Bellefonte Nuclear Plant
So, what could Memphis do with $487 million a year for 30 years?
It could reduce the city property tax to zero and have tens of millions left over. Or maybe the property tax rate could be cut by more than half and eliminate the entire local option sales tax. Or dramatically reduce utility rates for Memphians, who pay Tennessee Valley Authority $1 billion a year for electricity.
It could pay for the riverfront plan, the convention center renovation, the Fairgrounds plan for youth sports, and the Pinch Historic District revitalization, and then it could decide what to do in year two.
Maybe it could fund two neighborhood rejuvenation plans like South City or a massive park program or a dramatic downtown improvement program.
You get the idea: $14.1 billion over three decades is a lot of money.
Nonbinding Next Step
To keep this prospect alive, all it takes is for Memphis Light, Gas & Water Division to sign a nonbinding – underline nonbinding — letter of intent with a company selected to be the new owner of Bellefonte Nuclear Plant in Hollywood, Alabama.
And yet, MLGW decided not to sign a letter to keep the idea alive and commissioned a study that won’t be complete until after the U.S. Department of Energy deadline for moving ahead passes next month. It sounds suspiciously like it’s making a decision without really making a decision.
The company, Nuclear Development, LLC, has already produced its own in-depth study of the project by a leading expert in the field.
The nuclear plant 260 miles from Memphis was the biggest construction project in the history of Alabama, with Tennessee Valley Authority saying it spent $4 billion – others say it was more like $9 billion – on the plant’s construction between 1974 and 1988. The company submitted a purchase bid of $111 million in 2016 after TVA put it up for sale.
Keeping Options Open
The company estimates that it could cost $12 billion more to complete the nuclear plants with its two pressurized water reactors. TVA salvaged some parts and components from the plant when it tried to recoup some of its investment.
The 1,300-acre Bellefonte site has plenty of equipment—including two partly-built reactors, cooling towers, water pumping stations, switch yards, warehouses, office buildings, parking lots, a helicopter landing pad, and railroad spurs—still in place.
A University of Alabama economic study said Bellefonte Nuclear Plant will generate $12.6 million in economic input, so it’s no surprise that economic development officials in North Alabama are generally enthusiastic about its completion.
It appears that the company has been talking with MLGW for the entire year, and in fact, former president Jerry Collins signed a nonbinding letter of interest in January. New president J.T. Young balked at a similar letter that is needed now, and as a result, Memphis may not have the option for a source other than TVA.
Cutting Costs By Half
Here’s the kicker: Bellefonte Unit 1 could supply MLGW with up to 80% of Memphis’ electricity needs at almost half the cost that TVA charges our local utility now.
Currently, MLGW customers consume about 13 million megawatts each year. With its pending $8.6 billion federal loan to complete the plant, Nuclear Development LLC said it would charge MLGW’s customers only $39 per megawatt hour for electricity, compared to TVA’s cost of $76 per megawatt hour – a cost TVA already has said likely will rise to $80 by 2024.
All in all, it seems that MLGW is failing to exercise its fiduciary responsibilities by not considering a source for electricity other than TVA. We can appreciate its responsibility to make sure that the citizens of Memphis are not placed at risk, but the greater risk at this point is not keeping the options alive.
Memphians, Not TVA, Are The Priorities
This is not the first time that it’s seemed that MLGW is more solicitous to the interests of TVA than to its customers. Back when Memphis Mayor A C Wharton was pursuing the “Blueprint for Prosperity,” a plan to reduce poverty in Memphis by 10 points in 10 years, there was a similar indication.
A major part of that plan required the support of MLGW in order to achieve its core premise – that reducing the basic living costs of families in poverty could free up discretionary income that could be spent to improve standards of living while better opportunities were being created from the economic development component of the plan.
The word from City Hall was that MLGW was not going to ask TVA for funding or any other changes that could have been helpful to the plan. We were told that MLGW did not want to upset TVA.
While we are all proud of the red letter day in 1934 when TVA began to deliver electricity to Memphis (we even named November 6 Alley for it), but that does not mean that Memphis should be deferential or compliant to TVA. After all, we are customers and no one insults TVA by considering if there is a better – and more economical – method for providing power in two ways – the power of electricity and our power of consumers.
Keeping The Door Open
Considering that MLGW has already received Memphis City Council approval for an increase and has warned Memphis about needed future increases and that the system needs about $1 billion in infrastructure improvements, it seems only logical that the utility should not close any doors that might give the city more financial options for the future.
