The New York Times
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Nuclear Power's Second Act

By MATTHEW L. WALD

December 20, 2000

Nobody has ordered a new nuclear plant in this country in more than 20 years, but rising demand for electricity and prices for natural gas are forestalling extinction and giving aging reactors a new lease on life. Consider Vermont Yankee, on the banks of the Connecticut River here.

For years many people thought that the plant was at death's door. It is one of the oldest nuclear reactors that is still operating in the United States. The core shroud, a crucial internal part that holds the fuel in place and channels cooling water, is showing damage from age. The owners are short of money.

But now a bidding war is brewing among three eager buyers, and financial analysts say the winner is likely to invest even more to seek to extend its operating license for decades and possibly to raise its power output.

Similar decisions have quietly transformed dozens of plants around the country. While no one expects any American utility to order a new nuclear plant in the foreseeable future, the overall effect is a much-improved prospect for the long-battered industry.

Several factors are helping to turn nuclear white elephants into valuable heirlooms. The price of natural gas, the main source for new generation, has quadrupled in the last year. The market price of electricity has soared under deregulation, and the growing economy has led to shortages of generating capacity.

"Suddenly people realize that you can actually make money with these plants," said Ted Marston, the chief nuclear officer at the Electric Power Research Institute, a nonprofit research consortium in Palo Alto, Calif., that has helped utilities obtain license renewals beyond the initial 40 years for which they were approved.

In March, the Nuclear Regulatory Commission approved a 20-year extension on a twin-reactor plant in Maryland, Calvert Cliffs, which is now owned by the Constellation Nuclear. Two months later, it did the same for the three-reactor Oconee plant, owned by Duke Energy, in South Carolina.

Since then, Mr. Marston said, the market value of nuclear reactors has increased tenfold.

The effect is visible here. In October 1999, the AmerGen Energy Company, a partnership between the PECO Energy Company, the parent of Philadelphia Electric and itself a unit of the Exelon Corporation, and British Energy, made a $23.5 million bid in a battle for Vermont Yankee.

But the state Department of Public Service, which represents the interests of energy consumers, said the price was too low, helping kill the deal. AmerGen is now offering more than $93 million, but a second company, the Entergy Corporation, based in New Orleans, has indicated it will offer more. Entergy recently announced a merger with the FPL Group, parent company of Florida Power and Light, which would create the nation's largest electric utility.

The Vermont Public Service board has told Entergy to file a bid by Jan. 12, and told the plant to cooperate with the company in due diligence. The board also told two other companies, Dominion, based in Virginia, which has expressed interest, and Constellation Nuclear, that it would offer them similar accommodations.

The companies say they want to buy up reactors around the country, and through economies of scale and their extensive nuclear experience, run them better and make more money from their operations. AmerGen has already bought Three Mile Island 1, the undamaged twin of the reactor near Harrisburg, Pa., that experienced the nation's worst nuclear accident. It has also acquired Clinton, in southern Illinois, and Oyster Creek, in Toms River, N.J. Entergy has a deal to buy Nine Mile Point 2 and James A. FitzPatrick, near Scriba, N.Y., and Indian Point 3, in Buchanan, N.Y.

While Vermont Yankee has not yet applied for a license extension — its license is good until 2012, and the sellers are leaving that to a new owner — applications have been approved or submitted for about a third of the nation's 103 surviving reactors. In addition, in the last decade, 57 reactors have quietly received the commission's permission to increase heat output and thus electric production, according to the Nuclear Energy Institute, a trade association in Washington. Some did it more than once. The capacity increase totals 2,200 megawatts, which is the equivalent of adding two huge reactors.

The independent company that owns Vermont Yankee says output could probably be raised by 15 percent at a cost of about $200 for every kilowatt of additional capacity, which is far cheaper than a kilowatt of capacity at a new natural gas plant. Making the investment only makes sense, though, if the owner believes that the plant will run for more than a few years.

The higher prices for reactors have pushed them roughly into the range of prices for fossil fuel plants, and do not approach a level that would lead to new nuclear construction. Still, it is a sharp turnaround from the idea that nuclear power would be phased out almost entirely over the next 10 or 15 years.

