Wisconsin nuclear plant closing as gas boom cuts electricity prices

Tuesday, October 23, 2012

A Wisconsin nuclear power plant is slated for closure early next year, as electricity prices have fallen due to the proliferation of low-cost natural gas.

Dominion Resources Inc. announced yesterday that it will close its Kewaunee Power Station, a 556-megawatt nuclear power plant in Carlton, Wisconsin.  Located on Lake Michigan about 35 miles southeast of Green Bay, the Kewaunee plant features one Westinghouse pressurized water reactor.  The station began commercial operation in 1974, and was acquired by Dominion in July 2005.

Despite being relicensed by the Nuclear Regulatory Commission in 2011 for a new term through 2033, according to Dominion's most recent Form 10-K, Dominion faced a $66 million loss ($39 million after-tax) from operations of the Kewaunee plant.  Part of Dominion's problems likely arose from the relatively low price it could get for power produced from the plant.  While Dominion has cost-of-service-based contracts to sell the plant's output to two Wisconsin utilities - Wisconsin Public Service Corp. and Wisconsin Power and Light Co. - those contracts expire in 2013.

Meanwhile, the development of natural gas supplies from shale resources though hydraulic fracturing or fracking has led to significant decreases in the price of natural gas.  Since natural gas plays a significant role in the energy mix used to generate electricity, shale gas has led to decreases in the price of power.  This in turn has put pressure on electric generators powered by fuels other than gas.  Some of these generators have announced closures, while others are being converted to gas-fired generation.

Dominion had been trying to sell the plant since last year.  Between the lack of economies of scale resulting from the company's inability to grow its Midwest nuclear fleet, projected low wholesale power prices in the region, and no buyer for Kewaunee, Dominion now plans to decommission the plant in 2013.  If that happens, it will be the first permanent closure of a nuclear power plant since 1998.

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