Point Beach could be sold; Other nuclear plant sales might trigger move

WISCONSIN - Wisconsin Energy Corp. is studying whether it makes sense to sell the Point Beach nuclear plant now that three of six plants once managed jointly for Upper Midwest utilities have been put up for sale.

In the last six months, the Kewaunee plant in northeastern Wisconsin and the Duane Arnold plant in Iowa have been sold. In December, CMS Energy of Michigan said it planned to sell the Palisades reactor in South Haven, Mich.

For Nuclear Management Co. (NMC), based in Hudson, which operates a group of nuclear plants for Upper Midwest utilities, the sale of Palisades would leave just three nuclear plants in its fold, including Point Beach and two Minnesota plants owned by Xcel Energy Inc.

A sale of Point Beach could boost Wisconsin Energy in the eyes of investors because the company wouldn't have the day-to-day risks of operating a nuclear power plant at a time when federal nuclear regulators are keeping a close eye on aging reactors. It could also raise cash that Wisconsin Energy could use to pay for new coal plants it's building in Oak Creek.

But customer groups are expected to weigh in against selling the reactor, just as they did in the case of Kewaunee, arguing that profits from selling low-cost nuclear power should stay close to home and that the plants need state as well as federal oversight.

Owners of nuclear plants say their key concern is keeping the plants running reliably and safely. But they also face other challenges.

For example, nuclear companies need to keep attracting top-notch nuclear engineers to work at Upper Midwest power plants during a period of rapid consolidation in the industry, and it's getting tougher to fill nuclear operations and management slots as the work force ages.

Nuclear Management was created six years ago by utilities in Wisconsin, Michigan, Minnesota and Iowa to pool their resources to help attract nuclear workers, operate plants safely and help owners save money through streamlining and standardization.

Beth Martin, a Wisconsin Energy spokeswoman, said the company is evaluating Point Beach along with other power plants to assess their role in the company's long-term power needs.

"The CMS announcement to sell Palisades is a development that we will need to incorporate in our assessment," she said. The Milwaukee- based utility "will examine costs to our customers, NMC's ability to retain and attract necessary talent and the overall efficiency of operations," Martin said.

Utilities smaller than Wisconsin Energy, including WPS Resources Corp. of Green Bay and Alliant Energy Corp. of Madison, have decided the risks are too great.

"There has been consolidation throughout the country in the last several years into companies that do have the economies of scale to manage these assets," said Scott Smith, spokesman for Madison-based Alliant Energy. Alliant had a small stake in the Kewaunee plant, sold last year to Dominion Resources Inc. of Richmond, Va., and was majority owner until last week of the Duane Arnold reactor in Palo, Iowa.

Industry observers wonder whether a smaller Nuclear Management Co. will have enough "economies of scale" to help spread its costs among various reactor owners, after half of its fleet is sold.

"The trend's not a good one for Nuclear Management Co. The whole idea of pulling those plants together was to get the benefit that these companies like Dominion are getting," said David Parker, utility analyst with Robert W. Baird & Co. in Naples, Fla.

A key factor for nuclear plant owners is that the Nuclear Regulatory Commission is more comfortable dealing with operators of multiple plants.

"The NRC likes to see players that have a fair amount of assets with very experienced nuclear management teams that are focused just on that," Parker said. "If you get down to being only a group of three plants, your clout or your view with the NRC is diminished."

For Point Beach, keeping that clout may be important as the management there is poised, perhaps within months, to emerge from several years of stepped-up scrutiny after the agency found repeated serious safety violations at the plant in 2001 and 2002.

Point Beach was the only nuclear plant in the nation to have had two problems classified as "red" the most serious category under a system that gauges the safety significance of problems found at nuclear plants.

"Point Beach has just gotten over that issue and is moving forward with the help of the NMC and now we're right back to this issue of will NMC be able to have the key managers, because nuclear management is a talent set that's quickly diminishing as a lot of managers get old," Parker said.

Nuclear Management, meanwhile, isn't taking the potential departure of its third reactor, Palisades in Michigan, lightly.

Its senior management team has launched an effort this year to recruit new members and help bring down overhead costs for the remaining Nuclear Management Co. utility owners, said company spokeswoman Arline Datu. "We do want to boost that balance in the economies of scale, so that's why we are interested certainly in looking at recruiting new members."

For its part, Xcel Energy has no intention of selling its two nuclear plants, Monticello and Prairie Island, a company vice president said.

Charles Bomberger, general manager of nuclear assets for Xcel in Minneapolis, said Nuclear Management Co.'s track record has been strong.

"We've reaped a lot of those economies of scale through standardization and a lot of that will still exist if membership departs," he said. "We will continue to re-evaluate the programs and the overheads that are applied, but we intend to keep NMC as the operator of our plants."

Economies of scale may be important, but "it's not the most critical aspect" that has pleased Xcel about Nuclear Management Co.'s reactor operation, he said.

"I really consider the safety performance as well as the reliability to be the primary things that NMC has improved for the Xcel plants," Bomberger said. "And in doing so they've done it in a very cost-effective manner for the past five years."

Groups that opposed the sale of the Kewaunee nuclear plant have been bracing for a possible announcement regarding Point Beach.

Selling Point Beach would also be opposed, said Charlie Higley, executive director of the Wisconsin Citizens' Utility Board, an advocacy group representing residential and small-business ratepayers.

"Nuclear reactors deserve the extra round of oversight that comes with having them owned by Wisconsin utilities regulated by the Public Service Commission," Higley said.

Customers today benefit when a state utility sells the power from a nuclear plant. But if Point Beach were sold, the benefits from those power sales would flow out of state to that company's bottom line, Higley said.

"That's clearly the trend in the industry," he said. "It's just that we worry that ratepayers will lose any oversight or any benefit of having nuclear reactors in Wisconsin."