Tuesday, December 25, 2007

Browns Ferry repair costs $90 million above budget -- [$1.8 billion project]

December 25, 2007


The repair and upgrade of TVA's oldest nuclear reactor ended up costing $90 million more than originally budgeted, and so far the unit has operated at less than its forecasted long-term reliability, according to TVA documents filed with the U.S. Securities and Exchange Commission last week.

But TVA's chief operating officer said Monday that the restart this spring of the Unit 1 reactor at the Browns Ferry Nuclear Power Plant is saving TVA money and will be a better-than-expected investment because of the rising costs of other energy sources.

"Even at the higher costs, Browns Ferry still represents a significant value for TVA," said TVA Executive Vice President Bill McCollum Jr. "The payback should actually be better than the original estimates, primarily because the value of that energy is greater today."

In its first four months of operation, the Browns Ferry unit saved TVA $196 million compared with more expensive power the utility otherwise would have had to buy to meet its power demand, Mr. McCollum said.

In its annual financial report, TVA said it finished the Browns Ferry project on time and within 5 percent of its original budget forecast. That compares favorably to TVA's nuclear power construction program a generation ago when some reactors cost several times more than originally forecast.

The first reactor at the Watts Bar Nuclear Plant near Spring City, Tenn., for instance, took 22 years to build and cost more than $6.8 billion, or nearly 10 times its original estimate.

Critics of nuclear power contend that the cost overruns at Browns Ferry raise concerns about the costs of nuclear plants as TVA and other utilities make plans to add more reactors. Stephen Smith, executive director for the Southern Alliance for Clean Energy in Knoxville, said TVA has "really hyped the advantages of nuclear power.

"Browns Ferry certainly came out better than the huge cost overruns we saw in the past with these nuclear plants, but $90 million is still a significant amount of money," Mr. Smith said. "The plant also is running below the optimistic production levels TVA said it would achieve and has had a lot of trips that raise questions about whether TVA rushed to get it finished."

Since the Unit 1 reactor at Browns Ferry resumed power generation on June 2, the plant has operated 78.8 percent of the time. The reactor has had five unplanned shutdowns, or more than 10 times the industry average for such outages at operating plants, according to data compiled by the Nuclear Energy Institute.

But TVA spokesman John Moulton said such shutdowns are more common when a new plant is being started or a unit is being reactivated after a prolonged outage. TVA shut down the Browns Ferry reactor because of safety concerns in 1985 and the unit remained idle until this spring.

"These type of outages are to be expected when you restart a unit like this," he said. "The capacity factor is comparable to what TVA saw with units 2 and 3 after prolonged outages at Browns Ferry and those reactors are now performing very well."

Inspectors for the Nuclear Regulatory Commission reviewed the five outages at the Unit 1 reactor at Browns Ferry in November. NRC spokesman Ken Clark said Monday the NRC expects to issue its findings from its review in early 2008.

Mr. McCollum said in November that he did not anticipate any problems.

"I think they (NRC staffers) were well satisfied with the work that our staff has done to investigate the causes and see what we need to do," he said.

In its financial filings, TVA said the $90 million cost overrun primarily was due to the expense of boosting the power output of the unit by another 130 megawatts. TVA conducted a detailed engineering plan to repair Browns Ferry Unit 1 before the TVA board decided in May 2002 to restart the unit.

The initial $1.8 billion, 60-month budget for the Browns Ferry repairs included plans to boost the power output of the unit by more than 10 percent. But Mr. McCollum said that portion of the project required licensing approval and costs more than originally forecast.

The restart of the unit after its 22-year outage won acclaim from industry groups and President Bush. During a visit to the plant in June, the president called the Browns Ferry reactor "a reliable source of low-cost energy."

"This is a demonstration that one is capable of doing a job on time and on budget," Mr. Bush told more than 200 plant employees during a speech touting the advantages of nuclear power.

In November, the editors of Platts Insight, a global energy news service owned by McGraw-Hill Co., recognized the recovery of Browns Ferry Unit 1 as their Energy Construction Project of the Year. During the judging of projects in London earlier this year, one of the Platts' reviewers said the restart of Browns Ferry "was like converting a DC-3 airplane to a 747 in midair."

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