The WPPSS Default. A foreshadowing for Sound Transit?

Monday, Feb. 13, 1984
Pulling the Nuclear Plug
By Peter Stoler

A chain reaction of setbacks hits the industry, but the need for power remains It began with such promise. The scientists and engineers who had shown the terrible destructive power of the atom at Hiroshima and Nagasaki were going to harness its tremendous force in an atoms-for-peace program. They would build nuclear power plants producing electricity so easily that it would be "too cheap to meter." At a time when technology promised an almost boundless potential for improving humankind, nuclear power seemed so modern.

But today the concrete cooling towers standing in open fields or alongside rivers appear to many as monuments to a god that failed. Much of the public fears that nuclear plants are sending out mysterious and unseen radiation that will maim generations to come, or may somehow explode.

Instead of providing low-cost energy, many of the plants are managerial and financial disasters that have produced higher electric bills. Moreover, a new generation accustomed to seeing the dark side of technology sometimes views nuclear power as the future that did not work.

Opponents and critics of nuclear power are ready to write its obituary. But they are likely to be disappointed. Reports of the industry's death are premature. This year the U.S. will get 13% of its electricity from the atom; by the mid-1990s, according to some estimates, that figure will have risen to about 20%, and nuclear power will be the nation's most important source of electricity after coal.

Nevertheless, the nuclear industry is not well. Like a patient with a chronic disease, it has been ailing for more than a decade. It has been suffering seriously for nearly five years, ever since a 1979 accident turned the nuclear plant at Three Mile Island, Pa., into a focal point for public fears and protests. Now a series of reversals has worsened nuclear power's condition still further.

The first of the new setbacks occurred last July when the Washington Public Power Supply System, or WPPSS (more widely known by the satiric sobriquet of "Whoops"), defaulted on $2.25 billion worth of bonds. The consortium of 23 electric companies, which had postponed or canceled construction of four of its five proposed nuclear power plants, had sold the securities to help finance two of the facilities. The WPPSS default, the biggest municipal bond failure in history, shook financial markets and raised questions about the ability of utilities to manage nuclear plant construction.

The industry might have recovered from the WPPSS debacle, but in recent weeks it has suffered a series of other reversals. In mid-January the federal Nuclear Regulatory Commission denied Illinois' giant Commonwealth Edison a license to operate its new Byron plant, which was nearly completed and had cost $3.7 billion. Reason: the NRC said it had "no confidence" in the quality-control procedures for some of the construction. Three days later, Public Service Co. of Indiana announced that it was canceling all further work on its 2,260-megawatt (MW) Marble Hill plant, half completed at a cost of some $2.5 billion. The loss has put a severe strain on the company's finances. The utility said last week that it would eliminate 100 jobs over the next month. In addition, 573 of the utility's remaining 4,000 workers will go on a four-day week.

A third blow fell when Cincinnati Gas & Electric and two partner companies announced that they were halting further nuclear construction on their long-troubled William H. Zimmer plant at Moscow, Ohio. They plan to convert the 810-MW facility, 97% finished at a cost of $1.7 billion, into a coal-burning installation. A fourth shock to the gasping industry came when a Pennsylvania public utilities commission led overextended Philadelphia Electric to halt construction for 18 months on one of its two Limerick reactors, where $3 billion has already been spent.

The nuclear power industry had anxiously been watching as economic recovery slowly nudged upward the demand for electricity. Now, utility executives concede, the industry will do well just to hold its own. No one expects U.S. utilities to shut down any of the 82 nuclear plants currently in operation, but no one is betting against cancellation of some of the 48 plants in various stages of construction around the country. The utilities have not placed an order for a new nuclear plant since 1978, and they are unlikely to do so in the near future. Says Robert Scherer, chairman of Georgia Power and head of the U.S. Committee for Energy Awareness, a pro-nuclear group: "No utility executive in the country would consider ordering one today—unless he wanted to be certified or committed."

The U.S. nuclear power program did not reach its present condition suddenly. The illness appears to have been congenital and may have been caused, at least in part, by the great expectations that greeted its birth.

