Dominion Virginia Power’s latest Integrated Resource Plan (IRP) includes construction of a third nuclear reactor at North Anna, just as previous IRPs have done every year since 2008. What’s new this year is that we finally have a price tag. Scott Norwood, a witness for the Attorney General’s Office of Consumer Counsel, says Dominion’s $19 billion forecast will mean an average rate increase of approximately 25.7% over current Virginia retail residential rates.
The 2015 IRP shows cost estimates for the new nuclear plant have spiraled upwards. Norwood notes that the forecasted capital cost is currently 55% higher than in 2011. This capital cost is not only ten times the cost of new natural gas generation, it is also higher than Dominion’s solar energy option—which happens also to be its least-cost option for complying with EPA’s Clean Power Plan.
Indeed, the NA3 price tag makes it far more expensive even than the other nuclear plants currently under construction in Tennessee, Georgia and South Carolina. All three are behind schedule and over budget, which hardly inspires confidence in the industry’s ability to contain costs anywhere.
In his testimony to the State Corporation Commission, Norwood argues that North Anna 3’s high price tag means it is not reasonable to keep it in the IRP. Section 56-599 of the Virginia Code requires the Commission to make a determination whether the IRP is “reasonable” and in the public interest.
Including nuclear in an IRP doesn’t commit Dominion to building a reactor or the SCC to approving it, so the SCC has not previously chosen to weigh in. Nor have elected leaders yet responded to the rising cost numbers.
Legislators may be tempted to ignore North Anna 3 until Dominion secures an operating license from the Nuclear Regulatory Commission (anticipated in 2017) and applies to the SCC for a Certificate of Public Convenience and Necessity (with a decision likely in 2018).
Yet delaying the conversation is expensive. Dominion is already spending hundreds of millions of dollars annually on North Anna 3 development—and one way or another, Dominion expects customers to bear the cost.
In 2014 the company successfully lobbied for legislation shifting the costs it had incurred through 2013 onto its ratepayers, a move that sopped up Dominion’s overearnings and prevented a rate cut.
But those costs were chicken feed compared to what’s coming. By the end of 2018, Dominion will have spent close to $2 billion dollars on North Anna 3. The company can afford to front the money, in part because of 2015 legislation “freezing” rates until 2020 and allowing the company to keep what could amount to hundreds of millions of dollars more in excess earnings.
If the SCC waits until 2018 to consider the merits of North Anna 3 and then denies Dominion permission to move forward, the company will argue for the right to bill ratepayers for all that money it threw down the rat-hole. The SCC might not prove sympathetic, but General Assembly members maintain a strong record of doing anything Dominion wants.
Still, allowing Dominion to soak customers for $2 billion would be a welcome outcome compared to the alternative. Worse would be for the SCC to approve the plant—or more likely, for legislators to take it out of the hands of the SCC and simply vote to let Dominion proceed. Dominion has begun spinning a tale about North Anna 3 being needed for energy security, resource diversity, and compliance with new environmental rules. All of these are wrong, but they play into narratives that resonate with many lawmakers.
Meanwhile, the vast sums required for a new reactor would siphon money away from much more cost-effective strategies that can deliver carbon pollution reductions far sooner, including investments in solar and energy efficiency. That makes it critical for the SCC to put an end to the North Anna 3 rat-hole this year.
The Commission will hold a hearing on Dominion’s IRP on October 20. The case is PUE-2015-00035.