July 15, 2008

Woods and power company CEOs agree: “The state of the industry is cautious”

Jason Makansi, Pearl Street Inc.

It is rare indeed to witness, at an otherwise staid industry forum, the public rebuke of the country’s most prominent supplier to the electric power industry. But at the Keynote session and Power Industry CEO Roundtable of the 2008 ELECTRIC POWER Conference & Exhibition in Baltimore this May, Milton Lee, general manager and CEO of CPS Energy (City Public Service of San Antonio), apparently wanted to make sure representatives from General Electric Corp. heard what he had to say (Figure 1). At one point he asked for a show of hands of attendees from GE. Then he proceeded to describe how GE added risk to the nuclear energy business by backing out of South Texas Project’s (STP) new construction program.

 

 

 

Following Lee’s comment, Michael Morris, chairman and CEO of American Electric Power Corp. (AEP), Columbus, Ohio, reminded the audience of what this risk entails. “A merchant nuclear plant?” he exclaimed. “It takes five years to license, five years to build, and five years to litigate!”

Details of the flare-up were revealed in a follow-up article published in POWER’s sister publication, Energy Daily. Lee clarified his remarks in an interview, saying that GE refused to work with STP on building the advanced boiling water reactor (ABWR), which is commercially proven and operating at several sites in Japan, and instead pushed its newer economic simplified boiling water reactor (ESBWR) on STP. The global behemoth denied this, immediately issuing a statement that GE had pulled out because STP had switched prime contractors.

While the public drama was rare, the dilemma is anything but, and it points to the central challenge facing these CEOs, the industry, and the rate-paying public: What to build next for baseload supply, and how to pay for new supply and/or conservation (with ratepayer and regulator blessing) when cost pressures are virtually everywhere?

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