BGE putting focus on nuclear plants

Deregulation strategy involves purchasing more energy sources

January 02, 2000|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

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.

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