Over 20 municipalities, primarily located in Utah, have signed a contract with Utah Associated Municipal Power Systems (UAMPS) to purchase entitlement shares for a first-of-a-kind nuclear power plant based on NuScale’s unproven small modular reactor (SMR) design.
Ignoring the history of commercial nuclear plant construction, advocates have promoted the SMR project as a cost-effective energy resource without fully addressing the economic, contractual and litigation risks with stakeholders.
Between 1953 and 2008, approximately 250 commercial nuclear reactors were ordered in the United States. During this period, ratepayers (and investors) bore the burden for well over $200 billion (in 2009 dollars) in costs for completed and abandoned nuclear plants.
For example, one of the largest municipal bond defaults occurred in 1982 when the Washington Public Power Supply System defaulted on $2.25 billion in bonds for two nuclear power plant construction projects. In an effort to reduce their losses, bondholders sued a group of utilities (including several Idaho cities) that entered into contracts to pay for the plants.
In 2013, construction began on reactors in South Carolina (VC Summer project) and Georgia (Vogtle project). Four years later, South Carolina utilities killed the Summer project, and escalating costs forced Westinghouse, the lead contractor, to file for bankruptcy.
While the project was active, utilities were allowed to recover construction costs of over $2 billion from ratepayers via a series of rate hikes. The failed project triggered lawsuits and an investigation by the Securities and Exchange Commission, which resulted in fraud charges against former utility executives for allegedly making false and misleading statements to investors, regulators and consumers.
However, the Vogtle project, supported with $12 billion in taxpayer-backed loan guarantees and plagued with cost overruns and delays, remains under construction.
Well, what about the UAMPS SMR project, including the $65 dollars per megawatt-hour (price cost of electricity) sales pitch?
During a 2018 Los Alamos County Council meeting, held to consider approval of the UAMPS power sales contract, a council member asked a UAMPS lawyer, “There’s been mention of a target of $65 a megawatt-hour. How did we come up with that number?” Another council member, probing into the terms of the contract, expressed additional concern. The councilor stated, “I feel like we’re being sold a bill of goods with $65 a megawatt-hour.”
With that said, readers may wonder how UAMPS convinced some members to sign an “option” contract, which eventually converts to a “hell-or-high-water” contract, meaning that the buyer has no right, under any circumstances, to abandon the contract once construction, the Achilles heel of nuclear projects, is authorized.
Having a similar concern, especially given the history of nuclear plant construction, a sincere effort was made to address project risks with the UAMPS SMR project chair, including sharing concerns about transparency and proposing possible ways to minimize risks to ratepayers, including contract modifications such as price guarantees and redefining the construction period. Unfortunately, my questions and concerns fell on deaf ears.
Given the lack of project transparency by UAMPS, project details are sketchy. Yet, according to a recent commentary by Utah state Rep. Ray Ward, “Later this summer, the cities involved will be voting to increase their financial commitment.”
Therefore, prior to the commitment of additional funds, ratepayers should request that their city leaders exercise due diligence and address project risks including answering a few simple questions:
Have you read the UAMPS power sales contract? Do you understand the contract? Will the Idaho 1995 Settlement Agreement, limiting the storage of nuclear waste in the state, impact the project? Would you invest your own personal funds in the project?
Kurt Hamman is an Idaho Falls Power (a UAMPS SMR project participant) ratepayer. He served 20 years in the Naval Nuclear Propulsion Program as a nuclear-trained mechanical operator, submarine officer and project engineer. He has graduate degrees in engineering and business.