TVA Inspector General examines Watts Bar costs, delays

The Office of Inspector General (OIG) for the Tennessee Valley Authority (TVA) blames ineffective management oversight and problems with project setup for causing cost overruns and schedule delays in finishing construction Watts Bar 2 nuclear unit.

TVA OIG Richard Moore released the report on the Watts Bar 2 project on May 18. TVA CEO Tom Kilgore has already been publicly apologizing for the excessive cost and delays to complete the never-finished nuclear plant near Spring City, Tenn.

During the past year or so TVA has done a root cause analysis and named new management to oversee the Watts Bar 2 project. Weekly project and high-level status reports are now required by TVA.

With the issuance of the OIG report, TVA released its own executive report May 29 on completing Watts Bar 2.

TVA started working toward completion of Watts Bar 2 in October 2007. The project was originally expected to be completed in October 2012 at a cost of just under $2.5bn.

However, TVA will not meet these targets. On April 5, TVA announced an additional $1.5bn to $2bn would be required to complete the project with an estimated time of completion between September and December 2015. TVA’s board of directors approved the revised schedule and budget on April 26.

OIG Moore’s report said that the project’s detailed scoping was insufficient to provide accurate schedule and cost estimates. Construction also started before there had been adequate engineering progress, according to the OIG report.

Also, planned prime subcontractor deals were not implemented, “ultimately requiring TVA to enter into direct contracts because of Bechtel Power’s inability to finalize those agreements. TVA’s ability to remove Bechtel from the project if problems occurred was limited because Bechtel was the American Society of Mechanical Engineers certification holder,” OIG said in the report.

Bechtel takes issues with part of OIG report

Bechtel filed its own response to the criticism and the contractor’s comments were included in the OIG report package. Bechtel disputed OIG’s position about the quality of Bechtel’s information.

“We are concerned that a possible interpretation of the Draft Report is that the project data Bechtel provided attempted to cloud rather than draw attention to problems and challenges the project faced,” Bechtel said.

In addition, Bechtel said it had clearly informed TVA that the number of craft employees envisioned for the project “was not practical.”

On the management front, OIG said TVA failed to perform effective oversight of the engineering, procurement and construction contractor. TVA also failed to adequately mitigate known problems related to staffing, work order packages, timeliness and quality of information provided to the Nuclear Regulatory Commission, and the procurement of materials that require a long lead time to obtain.

While TVA management largely agreed with recommendations outlined in the OIG report, the OIG also went a step further and said TVA should “assess the culture” at Watts Bar 2.

Construction on Watts Bar 2 had been suspended in the mid-1980s due to reduced power demand forecasts. Major structures were already in place at Watts Bar 2 when work was suspended.

In spring 2007, TVA successfully completed the restart of the long-idled Browns Ferry Unit 1 in Alabama, adding about 1,150 MW of emission-free generation.

On Nov. 14, 2006, TVA informed the NRC of its intent to perform a study of the feasibility of completing Watts Bar 2 with the goal of producing power from the reactor in 2013. In August 2007, the TVA Board unanimously approved the construction of WBN Unit 2 at the DSEP estimated cost of $2.49bn.

Then in July 2008 the NRC issued an order extending the Watts Bar 2 construction completion permit to March 2013.

The OIG sought to keep tabs on the project by having staff assigned to keep abreast of management challenges. “During meetings attended by the OIG at the WBN Unit 2 project site, construction issues discussed were characterized by management as recoverable or normal construction problems.” The project was still supposedly on track for meeting deadlines.

“Additionally, pertinent information critical of the project’s performance was not provided to the OIG by TVA when requested by our office. These actions made it harder to identify the extent and potential consequences of the problems on the project. In 2010, it became evident that many of the issues raised in those meetings were symptomatic of much broader problems that could increase the risk of exceeding the project’s schedule and budget,” according to the OIG report.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.