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Nuclear Plant's Outages to May Cause Higher Rates for Arizona Utility Customers

Posted on: Wednesday, 26 October 2005, 12:00 CDT

By Ed Taylor, The Tribune, Mesa, Ariz.

Oct. 26--Unplanned outages at the Palo Verde nuclear plant could cost Arizona Public Service customers $40 million in higher electric rates.

That possibility was raised in a letter to the Arizona Corporation Commission written by APS executive vice president Steven Wheeler. Wheeler said the utility intends to seek approval to recover those estimated costs in the form of higher surcharges for customers.

The $40 million represents the added costs to APS to generate electricity and purchase power from more expensive replacement sources, Wheeler said.

Of that amount, about $14 million is related to the latest unplanned shutdown between Oct. 11 and Oct. 20, when APS engineers were unable to assure federal regulators the reactor core cooling systems at the plant's three units could operate in all emergency situations.

Last week APS said it intended to try to recover those costs from customers, but officials had not yet estimated what those costs were.

The $40 million estimate was revealed Monday in Wheeler's letter to the commission.

The commission, which regulates utilities in Arizona, must approve any APS rate increase before it can take effect.

The $40 million is in addition to an $80 million surcharge the company is seeking to impose on customers to cover the higher cost of natural gas used a fuel in some of its other generators. Hearings on that requests are scheduled to begin this morning.

Chairman Jeff Hatch-Miller said the commission will hold formal hearings, probably in the first quarter of next year, to determine how much of those costs should be passed on to customers. Also on Tuesday the commissioners decided to hold a special hearing, probably before the end of this year, on safety and maintenance procedures at Palo Verde.

The plant has been plagued with unplanned shut downs this year over a variety of issues, and Hatch-Miller said the commissioners "owe it to the people of Arizona" to determine if operations at the plant, the largest nuclear complex in the United States, can be improved."

"Palo Verde is incredibly important to us," he said. "It is one of the cheapest power sources we have, and it is the cleanest base-load generator we have."

The majority rejected, however, an immediate special hearing requested by commissioners Bill Mundell and Kris Mayes to determine the cost impact of the Palo Verde shutdowns. The majority said they preferred to wait for the formal hearings next year.

Mayes was upset that APS officials told the public during the shutdown they were unsure if they would seek higher rates when she said they already knew they would try to get the money from ratepayers.

"APS has been deceptive about this," she said.

APS spokesman Jim McDonald called the charges of deception "simply wrong" and that company spokesmen have always told the media what they knew at the time about the utility's intentions.

McDonald agreed that Palo Verde has been hit by an unusual number of unplanned shutdowns this year, but he said it appears to be more because of chance than any pattern.

Unscheduled shutdowns of Palo Verde units happened between May 23 and June 24 and between July 6 and July 13 before the latest outage this month.

McDonald said the aging of the units, which went online between 1986 and 1988, isn't a factor.

"We have an ongoing maintenance program to keep the plants in good operating condition," he said.

Salt River Project, which obtains about 20 percent of its power from Palo Verde, incurred about $19 million in higher costs related to the shutdowns between April and August, said spokesman Scott Harelson. The October cost won't be known until next month.

Also undetermined is how much of those costs will be passed on to customers, he said. As a quasi-public entity, SRP is not regulated by the corporation commission and can impose a surcharge without approval of regulators.

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Copyright (c) 2005, The Tribune, Mesa, Ariz.

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PNW,

Source: The Tribune

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