James Newman, a congressional counsel who helped draft the Atomic Energy Act of 1946, said: "This new force offers enormous possibilities for improving public welfare, for revamping our industrial methods and for increasing the standard of living." Proclaimed David Deitz, Pulitzer-prizewinning journalist and author of the 1945 book Atomic Energy in the Coming Era: "The day is gone when nations will fight for oil." Before the U.S. had time to consider fully the potential problems involved with the new form of energy, the nation leaped into the nuclear age.

The industry started off small: in 1957 the Government beached a submarine reactor at Shippingport, Pa., and converted it into a power station with an output of 60 MW. The earliest American nuclear facilities were built by private companies, such as General Electric and Westinghouse, as loss leaders to convince utilities that atomic power was the future. They needed little convincing. By the end of 1967 the U.S. had 28 times as much nuclear capacity on order as it did in operation. The capacity of plants under construction increased from 300 MW in 1962 to 700 MW in 1965 and 1,150 MW in 1972. "It is clear," said NRC Commissioner Victor Gilinsky, a frequent critic of the industry, "that we got ahead of ourselves in expanding and scaling up the applications of nuclear power as fast as we did."

It soon became obvious that building the plants was a more complicated task than the prophets of nuclear power had thought. Many units were plagued by problems, thereby raising fears about the plants' safety. A 1975 accident at the Browns Ferry nuclear reactor in Alabama intensified these concerns by showing how human and mechanical error could combine to create a potentially serious situation. In that accident, a worker using a candle to search for air leaks managed to start a fire in the plant's electrical wiring. This knocked out five emergency core-cooling systems and briefly reduced the plant's protection against a meltdown, which can theoretically occur if the core overheats and its molten uranium fuel drops through the bottom of the reactor.

The Browns Ferry accident fed a growing antinuclear movement. It included environmentalists such as the Sierra Club, Friends of the Earth and Citizens Against Nuclear Power, a handful of doctors and several scientists, as well as movie stars like Jane Fonda and other celebrities. The coalition of opposition battled nuclear power on several fronts, demonstrating at plant gates and marching in the streets of Washington. One of the opponents' most effective weapons was forcing the projects into legal battles that delayed programs and increased construction costs.

The event that really pushed the anti-nuclear movement and rocked the industry occurred early in the morning of March 28, 1979. Several water pumps stopped working at Metropolitan Edison's Unit 2 at Three Mile Island, a station southeast of Harrisburg, Pa. If everything had been handled properly, the event might have resulted in nothing more than a brief shutdown for the year-old plant.

But a series of operator errors compounded the machinery's malfunctions. Within a matter of hours, the reactor's radioactive core had become temporarily uncovered, and the reactor had come closer to a meltdown than anyone knew — or at least admitted — at the time.

Coming only two weeks after the release of the film The China Syndrome, which depicted safety problems in the nuclear industry, the T.M.I, accident sent residents of the area fleeing for safety. Pennsylvania Governor Richard Thornburgh was forced to consider ordering a total evacuation of the region. The accident also caught both the industry and the NRC unprepared. No one knew exactly how to solve the problem. "What shook the public the most," said Gilinsky, "was seeing the men in the white lab coats standing around and scratching their heads because they didn't know what to do. The result was that accidents were taken seriously in a way they never had been before." T.M.I. 2 may not actually have suffered a meltdown, as industry spokesmen were quick to maintain, but the credibility of the industry and the NRC suffered.

The T.M.I, accident led to a lengthy investigation and an NRC list of some 6,000 steps that utilities had to take in order to improve the safety of their plants.

