TVA says things are going better at Watts Bar 2 nuclear plant

Tennessee Valley Authority (TVA) President and CEO Tom Kilgore said Aug. 3 he is seeing better reports about construction at the troubled Watts Bar 2 nuclear plant.

Kilgore made the observation during a conference call that followed TVA’s financial report to the Securities and Exchange Commission for the quarter ending June 30, which is TVA’s third quarter for Fiscal Year 2012.          

Better management focus and cost controls implemented during the past year have helped stabilize TVA’s efforts to complete the unfinished Watts Bar 2 nuclear plant in Spring City, Tenn.

TVA is following Watts Bar 2 progress “by every commodity,” Kilgore said. “Cost reports are coming to me every week.”

TVA revised its figures in April and said the project will cost between $4bn and $4.5bn. The revised completion date for the project is late 2015. Back in 2007, TVA had predicted a 60-month construction schedule and a cost of $2.49bn.

A TVA Inspector General report found the utility’s planning and executive oversight of the Watts Bar project was lacking and TVA moved to fix the problems.

TVA has said that completing Watts Bar 2, TVA’s seventh reactor, would provide the region with 1,100-MW of additional carbon-free baseload generation.

During the call, Kilgore noted that TVA had committed to idle a large swath of it coal generation by 2017, although a couple of the idled units had to be resume service during the recent hot spell.

TVA’s fuel expenses decreased $224m or 11% in the first nine months of FY 2012 compared with the same period last year. TVA benefited from a balanced mix of generation resources and lower natural gas prices, which, in turn helped to lower rates for customers.

Gas generation increases with new combined-cycle plant

During the first nine months of FY 2012, gas-fired generation increased 138%, and coal-fired generation decreased 27% compared with the same period last year. Nuclear generation also helped offset the reduction in coal-fired generation, increasing 17% in the first nine months of the fiscal year.

“Helped by the recent addition of the 880-MW John Sevier Combined Cycle facility, which became commercially operational in April 2012, TVA’s power system was able to handle peak demands during the record-breaking heat wave in late June,” TVA CFO John Thomas III.

“We still have coal under contract while we are burning natural gas,” Thomas said.

Warm temperatures across the Tennessee Valley during the period from April through June of 2012, including four straight days with highs above 100 degrees, contributed to a 6% increase in electricity sales and a 5% increase in operating revenue compared with the same period last year.

TVA reported that its average power rate in June 2012 was 6.6 cents per KWH, compared to 6.9 cents/KWH in June 2011.

The increases in sales and revenues were not large enough to offset decreases reported in the first two quarters of 2012 attributed to the exceptionally mild winter and slow economy, TVA said.

TVA reported a $290m net loss in the first nine months of 2012, compared with a net loss of $35 million reported in the same period last year.

“The warm weather pattern contributed to higher sales and revenues during the third quarter; however, we are still projecting revenues for the year to be 7% percent less than originally planned,” Thomas said. Kilgore noted that this past winter was the mildest in decades.

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.