The recovery is visible not only on the balance sheet but in improved operations. Vermont Yankee, for example, now shuts for refueling once every 18 months, and finished the job in 1999 in 34 days. In the 1970's and 1980's, it would shut down every year, for 60 or 70 days.

"We did it under budget, under dose and under days," said Joseph P. Cox, who schedules engineering work at the plant, meaning that money, radiation exposure and time are all carefully watched.

And 28 years into its lifetime, "we're hitting the top of our game," said Michael Balduzzi, vice president for operations.

In the early days, emergency shut- downs came every couple of months or so; now they are so infrequent plant managers remember each one, and every manual shutdown. The last shutdown was in August. Before that, Vermont Yankee ran 285 days uninterrupted. The run before that was 372 days, a plant record.

The result of more powerful plants running more days of the year is that a reduced number of reactors is producing more and more power; in 1999, the 103 reactors produced more power than the whole industry did in the early 1990's, when the number of plants peaked at 110.

The turnaround has stunned opponents, like Debbie Katz, who lives in Rowe, Mass., near the now closed Vermont Yankee plant. Vermont Yankee was one of the four Yankee reactors built by New England utilities, with overlapping ownership and some shared engineering services; she expected them all to close. The other three did. And she pointed out that in 1992, Shearson Lehman Brothers predicted that within 10 years, 25 reactors could face closing because they were not economically viable.

Ms. Katz now tours Vermont with a camper emblazoned with the words, "No Nukes," and painted with the propeller-shaped logo that is the international symbol of radiation. In a reference to AmerGen's British partner, the sign also has a silhouette of Paul Revere on his midnight ride of warning.

Like many nuclear opponents, she was counting on nuclear power to fail the economic test. But deregulation, combined with the recent electricity shortage, has given the industry new life instead. "These reactors they are selling would have closed," she said. Speaking of the wild price swings, she said, "This is such a destabilized situation, it's like being in the Wild West all over again."

Ms. Katz and others say the sales of old plants are putting the job of decommissioning — for which money has already been set aside — into the hands of companies focused on profit, not safety; she likened it to an unscrupulous fortune-hunter marrying a rich widow and soon burying her cheaply.

Critics say the idea of a 60-year-old reactor makes them nervous. Vermont Yankee's shroud, a barrel- shaped structure around the fuel that directs the flow of water being boiled into steam, shows damage in places that were heated during welding. Metallurgists have diagnosed something called intergranular stress corrosion cracking, a process not understood when the part was made in the 1960's. They have added reinforcing rods around it.

But engineers, managers and operators insist that simple age is no barrier to performance.

"They have B-52's flying around that were flown by the pilots' grandfathers," said Michael G. Laporte, a work management supervisor here. A 20-year extension might make the same true for Vermont Yankee.

The owners have spent tens of millions of dollars modernizing and re-analyzing in order to address safety concerns. The control room is now full of digital readouts and a monitoring system that runs on Gateway personal computers, undreamed of in 1966, when work here began.

But Vermont Yankee and other plants still face problems, such as how to store the spent fuel, which is kept in a pool that will be full in 2008.

Immediate neighbors like the plant. "We've always been careful to watch it, but it is very, very well run, and a safe plant," said Patricia O'Donnell, who represents Vernon in the state House of Representatives and is also one of the five members of the Board of Selectmen, the town's executive body. Mrs. O'Donnell expressed her confidence from behind the counter at the clerk's office in town hall, a solid brick building that also houses a spacious library, less than a mile from the reactor that paid for it. The plant is 73 percent of the local property tax base. It is comforting to many here that the goose that lays the golden eggs may not, in fact, be getting too old yet.

In Brattleboro, William L. Morse saw it a little differently. His brother- in-law has worked at Vermont Yankee, Mr. Morse said, and in general, nuclear power "doesn't bother me any." Mr. Morse is the proprietor of Earth's Treasures, which sells Native American arts and crafts to tourists, and the shop is adjacent to one gasoline station and across the street from another, probably more of a hazard than the reactor down the road, he said.

But pondering the idea of running it for 20 years beyond its 40-year license, he said that they "better have a big shutdown and go through it really carefully."

"You hear people say, `They closed those other plants down,' " he said. "Why run this one?"