Dominion to Decommission Kewaunee Nuclear Plant, Cites Poor Economics

The Kewaunee Power Station—a 556-MW nuclear facility in Carlton, Wis.—will be shut down and decommissioned starting in the second quarter of 2013, its owner Dominion said on Monday. The company said the decision to shutter the plant was based “purely on economics.”

Dominion put the plant up for sale in April 2011 “as part of a regular review of its portfolio of assets to determine which assets fit strategically and support its objectives to improve return on invested capital and shareholder value,” but it has been unable to find a buyer.

At the same time, though it evaluated a number of other nuclear plants in the Midwest for purchase, it was unsuccessful in winning the respective auctions for those plants, Dominion spokesperson Jim Norvelle told POWERnews on Monday. “Most of those other nuclear stations went for sale prior to the increased supply of natural gas brought about by new technologies now available to get the natural gas out of the ground,” he said. “Kewaunee is a small, single-unit station. We were not able to move forward with our plan to grow our nuclear fleet in the Midwest to allow Kewaunee to take advantage of economies of scale.”

"This was an extremely difficult decision, especially in light of how well the station is running and the dedication of the employees," said Thomas F. Farrell II, Dominion’s chairman, president, and CEO. "This decision was based purely on economics.”

Meanwhile, Kewaunee’s power purchase agreements are scheduled to end in December 2013, when prices of wholesale electricity in the region, pegged to declining natural gas prices, have been projected to be low. “The combination of these factors makes it uneconomic for Kewaunee to continue operations," Farrell said.

Plans to shut down the plant depend on a grid reliability review by the Midwest Transmission System Operator. If they proceed, the station will remain under the oversight of the Nuclear Regulatory Commission (NRC) throughout the decommissioning process.

Following station shutdown, Dominion said it plans to meet its obligations to the two utilities that purchase Kewaunee’s generation through market purchases until the power purchase agreements expire in December 2013.

Dominion’s most recent Form 10-K filing with the Securities and Exchange Commission notes that as of December 2011, estimated decommissioning costs for Kewaunee were about $680 million. But that figure did not reflect “any reduction for any potential future recovery from the U.S. Department of Energy of certain spent fuel costs,” Norvelle said. As of December 2011, the Kewaunee decommissioning trust had funds of about $517 million. “The trust is fully funded and we believe that the amounts currently available in the trust plus expected earnings will be sufficient to cover all decommissioning costs expected to be incurred after the station closes,” he said.

The single Westinghouse pressurized water reactor on Lake Michigan, about 35 miles southeast of Green Bay, started commercial operations in 1974. Dominion bought the plant in July 2005, and the NRC renewed the station’s operating license for 20 more years in February 2011, giving it a new expiration date of 2033.

Farrell said Dominion believes nuclear power will continue to play an important part in the nation’s energy future and that U.S. reliance on nuclear power for about 20% of its power needs is a “major reason” it enjoys “one of the most reliable, least expensive and cleanest electric grids in the world.”

"The situation Dominion faces at Kewaunee is the result of circumstances unique to the station and do not reflect the nuclear industry in general. The nation will be hard-pressed to meet its energy needs, let alone do so in a secure and affordable manner, without a robust and growing nuclear energy program," he said.

Wisconsin Gov. Scott Walker (R) in a statement on Monday expressed disappointment about the station’s closure, blaming "cumbersome [Environmental Protection Agency (EPA)] regulations" for "slowing the process for companies, like Dominion, to take advantage of economies of scale and keep their businesses profitable and open."

Walker said he and 16 other governors sent a letter to the White House Office of Management and Budget in March 2011 expressing concern about the potential cost imposed on power facilities related to cooling water intake structures as a result of the EPA’s proposed revisions to section 316(b) of the Clean Water Act. The EPA is expected to finalize the standards by June 27, 2013.

But Norvelle told POWERnews that the decision to decommission Kewaunee was based on a combination of economic factors. However, “Naturally, any regulatory uncertainty or cost adds to the challenges,” he said.

Sources: POWERnews, Dominion

—Sonal Patel, Senior Writer (@POWERmagazine)