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May 06, 2016
SEC Backs Shareowner Challenge of Dominion Nuclear Plant
    by Robert Kropp

The utility's effort to exclude the resolution calling for analysis of the financial risks associated with a nuclear reactor which could cost over $19 billion is turned down by the Securities and Exchange Commission.


Dominion Virginia Power wants to construct a third nuclear reactor at its North Anna Power Station northwest of Richmond, and cites the transition to a low-carbon economy—along with expected regulatory action on carbon emissions—as a primary cause.

“As we are transiting into a low carbon future, North Anna will be an option that is very valuable to us at some point in the future,” Bob Thomas of the utility told the Associated Press.

Dominion projects that the cost of constructing the new reactor will be $14.8 billion. But the nuclear industry is notorious for incurring significant cost overruns; and since the proposed North Anna 3 reactor will be of a new construction type, overruns can be expected to be even higher than the industry norm. Scott Norwood, an energy analyst for the Virginia Office of the Attorney General, estimated that “after including a conservative estimate of construction interest costs, the current capital cost forecast for NA3 would be approximate $19.3 billion.” Norwood also calculated an “average rate increase of 25.7% over current Virginia retail residential rates.”

Furthermore, even before applying for a certificate of public convenience and necessity or a rate adjustment clause, Dominion expects to have spent $1.87 billion by 2018 and $4.7 billion by thee end of 2020.

Even setting aside the potentially disastrous environmental and public health consequences of nuclear power as an energy source, Dominion shareowners are understandably concerned over the financial implications of spending billions on a reactor whose construction is by no means a foregone conclusion. Shareowner Ruth McElroy Amundsen has filed a resolution with the company, requesting that it “prepare and make public a financial analysis by November 30, 2016 reporting on the potential impact on earnings, share price and dividends should the State Corporation Commission deny a certificate for the development of North Anna 3 and further deny the recovery of $1.87 billion in costs associated with the North Anna 3 nuclear reactor incurred prior to an order denying a certificate to construct the reactor.”

“The NA3 price tag makes it far more expensive even than the other nuclear plants currently under construction in Tennessee, Georgia and South Carolina,” the resolution states. “All three are behind schedule and over budget, which does not inspire confidence in the industry’s ability to contain costs. As a result of this high capital cost, Norwood found that the ‘total delivered cost of power from NA3 is more than $190 per MWh in 2028.’ That translates into more than 19 cents per kWh. Average wholesale price of electricity in the [Virginia] region was 5.3 cents per kWh in 2014.”

Dominion responded to Amundson's proposal by seeking to have it excluded from this year's proxy ballot, but the Securities and Exchange Commission (SEC) denied the company's request. Dominion's Annual General Meeting will be held on May 11th.

“I am very grateful that shareholders, who need Dominion to make the right long-term moves, will now get to weigh in on North Anna 3,” Amundson stated. “The problem with waiting to make this decision is that doing so is very expensive, and pulls capital away from other projects that might be in the better long-term interests of the company and its shareholders. Because the financial stakes are so high, it is important to have shareholders fully aware of the financial risks Dominion is taking by proceeding with North Anna 3.”

 

 
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