North and South Carolina regulators approve Lee pre-construction costs

10 June 2008

The North Carolina Utilities Commission has followed the lead set by the Public Service Commission (PSC) of South Carolina in approving Duke Energy's request to spend up to $160 million in pre-construction costs for the proposed William States Lee III nuclear power plant in Cherokee County, South Carolina, in addition to the $70 million already spent. 


Two AP1000s, as planned for Lee (Image: Westinghouse)
Duke submitted a combined construction and operation licence (COL) application with the US Nuclear Regulatory Commission (NRC) for the proposed Lee plant at the end of 2007. The COL application is based on two Westinghouse AP1000 pressurized water reactors with a combined capacity of 2234 MWe.

Duke said that it incurred pre-construction costs of some $70 million up to the end of 2007 and that it estimates that it will incur up to an additional $160 million in costs between the beginning of 2008 and the end of 2009.

These costs are expected to include expenditure on NRC review and hearings; land and right of way purchases; site preparation; and project planning and engineering. The latter includes costs associated with developing an engineering, procurement and construction contract with Westinghouse-Shaw, the consortium that would supply the two AP1000 reactors for the Lee plant.

The directive issued on 28 May by the South Carolina PSC stated: "Payments required to ensure the timely fabrication and delivery of long-lead procurement items such as reactor coolant pumps, the containment vessel, reactor pressure vessel, steam generators, control rod drive mechanisms and condenser circulating water piping for the Lee nuclear station would qualify as 'project development costs' to the extent that those costs are incurred prior to the issuance of a certificate of public convenience and necessity by the Public Service Commission of South Carolina. No payments towards these long lead time items have been made to date and the company estimates that the amount of such payments may be approximately $10 million through the end of 2009. It is reasonable and prudent for Duke Energy Carolinas to incur these long-lead procurement obligations and costs."

Duke filed its application for PSC approval for pre-construction costs in December 2007. In its application, Duke said it was "seeking Commission approval to conduct the necessary development work to ensure that the Lee nuclear station remains an option to serve customer needs in the 2018 timeframe."

In approving the expenditure, the PSC said that it "agrees with Duke Energy Carolinas that preserving the option of new nuclear generation is valuable for the company's customers and for the future of the State of South Carolina, and is therefore in the public interest." The PSC said the pre-construction costs could be recouped from Duke's customers.

North Carolina follows suit


The directive issued by the South Carolina PSC only covers the South Carolina allocable portion, or 28%, of the pre-construction expenditure for which Duke is seeking approval. The remainder must be paid for by Duke's customers in North Carolina. On 11 June, the North Carolina Utilities Commission duly granted its approval for the expenditure of North Carolina's share of the $160 million. The current approvals are limited to expenditure over the period from 1 January 2008 to 31 December 2009.

The company has announced plans to add some 3300-4100 MWe of generating capacity by 2016, an increase of at least 15% over its current capacity. In addition to the $4-$6 billion it will spend on Lee, Duke also plans to construct two gas-fired plants in North Carolina. It is also considering spending more than $1.9 billion on building a new 800 MWe coal-fired unit at its existing coal-fired Cliffside plant in North Carolina.