The expensive reforms involved operator training, the development of evacuation plans and the addition of a great deal of hardware. The safety search continues. Late last week, after workers discovered a large crack in a steam pipe at Georgia Power Co.'s twin-reactor Hatch plant at Baxley, the NRC ordered owners of five similar plants in the U.S. to search for possible cracks; all the reactors were temporarily closed. T.M.I, produced a much tougher attitude toward operators who broke safety rules. Until then federal law limited the fines that the NRC could impose to $25,000 for each violation. Soon after T.M.I., Congress removed that lid, and since then the NRC has been handing out higher and higher fines. Last February electric circuit breakers at the Salem plant of New Jersey's Public Service Electric & Gas twice failed to function properly, preventing an automatic emergency shutdown of the reactor. In May the NRC levied a fine of $850,000, the biggest in its history, against PSE&G for attempting to restart the plant without recognizing that anything was wrong. Applying the lessons of T.M.I, has cost the nuclear power industry billions of dollars and significantly slowed its expansion. New safety equipment has added millions to the cost of both existing reactors and those under construction.

Changes in the licensing process and opposition from environmentalists have stretched out the time it takes for plant approval and construction from seven years in the early 1960s to as long as 14 years now. It would be unfair and unrealistic, however, to blame all of the industry's problems on the accident and its aftermath. The industry's ailments are due to a whole congeries of factors. One of the most important was the twin oil shocks that hit the world during the 1970s. The first occurred in 1973-74, when the Organization of Petroleum Exporting Countries raised the price of oil from about $2.50 to more than $11 per bbl. Then Arab members of OPEC cut off oil exports to the U.S. The steps triggered long lines at gas stations and led the U.S. to look for a quick technological fix for its fuel problems. Nuclear power seemed like just the answer to some, and President Richard Nixon launched his much ballyhooed "Project Independence." It set the goal of obtaining half of American electricity from nuclear power by the year 2000. The objective made good sense at the time.

Demand for electricity had been rising steadily, increasing an average of 7% a year for more than a decade.

In some parts of the Sunbelt, demand was doubling every seven years, practically overnight in an industry that normally plans on a 15-to-20-year schedule. The world of energy economics, though, was about to change. After the second oil shock, in 1979, which followed the overthrow of Iran's Shah, the price of OPEC crude reached as high as $40 per bbl. Energy consumers reacted to the staggering prices by conserving fuel in a way that had never been imagined. Demand for electricity increased by only 1.7% in 1980 and .3% in 1981 and actually shrank 2.3% in 1982. That was the first decline in power use since the end of World War II. The lower energy consumption placed the power industry in an awkward position: the supply of electricity far exceeded the demand. American utilities now have about 30% more generating capacity than they need, far more than the 20% to 25% generally considered sufficient to meet unusual weather-caused emergencies or to assist neighboring utility companies. In response to the lower energy demand, some utility companies slowed or halted construction of new plants, whether coal or nuclear.

Indeed, more plants — 18 — were canceled in 1982 than in any other year since the U.S. first went nuclear. Encouraged by the strongly pro-nuclear Reagan Administration, other utilities ignored the omens and pressed on with plans to expand their generating capacity in expectation that demand would soon come back. Still others kept building nuclear plants on the ground that it was often more economical to complete the multibillion-dollar projects than to abandon them. That assumption sometimes proved erroneous. Constructing nuclear plants has proved very expensive. In the early 1970s, says Charles Komanoff of the New York City-based consulting firm Komanoff Energy Associates, there was little difference in the construction costs of nuclear and coal-burning plants.

Nukes cost $200 per kilowatt (kW) to build, coal plants around $175. But nuclear construction prices quickly began climbing. By the late 1970s, Komanoff says, nukes cost $700 per kW, compared with $500 for coal plants. Now, with post-T.M.I. requirements pushing the price of nuclear construction even higher, coal plants are clearly more economical. According to Komanoff, a coal-fired plant with state-of-the-art pollution-control equipment can be built today for around $1,200 per kW; a nuclear plant costs $3,000 per kW. Says Komanoff: "The power industry may really have made only one forecasting mistake, and that was that nuclear plants would become cheaper." That one mistake would have been bad enough, but the industry also committed several others.

