In 2009, the Progress Energy company in Tampa Bay FL decided to upgrade its aging nuclear power plant at Crystal River by replacing the plant’s steam generators with newer ones. This was a routine operation that had already been done in several dozen other nukes around the US. But in the case of Crystal River, it turned out to be anything but routine.
The Crystal River Unit 3, located in rural Citrus County FL near the Gulf of Mexico, was one of the last nuclear power stations to be built in the United States, being completed in 1976. The 860 MW pressurized-water reactor was the only nuclear-powered plant at what would over the years become a 5-unit power station, one of the largest in the US. (The other four units were all coal-fired.)
But by 2009, Crystal River Unit 3, like all the other nuclear plants in the US, had been in service for over 30 years, and was reaching the end of its designed lifespan. To keep the aging nukes running, electric companies across the US had begun upgrading some of the equipment to give them another 20 years or so of useful life.
In September 2009, Unit 3 was scheduled for a routine shut-down to have its nuclear fuel replaced, and Progress Energy had already decided to use the opportunity to replace the 30-year old steam generators with new ones, which would increase the lifespan of the plant and also expand its electricity output by about 20%. Since the generators were located inside the thick cement containment building that surrounded the nuclear reactor (which was designed to prevent radioactive contamination if there were an accident) and were too big to fit through the existing door, the procedure for replacing them involved cutting a large hole, some 30×20 feet, through the thick wall, and using the hole to gain access. While this might sound drastic, it had already been done several dozen times before in the US and was a rather routine task. It was expected that the work would be finished and the plant would be up and running again by December.
But when workers began to cut the hole through the containment wall, they noticed some places where the wall had cracked and the concrete had “de-laminated”–the several layers of cement that made up the wall had separated from each other, and large patches of the inner wall were flaking off in huge chunks. Further probing discovered that the cracked and damaged area was extensive. It was apparent that the wall had essentially been destroyed, and the entire containment building would have to be torn down and rebuilt. The cost was estimated at over $2.5 billion. Progress Energy assumed that its insurance would cover most of the costs.
But here is where things started to get strange…..
Years before, the Florida State Legislature had passed a law called the “Nuclear Cost Recovery Act”. In effect, the law stated that an electric company that wanted to build a nuclear power plant could go to the Public Service Commission, the governing body that oversaw Florida’s utilities, and ask permission to begin charging its customers an increased rate, raising their electric bills to pay for the costs. Not only could this be done before the plant was even begun, but if, for any reason, the nuke never got built, there was no obligation for the company to give back any of the money. Further, although the electric company was a privately-owned for-profit Fortune 500 company, as a state-sanctioned monopoly it was granted a guaranteed Return On Investment, and the surcharges already contained the electric company’s guaranteed ROI. In effect, the company’s customers would not only be paying the cost of the nuke, but also paying the company’s profits, before any shovels were put into the ground–and the public would continue paying even if the nuke were never actually built. It was a sweetheart deal, and its passage may or may not have had something to do with the fact that for many years the top three campaign contributors in Florida’s state legislature races were all electric companies, two of which had plans to build new nuclear stations.
So when the upgrade to Crystal River 3 went bust (literally), Progress Energy went to the Public Service Commission and asked to have consumers pay whatever amount of the $2.5 billion that its insurance didn’t cover. And as part of the process, the PSC began an investigation into the circumstances of the accident. They did not expect to find what they found. Progress Energy’s story was that they had been doing a routine job when all of sudden, quite unexpectedly and unpredictably, the wall just…well…broke. They had no idea at all, by golly, how or why it happened. But the investigation quickly found that Progress was being less than forthcoming, and the company’s own internal memos, emails and files revealed the true story.
By the time Progress Energy decided to upgrade its nuke, the same operation had already been done 34 times in other plants in the US, and in 13 of those cases, it had been necessary to cut through the containment building to replace the generators. All of those jobs had been carried out by one of just two companies, Bechtel Corporation or SGT. They all went without a hitch.
At the time it first decided to replace the generators, back in 2004, Progress Energy approached SGT to do the work. The job would cost a total of $230 million, of which about $81 million would go for SGT’s management fees. But then, someone in Progress Energy’s upper-level management had what they apparently thought was a great idea–if they bypassed SGT entirely, managed the project themselves, and hired Bechtel solely to do the actual construction work, they could save the company somewhere between $15 and $30 million.
The idea drew immediate criticism within the company. An internal memo pointed out that “large scale engineering and construction management is not our core business”, and others argued that the company’s inexperience in overseeing this type of project could very likely cause lots of delays that would ultimately swamp out any savings.
Nevertheless, Progress Energy decided to go ahead with the “DIY” management plan. It hired Bechtel to do the actual work of replacing the generators, and another company called Mac & Mac Hydrodemolition (which had never worked on a nuclear plant) to cut the actual hole through the wall. To do all the preliminary planning, Progress hired an engineering company called Sargent and Lundy, which had also never worked on a nuclear power plant before. These all agreed to work directly under Progress’s own management.
