Halloween comes early in Monroeville

Westinghouse engineers are burning the midnight oil just outside of Pittsburgh this week, and it’s not because they are filling trick-of-treat goodie bags.  The reason is the Nuclear Regulatory Commission (NRC) threw a scare into the company, and, with it, set teeth on edge at five U.S. power utilities and two provinces in China.

What happened is that the NRC appears to have lost its patience with the company after holding discussions with firm for the past 12 months on design changes to its AP1000 reactor.  According to an NRC press release, the agency feels the shield building, which provides the primary containment safety barrier for the reactor, isn’t going to do everything expected of it. 

And that is quite a lot.  The 35 inches of concrete, with two half inch steel plates holding it, must provide a radiation barrier during normal operations and also protect the reactor against severe weather, such as tornados, earthquakes, or the impact of a jet airliner. 

NRC says AP1000 design not ready

Michael Johnson, director of NRC’s Office of New Reactors, told the news media in a conference call, “This is a situation where fundamental engineering standards will have to be met before we can begin determining whether the shield building meets the agency’s requirements.”

The agency said Westinghouse “has not demonstrated that certain structural components of the revised AP1000 shield building can withstand design basis loads.”

The Wall Street Journal reported the NRC decision is a setback for new modular construction techniques.  In Westinghouse's modified design, which the NRC rejected, the shield building would be assembled from steel-and-concrete sections fabricated elsewhere. The building would be built in lego type-block fashion.  Previously, the shield wall was poured continuously on site.

The NRC staff told the WSJ the construction method has not been used before and there was inadequate testing to prove it is strong enough to satisfy safety requirements.

The agency told Westinghouse it would have to change the design and conduct tests to prove the modifications would meet agency safety requirements.

Which way are the goal posts?

The letter from the regulatory to the reactor vendor sent it scrambling to develop a series of tests that will convince the agency the building will do its job.  Ed Cummins, VP for Regulatory Affairs, told the NY Times Oct 16 his company designed the containment structure to stand up to the impact of a jet airliner.  But after doing so, he said, the NRC then questioned whether it could meet the other requirements. 

The NRC said it was rejecting the design on the issue of the threat of a natural disaster and not an aircraft hitting the building.  Anti-nuclear groups have previously tried to stop new reactor construction, and relicensing of current plants, on the issue of the threat of terrorist attacks using airplances.  They took the agency to court on this issue over the relicensing of the Oyster Creek reactor in New Jersey and lost.

What’s ironic about the NRC’s action this week is that in 2006 the NRC certified the AP1000 design. The change in direction from the NRC comes after Westinghouse made change to the AP1000 reactor design to reduce costs, especially in the area of piping, and in improved instrumentation. The shield building design was modified to take aircraft crashes into account.

Issue in a nutshell

The issue in a nutshell is that when Westinghouse made the shield wall more rigid to stop impacts from aircraft, it lost the flexibility it needed to withstand earthquakes. While it seems counter-intuitive, buildings are now being designed to "roll" or "flex" with the swaying motion caused by earthquakes to avoid damage. There is a lot of literature on this but a USGS web page has some useful information in plain English

One interpretation of Cummins’ comment is that the company is worried the NRC is moving the goal posts after the game is underway.  In the 1970s constantly changing federal regulatory reviews drove up costs for new reactors adding huge costs to their construction.  It didn’t help that some reactor vendors were  designing the reactors as they were building them.  The new combined agency processes are supposed to prevent these types of situations. 

Amidst all the speculation, the significance is that the NRC went public with its concerns after a year of dialog with the company. Whether that means the agency is taking a tougher line, or just lost its patience in this one instance, remains to be seen.

This week the NRC told SNL Energy, a financial analysis firm, that it doesn’t know what the impact of its decision this week will be on the reactor design certification schedule.  At Westinghouse spokesman Vaughn Gilbert told the Charlotte Business Journal the company still expects the NRC to certify the AP1000 design in 2011. He said this schedule will support the timing of all of the license applications that reference it.

Design changes can drive huge costs increases

All these steps will cost time and money and not just for Westinghouse.  A total of 14 U.S. reactors with combined costs of at least $80 billion are now planned mostly in the deep South.  Four more are under contract in China with two now under construction.

Westinghouse customers are trying to get beyond the firm’s terse assurances that the NRC’s rejection of its design will not impact schedules for completion of 14 AP1000 reactors in the U.S. and four in China.  Progress Energy has the most chips on the table with four reactors – two planned at the Harris site in North Carolina and two more planned for Levy County, FL. 

All five of these firms have combined construction and operating license applications pending with the NRC and they reference the AP1000 reactor design. If the NRC decides not to certify the updated 2006 design, with its changes, the utilities cannot break ground.  Changing reactor designs in the license application is a costly process that none of them are likely to want to pursue.

States worried about new costs

States which have authorized power utilities to cover regulatory and construction costs as they are accrued are not happy about possible cost escalation caused by changing design requirements.  In Florida, Nathan Skop, a member of the powerful Florida Public Service Commission (PSC), expressed skepticism about the NRC’s decision.

He told Reuters . . .

“The NRC process is supposed to be new and improved, but I’m not so sure.”

And his boss, PSC Chairman Matthew Carter, was blunt about the potential cost impact of the decision.

“The NRC said it would streamline the process and bring us off-the-shelf plans they would approve.  It’s time for them to expedite the process. We have ratepayers dollars on the line.”

In Florida Progress Energy (NYSE:PGN) has already cut back a planned rate increase to cover licensing costs for the twin AP1000 Levy County plant after an uproar from the state legislature.  Political leaders, looking at record unemployment in Florida due to the recession, threatened to pull the CWIP (construction while in progress) provision in state law unless Progress backed off.  Such a move would not only doom the two reactors at Levy County, but also Florida Power & Light’s planned twin AP1000s at Turkey point near Miami.

Other utilities in states with CWIP, which could be impacted include South Carolina Electric & Gas, Southern, and Duke Energy.  The William Lee plant, with planned twin 1,150 MW AP1000s, may be postponed regardless of what the NRC does due to declining demand for electricity in the current deep recession.

Another impact of the NRC’s decision is that huge engineering procurement contracts to build the reactors, with schedules and costs tied to a specific design, weigh in the balance. Shaw Group (NYSE:SHAW), which has a 20% stake in Westinghouse, will build some of these planned reactors. It saw its stock price tumble nearly 10% on the NYSE Oct 16 immediately following the NRC decision.  The company issued a statement saying it did not expect the regulatory changes to impact construction plans, but the damage was done.

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