The most obvious was poor management of plants under construction. Industry analysts agree that all too many nuclear projects have been badly conceived, poorly designed and inadequately controlled. Each U.S. nuclear plant is in effect a custom-made affair. The industry has failed to follow the lead of such countries as France and Canada, which have adopted standardized reactor designs. Such blueprints would allow modifications made on one plant to be copied at others in the series. Each American plant must now be checked out individually, and the lessons learned from operating one are difficult to apply to others. The construction of facilities, which is generally done by a veritable army of subcontractors under the direction of the utility, is often poorly supervised. The result of this laxness is work that can best be described as shoddy. Some of the earthquake supports for California's Diablo Canyon plant were installed backward, as was the reactor vessel at the San Onofre plant near San Diego. Reactor supports at Comanche Peak in Texas were installed 45° out of position. Pipes inside and outside the reactor building at Shoreham on Long Island, N.Y., failed to meet properly and had to be connected with elbow joints. One reason the nuclear industry has been so prone to glitches is that it plunged into building atomic plants on a grand scale before it had enough experience and expertise.

The danger of radiation release makes the precision required in putting up a nuclear plant much greater than the accuracy needed in an ordinary coal-fired facility. "It's like building a giant Swiss watch," says David Freeman, a director of the Tennessee Valley Authority, which operates two atomic plants. Many nuclear construction crews tried to build these Swiss watches with little more than the skills needed to hammer together a coal burner. Delays and repairs have led to catastrophic cost overruns, which have plagued many plants completed in recent years as well as some of those currently under construction. Florida's new St. Lucie 2 facility, which was built and brought on line in six years for $1.4 billion, about four times its original estimate of $360 million, is considered an industry bargain.

So is the Palo Verde complex, three 1,270-MW units 50 miles west of Phoenix. It is looked upon as a success by current nuclear industry standards because the expected final cost of some $6 billion is only about double the original estimate of $2.8 billion. A study released in January by the Energy Information Administration, a division of the Department of Energy, showed that 36 of the 47 nuclear plants surveyed cost at least twice as much as initially projected, while 13 of them were four times higher. Among the most expensive of these nuclear white elephants:

SHOREHAM. Overlooking the sound on the North Shore of New York's Long Island, this 1,100-MW plant was supposed to cost $241 million when it was started in 1965 and was expected to go on line in 1975. Now nearly a decade behind schedule, the plant will cost at least $4 billion, or 15 times the original estimate, and could run the Long Island Lighting Co. (Lilco) even more before it produces any electricity. The utility last year had a continuing battle with Suffolk County officials over the approval of evacuation plans in case of an accident. The emergency procedures were finally approved, but now the plant's diesel generators have been found to be defective and may have to be replaced. The utility's chairman, Charles Pierce, resigned suddenly last week. He gave no reason, but the company's board was reported to be unhappy with his handling of the problems at Shoreham.

SEABROOK. Besieged by members of the Clamshell Alliance and other environmentalists, the two-reactor Seabrook plant was begun by Public Service Co. of New Hampshire in 1976 and was slated to cost $973 million. Unit 1, which stands near the coast, may be ready in July 1985, but the company is making no predictions as to when—or whether—Unit 2 will be completed. The utility is currently revising both its construction schedule and the cost projections for the whole project. The most recent estimate: $5.8 billion.

MIDLAND. Conceived as a cooperative venture that would supply Michigan's Consumers Power Co. with electricity and a neighboring Dow Chemical plant with steam, the two-unit, 1,300-MW project on Michigan's Tittabawassee River was launched in 1969. It then carried a $267 million price tag. The problem-plagued development is currently nine years behind schedule and egregiously over budget. Company officials say that construction, now 85% complete, has al ready cost $3.4 billion.

The impact of such overruns on the companies involved is enormous. Lilco, which concedes that it now has a cash-flow problem, is paying more than $1 million a day in interest on its Shoreham loans and losing $1.5 million for each day that start-up is delayed. New York Governor Mario Cuomo said last week that he doubted Shoreham would ever begin operating and that he saw no reason why the state should bail Lilco out of its losses. "Let them take a bath," he said. "They're a private corporation."

