Dominion Resources Inc. announced Monday that it plans to close and decommission a nuclear power plant in Wisconsin next year, a decision the company said was made in part due to continuing low natural gas prices.
Richmond, VA-based Dominion said it was unable to find a buyer for the 556 MW Kewaunee Power Station, a facility the company has been looking to sell since April 2011. Dominion said after an inspection by the MISO (Midwest Independent Transmission System Operator) Inc., the plant — located in Carlton, WI — will cease power production in 2Q2013 and move to a safe shutdown.
The company said it will take an after-tax charge of $281 million in 3Q2012 for the power plant’s closing and decommissioning costs. The one-time charge will be excluded from operating earnings.
Dominion spokesman Jim Norvelle told NGI’s Shale Daily that he wasn’t sure if Kewaunee is the first nuclear power plant to be shuttered as a direct result of low natural gas prices, but said they were a contributing factor.
“Certainly what’s going on is a natural gas market with its impact on electricity cost, is a reason that we announced our decision today,” Norvelle said Monday. “It’s a combination of things. We were unable to grow our fleet. We were looking for economies of scale seven years ago when there were a number of nuclear stations that were going to be up for auction in the Midwest. We were unsucessful in getting any of them. Our plan was to get more than just one and achieve an economies of scale that would hold us for the long term, but we were unable to do that.
“You toss in the fact that there are projected, low wholesale electricity prices in the region, that is certainly a result of the abundance of natural gas in the supply chain.”
Dominion said the power plant will remain under the oversight of the Nuclear Regulatory Commission throughout the decommissioning process.
According to the U.S. Energy Information Administration (EIA), domestic natural gas production is expected to hit record highs in 2012 and 2013, with the projected consumption of natural gas for power generation averaging 25.2 Bcf/d in 2012 (see Shale Daily, Sept. 12).
In its Annual Energy Outlook for 2011, the EIA estimated that natural gas will produce 25% (1,287.62 billion kWh) of the nation’s electricity in the year 2035, compared to 17% (874.36 billion kWh) from nuclear power. In 2009, natural gas produced 23.4% (920.38 billion kWh) of the nation’s electricity, while nuclear power constituted 20.3% (798.74 kWh) of the total.
Despite those projections, CEO Tom Farrell said Dominion still believes nuclear energy must play an integral role in power generation in the future.
“History has proven that nuclear energy is a major reason the United States enjoys one of the most reliable, least expensive and cleanest electric grids in the world,” Farrell said. “The situation Dominion faces at Kewaunee is the result of circumstances unique to the station and do not reflect the nuclear industry in general. The nation will be hard-pressed to meet its energy needs, let alone do so in a secure and affordable manner, without a robust and growing nuclear energy program.”
After the power plant is shut down, Dominion said it plans to meet its obligations to the two utilities that purchase Kewaunee’s generation through market purchases until the power purchase agreements expire in December 2013. The utilities are units of Integrys Energy Group Inc. and Alliant Energy Corp.
Dominion is one of the nation’s largest producers and transporters of energy, with a portfolio of approximately 27,400 MW of generation, 11,000 miles of natural gas transmission, gathering and storage pipeline and 6,300 miles of electric transmission lines. Dominion operates the nation’s largest natural gas storage system with 947 Bcf of storage capacity and serves retail energy customers in 15 states.
The company has also proposed building a natural gas liquefaction facility at Cove Point, its liquefied natural gas (LNG) terminal in Lusby, MD (see Shale Daily, Oct. 2).
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