During the planning, Progress continuously pushed Sargent and Lundy to do things on the cheap. Nuclear containment buildings are built from cement which is reinforced by a number of tightened steel bands, called “tendons”. The Crystal River plant had 426 tendons. In the process of cutting through the wall, a number of these tendons had to be loosened (called “de-tensioning”). When Sargent and Lundy submitted its plans for the project, they called for a total of 97 of the tendons to be loosened. Progress Energy management in turn complained that “de-tensioning the tendons is a very expensive and time-consuming effort,” and asked S&L to reduce the “excessive” number. The next proposal was for 74 tendons to be loosened–about the same number as had been done in all the other plants that had undergone the procedure. It still wasn’t enough to satisfy Progress. Company execs told Sargent and Lundy to “put their thinking caps on” and find “an alternative method. . . that would result in a lot less tendons being de-tensioned”. S&L returned with a proposal to loosen just 65 tendons–lower than any of the other projects. Progress Energy, delighted with the cost savings, accepted the plan.
But in September 2009, when the actual work began, it quickly became apparent that there were additional unusual things being proposed, apparently to save time and costs. In order to keep the tension evenly distributed around the containment building, it was necessary to loosen the tendons in a staggered pattern. Progress Energy management, however, was ordering the Bechtel workers to de-tension the tendons sequentially, right next to each other. The normal procedure was also to loosen all the necessary tendons before attempting to cut the actual hole through the wall; Mac and Mac was being ordered to begin cutting the hole after only 27 tendons had been loosened. A number of the Bechtel supervisors had worked on the projects at the other nuclear plants, and they were concerned at these departures from standard operating procedure. “I have never heard of it being done like this before,” noted one foreman in a memo to his boss, “and I just want to express my concerns to you one last time.” Bechtel’s project supervisor asked in an email, “Why are we doing tendons different here than all other jobs?” Progress Energy responded with a bland, “I am satisfied the Sargent & Lundy approach is technically correct and will withstand scrutiny.”
The cutting process began in October 2009. Within an hour, cracks appeared in the wall of the containment building. Soon “large chunks” were popping loose and falling out. The work was halted. The company’s efforts to save itself $15 million had resulted in the destruction of a $2.5 billion building.
The Public Service Commission’s investigation concluded, as did the Nuclear Regulatory Commission’s later, that it was the non-standard procedure followed by Progress Energy, particularly in loosening all the tendons in sequence in the same area, that caused the tension to become uneven and cracked the wall. Not only was Progress’s excuse that “no one could have predicted this” rejected, but their own documentation showed that it had indeed been predicted by its own workforce. Within a short time, Progress Energy’s insurance company, apparently having reached the same conclusion, informed the company management that it would not be paying any of the repair costs. Progress nevertheless asked the PSC to allow the company to charge its customers an extra $50 per month, on average, to pay to fix the nuke they had just broken.
A flurry of lawsuits and regulatory complaints from PE customers followed. The local Occupy St Pete group made the Crystal River situation one of its primary projects, arguing that it was corporate welfare at its worst. Occupy organized protest rallies at the Progress Energy corporate headquarters, appeared on local radio and newspapers, and began to coordinate an effort with other state groups to begin the referendum process to repeal the entire “Nuclear Cost Recovery” policy.
At the same time, a number of lawsuits appeared over Progress Energy’s plans to build two new nuclear power plants in Levy County FL. These had originally been budgeted at $7 billion, but the cost had already tripled to over $20 billion, and construction had yet to begin. It was widely expected by industry experts that the final cost for the two nukes would be at minimum between $25 and $30 billion, making them the most expensive nuclear power plants ever built. And despite the fact that the permits had not even been issued yet, Progress had already charged its consumers some $1.5 billion towards the Levy plants, which included its own built-in ROI of around 8%. The soaring costs made it increasingly more likely that the two nukes would in fact never be built at all–in which case Progress Energy would get to keep all the money it had already collected from its customers. Lawsuits were filed challenging the “cost recovery”.
And in the middle of all this, in 2012, Progress Energy was bought by Duke Energy, which became the largest electric company in the US–and which inherited all of Progress’s difficulties with the Crystal River and Levy County nukes.
In the end, it all played out much as industry experts had expected it would. Duke Energy announced that it would shut down and dismantle the Crystal River Unit 3 instead of repairing it. In a settlement deal with the PSC to end all the lawsuits, Duke agreed to refund over $380 million to consumers that it had already collected for the wrecked Crystal River plant, but consumers would still be on the hook for about $3.2 billion towards the Levy County nukes, plus future costs. Not long after this agreement, Duke cancelled the two new nuclear plants, citing the skyrocketing costs (which it now estimated at almost $25 billion). No, Duke doesn’t have to give back any of the money it has already collected from its customers for the now-cancelled nukes–at least not yet. The Florida legislature, stung by the way its Nuclear Cost Recovery law backfired, ordered that a review of the policy be undertaken when it expires in 2017, and both Duke and the PCS agreed not to charge customers for the two cancelled nukes until after that review is completed.
Decommissioning the Crystal River nuke is currently expected to cost about $1.2 billion, and take about sixty years.
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Similar issues caused a power plant not to be completed in SC. Customers in a co-op region are also paying $50 month surcharges for 40 years to compensate for the state’s failure to protect ratepayers from corrupt practices. Lawsuits continue.