Two nuclear power plants under construction in Washington state, plagued by cost overruns and facing a decreasing need for the electricity they would produce, have been scrapped because of a failure to get continued financing.
The termination of the two plants, voted Friday by the board of the Washington Public Power Supply System, a group of utilities that had been building the plants, is a major blow to the nuclear industry.
Others considering nuclear plants should "take a look at what happened here first," said Roger Sparks, a WPPSS director from Kittitas County, Wash.
Orders for new nuclear plants in America stopped several years ago, and the cancellations of existing orders continue.
One of the two Washington plants was 25 percent completed, and the other 16 percent finished--further along than any other unfinished nuclear plants at the time of their cancellation.
The group of 88 utilities running the project will have to repay more than $2.25 billion in loans, plus $343 million in termination costs.
WPPSS managing director Robert Ferguson said that a buyer for the abandoned plants will be sought to help avoid a total loss on construction and licenses.
While there are no estimates on how much electricity bills will increase in the four states affected by the scrapping of the plants, financial analysts say that if the termination is managed well, consumers could face doubled electric rates. If it isn't, the experts estimate, some customers could face a fourfold increase.
June Zamjahn, of Tacoma City Light, one of the largest participants in the two terminated plants, said its average residential power bill is now about $35 a month.
The central problem crippling the two plants was the continued deterioration in the long-term bond market, Ferguson said.
This project not only took bonds to finance construction, but also required bonds to pay the interest on the construction bonds.
The bonds required just to pay the interest and the interest on that interest ran to about $4 billion, Ferguson said. "There was literally no way we could raise that kind of money in that kind of market," he said.
Ferguson said that because nuclear plants require so much capital and take so long to finish in the current climate of regulation, they become very risky.
The WPPSS nuclear program, which oversees construction for 115 utilities in eight western states, was the most costly publicly financed construction program in the nation. It has three other nuclear power plants under construction and within three years of completion. They are financed through a federal power agency in the Northwest, the Bonneville Power Administration, and so are not threatened by this cancellation.
The financial problems of the two canceled plants, located at Satsop and at Hanford, spurred passage of a ballot referendum last November requiring voter approval when public projects are financed by bond issues. That referendum, being challenged in court, could affect future financing of the remaining three plants.