Consumers Power Co. is spending $1 million a day in interest payments to keep its Midland project going. Consumers Power's long-term debt now exceeds the firm's shareholder equity by more than $1 billion; Chairman John D. Selby has warned that if the twin reactors are not finished, the company, which has 1.3 million electric customers, could be forced into bankruptcy proceedings. The credit ratings for bonds issued by several utilities have been lowered. Moody's Investors Service dropped the ratings on bonds put out by Public Service Co. of Indiana from Baa2 to Ba2 after the company announced that it was abandoning the Marble Hill plant. Standard & Poor's has warned Illinois' Commonwealth Edison that its B1 rating of the utility's commercial paper was put on credit watch because of the NRC's denial of an operating license for the Byron units.

These actions hamper the companies' efforts to raise capital and keep their nuclear projects going. They also hit utility stockholders, who may see the value of their investments shrink. The price of Lilco's stock dropped last year from $17 to $10.13, costing the company's 181,127 stockholders an estimated $70 million. The ultimate victims may be consumers. Lilco customers, who already have the highest electricity bills in the U.S., can expect to pay up to 50% more to help cover the costs of building the Shoreham plant. Public Service Co. of New Hampshire is prevented by law from imposing the expense of construction work at Seabrook on the public until it is receiving power from the plant. If Seabrook 2 ever goes on line, the company will have to increase rates by 40% to 50% to recover its investment. Consumers may not even be spared from paying for abandoned nuclear operations. Companies like Public Service Co. of Indiana are seeking permission to pass part of their loss on to customers in the form of higher fees. Many antinuclear activists see recent events as confirmation of all their dire predictions. "This is a failed technology," says Melody Moore, director of Chicago-based Citizens Against Nuclear Power. Even businessmen sympathetic to nuclear energy as a source of electric power are pessimistic about its future. "Nuclear power is well into free fall. It's beyond recovery," says John Nichols, president of Illinois Tool Works, a diversified manufacturing firm.

Utility company executives are bitter about their present plight. Says Don Beeth, director of nuclear information at Houston Lighting & Power: "The first lesson we've learned is 'Don't build nuclear plants in America.' You subject yourself to financial risk and public abuse." William Dickhoner, president of Cincinnati Gas & Electric, sounds a similar note: "It's almost a punitive deal to open a nuclear plant these days."

A few utility executives question the future of nuclear power in the U.S. "Some days I think I may be building the last nuclear plant that's going to be built for a while," says R.E. Conway, the senior vice president of Georgia Power. "They are just too expensive for a company like us to construct any more." Georgia Power's Plant Vogtle, a two-unit facility now more than 50% complete, is expected to come on line at ten times its original price tag of $660 million. For many utilities, nuclear plants are far too costly. The huge, quasi-governmental Tennessee Valley Authority made a commitment in the 1960s to generate most of its electricity by nuclear power.

Since August 1982 the giant utility has canceled four nuclear units and taken a $1.8 billion loss. Now it is turning back to coal. "We recognized the situation we were in and took the most prudent action," says Hugh Parris, manager of power at TVA. "Some folks might look at abandoned nuclear plants as monuments to mistakes and stupidity. I look at them as monuments to good management." Despite these myriad troubles, however, the majority of utility company executives feel the nuclear power industry will survive. Says Commonwealth Edison Chairman James O'Connor: "We have limited options in the ways we can produce electricity. It's important not to lose sight of the considerable role nuclear energy plays. Very little attention has been paid to the pluses, too much to the negative side of the industry. I would not over time write off the nuclear option." Many Government officials agree. Says Secretary of Energy Donald Hodel: "I think it will come back. I think eventually the U.S. will say we need a continuing nuclear component." Edward Merrow, director of energy policy programs at the Rand Corp., believes nuclear energy is inevitable. "It is the only real energy alternative that appears viable," he says. "Coal is an alternative, but it is problematical, what with environmental difficulties and acid rain." Merrow's point is well taken. American energy needs are bound to increase, even if slowly, particularly if the current economic recovery continues. Other sources of energy will simply not meet future U.S. power demands. Oil is too valuable as an aircraft and automobile fuel and as a raw material for petrochemicals to be used to generate electric power. Only 6% of American electricity comes from oil-burning plants, and that figure is likely to shrink. Natural gas is better used as a heating fuel, and its share of electricity generation has gone down sharply in the past two decades.

