Copyright 2000 The Baltimore Sun Company
THE
BALTIMORE SUN
January 2, 2000, Sunday ,FINAL
SECTION: BUSINESS ,1D
LENGTH: 1264 words
HEADLINE:
BGE putting focus on nuclear plants; Deregulation strategy involves purchasing
more energy sources
BYLINE: Shanon D. Murray
SOURCE: SUN STAFF
BODY:
Even as Baltimore Gas and Electric Co. seeks to become the nation's first
electric utility to re-license its nuclear power plant, its parent is targeting
the controversial energy source as a key component of its post- deregulation
business strategy to become a major power provider.
To kick off the
strategy, Constellation Energy Group plans to acquire additional reactors to
expand its nuclear portfolio beyond Calvert Cliffs Nuclear Power Plant and
create economies of scale.
Constellation wants to take advantage of
bargain prices for nuclear plants as other utilities, which have chosen to focus
on transmission rather than power generation, put theirs up for sale, company
officials said.
Analysts say the strategy is a sound one. If the company
can buy nuclear reactors cheaply enough, it can run them at a profit, said
Thomas Hamlin of First Union Securities in Richmond, Va., who has monitored the
nuclear business for 20 years. Prices for nuclear plants "are good, and if a
company can maintain strong operations, acquiring nuclear plants should be a
positive economic event," he said.
"If there's an opportunity for
Constellation Energy to leverage its nuclear asset, they should certainly take a
look at it," Hamlin said. "It's expensive to have the infrastructure in place to
manage just one nuclear plant."
To prepare for additional nuclear
assets, Constellation Energy said, it will shift Calvert Cliffs, a two-reactor
nuclear plant in Southern Maryland, to a nonregulated subsidiary, Constellation
Nuclear, once Maryland's electric market is deregulated July 1.
The
holding company will also include the country's first nuclear power plant
re-licensing consulting firm, Constellation Nuclear Services, which began
operating in August.
The steps will allow the company to "be not only a
strong multifaceted energy company, but to take a strong leadership role in
nuclear energy," said Barth W. Doroshuk, president and chief operating officer
of Constellation Nuclear Services.
Critics of Constellation Energy said
the company is ignoring the safety risks associated with nuclear power in its
pursuit of profits.
"What you see here is greed overcoming common
sense," said Stephen Kohn, an attorney with the National Whistleblower Center, a
citizen advocacy group in Washington that opposes the re-licensing of Calvert
Cliffs.
Constellation Energy "wants to buy plants cheaply, keep them
running, and usher in a whole new generation of nuclear power," Kohn said.
Analysts agree that deregulation along with the prospect of plant
licensings have breathed new life into the nuclear industry.
Ever since
the last round of nuclear plant construction was completed in the early 1980s,
the industry has sagged and seemed to be approaching certain death, primarily
because no new plants have been planned since, said analyst Hamlin.
"There are too many issues involved," he said, including bad publicity
stemming from the 1979 Three Mile Island nuclear accident, the nation's worst.
The nation's 103 nuclear plants supply about 20 percent of the country's
power, but many of those plants face the expiration of their operating licenses.
The first license will expire in 2006; approximately 10 percent will expire by
the end of 2010 and more than 40 percent will expire by 2015.
Deregulation sent companies scrambling to figure out how to survive and
prosper in the new national marketplace.
Constellation Energy's strategy
is to become a major national power provider, and bulking up on nuclear plants
is one way to help achieve that goal, said Charles H. Cruse, BGE's vice
president for nuclear energy.
"To support that base strategy, we need
generation. And with generation, we need diversity," Cruse said.
Nuclear
power, said Cruse, has a number of advantages. The nuclear fuel is cheaper than
coal and gas generators; its costs are fixed, compared with other fuel sources;
and it does not produce the air pollution and global-warming emissions released
by fossil fuels.
"The economics are quite robust, once they are
calculated out," Cruse said. "Nuclear is the way to go."
However, it
also has formidable disadvantages, nuclear experts said.
Nuclear plants
incur high maintenance costs, and, as the nation's nuclear plants age, that can
be expected to increase. Because nuclear plants are much more expensive to build
than hydro-electric and fossil fuel plants, there is little likelihood that any
new ones will be built in this country any time soon, industry analysts said.
The last construction permit for a nuclear plant was issued in 1979, according
to the Energy Information Administration of the U.S. Energy Department.
Disposal of the spent radioactive fuel rods that control the nuclear
reaction also is a problem.
The federal government's promised site under
Yucca Mountain in Nevada, which was supposed to have come
online in 1998, is years behind schedule. The new target date is 2010. BGE, like
many other utilities, is storing the waste in a specially designed above- ground
facility near its nuclear plant.
There is also an image problem. The
1979 near meltdown at Three Mile Island in Harrisburg, and 1986 disaster at the
Chernobyl nuclear power reactor in Ukraine tarnished the industry's portrayal of
nuclear power as a safe, cheap energy source and appeared to lend credibility to
the dire warnings of nuclear critics.
Analysts say nuclear is a
reliable, economical and environmentally friendly source of electricity.
But success from consolidating nuclear assets is far from guaranteed,
they say, because other utilities -- Duke Power in Charlotte, N.C. ; Southern
Co. in Atlanta; Entergy Corp. in New Orleans; and PECO Energy Co. in
Philadelphia -- have similar strategies.
Recently, Rochester Gas &
Electric Corp. said it intends to buy one of the Nine Mile Point nuclear plants
on Lake Ontario's southern shore and acquire a controlling interest in the other
for $163 million.
"Running nuclear plants is big
business," said Ronald S. Tanner, an analyst with Legg Mason Wood Walker in
Baltimore.
Yet, the advantage in shopping for nuclear plants right now
is utilities are " almost giving them away," Tanner said.
In a typical
deal, Boston Edison sold Pilgrim Nuclear Power Station in Plymouth, Mass., to
Entergy Corp. last summer for $81 million, far below the
$700 million assessed value of the plant. The utility also
agreed to fund the plant's decommissioning at $471 million when
its license expires in 2012.
BGE's re-licensing efforts have built new
confidence in nuclear power and has positioned the utility in a leadership role,
said Doroshuk of Constellation Energy. A final decision on its re-licensing
application is expected from the Nuclear Regulatory Commission during the first
quarter of 2000, he said.
Calvert Cliffs' two reactors operate with
40-year licenses, one of which will expire in 2014 and the other in 2016. If
granted, Calvert Cliffs will be allowed to operate for an additional 20 years.
BGE said it learned a hard lesson from the 1,370-day shutdown that began
in 1989, causing $460 million in losses. State investigators
attributed much of the situation that led to the shutdown to human error, and
BGE settled the matter by disavowing $118 million in energy
costs.
"Management said they did not want to be in a situation where
they would be surprised like that again," Doroshuk said. " They created a vision
of looking forward and making sure they are ready for anything by doing things
in a pro-active manner."
GRAPHIC: PHOTO(S) 1.
Control room: Operators work at Calvert Cliffs Nuclear Power Plant in Southern
Maryland.
2. Power: Barth W. Doroshuk is president and chief operating
officer of Constellation Nuclear Services, a subsidiary of Baltimore Gas and
Electric Co.'s parent Constellation Energy.
LOAD-DATE: January 17, 2000
