Texas Nukes Await Austin's Decision

DALLAS — Austin Energy, the city-owned power utility, is expected to make a decision on joining in two new nuclear reactors at the South Texas Project by March 4, officials said.

Austin is a 16% partner in the existing two reactors with San Antonio’s CPS Energy and the shareholder-owned NRG Texas. While San Antonio and NRG have already committed to the new projects, Austin is awaiting a consultant’s report before the City Council decides to join the $5 billion plan. Nuclear power is a controversial topic in the city that is home to a large number of environmental activists.

As the city waits for direction on the nuclear issue, Austin yesterday tweaked an ordinance on utility finance to allow greater use of commercial paper. Under the previous ordinance, commercial paper was used only for “routine” projects, according to Elaine Hart, senior vice president of finance and corporate services for the utility.

“We took out the word ‘routine’ so that it would apply to all projects,” she said.

At the same time, the ordinance firmed up the city’s commitment to seek voter approval before issuing any debt for nuclear power. Austin’s use of revenue bonds for the STP without voter approval in the 1980s stirred community ire.

Austin’s last revenue bond election for electricity infrastructure came in 1992.

CPS, meanwhile, has not decided how large of a stake to take in the project, but the city utility’s board has committed to the project. CPS is in the process of holding public meetings to discuss nuclear and other sources of energy, including a coal plant under construction.

Austin voters and the CPS board approved participation in the $5.5 billion South Texas Project in 1973, a full 15 years before Unit 1 began commercial operation. By 1996, the two Westinghouse pressurized water reactors were recognized as two of the top 20 electricity generating nuclear units in the world.

The 12,220-acre site and 7,000-acre cooling reservoir were originally designed for four units. The two new units will be built adjacent to the currently operating STP units 1 and 2, NRG said.

NRG, based in Princeton, N.J., said that last year’s filing of the permit signals the start of a possible nuclear revival in the United States.

Under the Energy Policy Act of 2005, the first six reactors to receive licenses are eligible for as much as $2 billion in insurance against regulatory delays or legal challenges. Production tax credits and loan guarantees are also provided, and the 2005 act reauthorizes an older law limiting the liability of a plant operator to $10 billion in the event of an accident.

Under a Texas law passed in this year’s session, school districts can grant property-tax abatements to nuclear plants. More than half of the value of the STP is already exempt from state and local taxes.

San Antonio’s utility revenue bonds issued on behalf of CPS carry ratings of AA from Standard & Poor’s, AA-plus from Fitch Ratings, and Aa1 from Moody’s Investors Service. Austin’s electric system revenue bonds are rated A-plus by Standard & Poor’s and A1 by Moody’s. Fitch does not rate the debt.

As San Antonio looks toward expanding its nuclear sources, ratings analysts will focus on environmental issues, financing plans, and the ability to recover initial investment, said Standard & Poor’s analyst Judith Waite.

“In Texas, nuclear power is environmentally acceptable to most consumers,” Waite said.

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