Alternative energy sources are not ready to play a big role in electricity generation. Neither solar nor wind energy is sufficiently developed to produce large amounts of electric power. Solar panels are being more widely used on new homes, particularly in the Sunbelt. But even solar's most ardent backers do not argue that sun power can generate enough electricity to become a major energy factor.

Windmills provide some supplemental power at experimental installations around the U.S., especially in California, but few utilities can rely on them because of problems with cost, reliability and durability. Nuclear fusion, in which light atoms of hydrogen, extractable from sea water, are fused to provide energy, is likely to remain an elusive dream for the remainder of the century. Scientists have yet to achieve a self-sustaining fusion re-action in the laboratory, much less design a commercial fusion reactor.

The U.S. could rely more on coal to meet its energy requirements, and the idea is appealing. The U.S. has abundant coal reserves — enough, according to some estimates, to last 200 years — and coal-burning plants can be built more quickly and cheaply than nuclear ones. But coal facilities pump thousands of tons of sulfur oxides and other pollutants into the air each day. They are the prime cause of acid rain, which is slowly destroying some U.S. and Canadian lakes and may be damaging forest areas. Despite their lower construction costs, coal plants are no cheaper to run than nuclear ones.

The Atomic Industrial Forum, which represents the nuclear industry, reported that nuclear-generated power actually undersold coal-produced electricity, 3.10 per kilowatt-hour (kWh) to 3.50 in 1982. Figures compiled by United Engineers and Constructors, an energy consulting group, showed that nuclear power cost 3.20 per kWh, while coal was 3.190. Contrary to a widespread impression, nuclear plants can be run well and economically. The 830-MW Maine Yankee Atomic Power plant in Wiscassett, Me., has operated reliably since it first went on line in 1972. The plant established a world record for performance by working 392 consecutive days without shutting down during 1977 and 1978 and was in service 79% of the time last year. Yankee Atomic Electric's plant in Rowe, Mass., has been producing 185 MW without an accident since it started up in 1961. The Trojan plant on the Oregon side of the Columbia River was completed in 1975 at a cost of just $460 million. It provides some of the cheapest thermal energy in the U.S. (2.50 per kW) and has a good safety record. Even the most ardent nuclear power advocates admit that the industry must change in order to survive and expand. The industry could help itself by developing standardized reactors and revamping management procedures so that construction could be handled by a single experienced company rather than confederations of subcontractors. The industry must also be more sensitive to public concerns about safety and the disposal of nuclear wastes.

Regulatory reform is necessary to cut through the paperwork that can delay projects and increase construction costs. Says Cincinnati Gas & Electric's Dickhoner: "You can't build something when you have 285 regulatory changes while it's being built." Such reforms could help the nuclear industry without endangering public health.

Despite the fears about safety, the difficulties of disposing of waste materials and the outrageous construction-cost overruns, nuclear power is not finished. The atom will be part of America's and the world's energy future. "We'll all live to see the building of additional nuclear plants down the road," says W.S. White, chairman of Columbus & Southern Ohio Electric Co. The U.S. may never have to rely on nuclear power to provide most of its energy, but it does need reactors for a large portion of its electricity. American consumers want to continue flicking light switches and turning on appliances without worrying about where the power will come from. The American economy depends on an expanding supply of energy to continue growing. Moreover, the U.S. needs a secure, reliable energy supply that is not subject to disruption by political upheavals abroad. In short, the nation requires a mixture of energy sources to drive its economy in the future, and nuclear power should be part of that mix.

With reporting by Jay Branegan, J. MADELEINE NASH