Company (ITC), each of the four utilities will continue to plan its own transmission. Tony Schuster, NSP`s transmission system vice president, said formation of the management company “makes sense for business interests” due to similarities in (nuclear plant) technology, facilitating transfer of technical expertise.

He added, “Drivers behind the ITC are also business interests.” Each utility must, therefore, determine which transmission model is most advantageous economically for its own business. Schuster emphasized that “the whole concept of transmission, ITC or ISO, is to make it independent of generation resources,” so the formation of the management company does not redirect the separate entities` transmission planning.

Alliant`s David Giroux, manager of external communications, concurred with Schuster. “Transmission is a whole separate deal.” He said the ITC offers engineering and economic efficiencies, and Alliant is preparing to “file with FERC very soon to get the ITC approved.”

Giroux said that once the ITC structure-including options such as divestiture, leasing, and performance-based contracting-is put on paper, more utilities may be interested. He said outside of NSP and Alliant, a “wait-and-see” stance is common, although “Alliant is talking with representatives of every major utility in the Midwest.”

Nebraska Public Power District recently signed a letter of confidentiality with Alliant and NSP to share information, including operational data, and discuss how it might participate in the proposed ITC.

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