If that door is kept cracked open by a nonbinding letter of intent written mostly on MLGW terms, it seems prudent to take the next step. This does not mean that City of Memphis and its Division of Light, Gas & Water should not move ahead with all deliberative care and without a serious commitment to the best possible next steps, which would be about negotiating a concept that should be presented to and considered by the citizens of Memphis to determine if it’s in their best interest.
To this end, MLGW should commit to transparency in its discussions with Nuclear Development LLC. After all, it was concerning that at yesterday’s City Council hearing, Councilman Kemp Conrad expressed surprise and frustration that he had just learned about the conversations between MLGW and the company.
We are confident that he will make sure that he – and ratepayers – know more about this in the days ahead. Some decisions are too important not to be considered except in the full light of day.
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I was unaware of this option. It seems like a no-brainer to me…a much cheaper source of energy that is also “cleaner” from a carbon perspective. Why isn’t this getting any visibility or traction?
Competition should always be considered —why would MLGW make this decision? So many of our community decisions depend on MLGW and all citizens should have a voice in our future! Great article!
While I am certainly not an expert on the issue of nuclear power generation, I follow the articles published in the Wall Street Journal regularly. This industry is on the edge of falling apart. No one in the US is finishing plants to generate electricity with nuclear power. The equipment producers are struggling to stay out of bankruptcy. The actual cost of delivering nuclear electricity is usually significantly higher than electricity produced with natural gas. And some articles indicate that wind and solar are now cheaper electricity producers than nuclear. So the claims here and in the morning newspapers that this company can actually finish a nuclear plant AND deliver electricity cheaply is on the lower end of the probability scale. No wonder MLGW is correct to be very hesitant. On top of everything else, while nuclear power generation does not produce greenhouse gases, it does have significant waste and safety issues.
There seems to be no real reason to at least consider it. If there is nothing really binding, it seems silly not to at least keep the idea alive and see what happens. There has to be iron clad assurances of course but if the electricity bills by half for the families in a poor city, it sounds reasonable to evaluate carefully and if it comes to it, negotiate strongly and willing to walk away. There are a lot of what ifs and concerns about future of energy, but any chance to cut costs and make Memphis more attract to good jobs is good news.
Thanks Smart City. The lack of checks in this city is Alarming. A non-binding letter of intent is nothing more than a promise to continue an important conversation for the benefit of customer taxpayers while checking TVA….
MLGW is very smart to stay away from nuclear power in any shape form or fashion.
This article is so superficial. MLGW passes on power costs to the rate payers, not tax payers. If the city of Memphis received the $487 million to spend as you suggest, MLGW would have to keep the rates at the 2018 rate prices to have a surplus of $487 million. Secondly, the rate payers would have to pay for the construction of transmission lines from the plant to Memphis. And most importantly, if this unfinished plant fails to deliver electricity to us after a breakdown, TVA may not have the capacity to pickup our load demand and we are without power for who knows how long. This article is so misleading and stirs the pot without presenting both sides of the story. Shame on you.
This scenario smells of desperation, but I guess a utility as poor as MLGW and a city as down as Memphis is willing to try anything. Nuclear anything is a big risk.
Dr. Ciscel’s response is on point, this would have been ridiculous for the council to approve. Not even sure why this was posted.
TVA already spent $4-9 Billion on it? Then walked away, with some components, selling it for $111 Million, and it would cost $12 Billion more to complete? And the plant would pay Alabama only $12.6 Million a year? This does not make sense.
I do get that if power cost half what it does now, the populace would have more cash in hand, not that the city/county would have a blank checkbook.
But nuclear never seems to achieve “Too cheap to meter” status, and there is the huge balloon payment when it’s time to bury the radioactive containment vessel.
As for cutting costs, every few years MLGW dreams up another ‘separate fee’ which in total cost some of us more than the electricity we buy.
None of us are experts on nuclear energy. Which begs the question: when did the Wall Street Journal become the expert about energy and the nuclear power industry? The WSJ ran a story a few months ago about the Vogtle plant being built by the Southern Co. in Georgia. As I understand it, Votgle is much different than the Bellefonte plant in Alabama. Votgle is being built ground up. Bellefonte is already 3/4 finished. Back to Smart City’s position: why not give the Bellefonte developers a non-binding letter of intent? That letter would keep one alternative power supplier open to MLGW. Or is MLGW scared that such a letter would just anger TVA? MLGW’s president said the utility is conducting a study — and it will be finished just after the federal loan program goes away. This doesn’t pass the smell test. Isn’t MLGW is owned by the people. Shouldn’t they be operating for their ratepayers who could use efficient and clean energy at a much lower cost?
Great conversation. Thanks, everyone.
Dan: In MLGW’s defense, most of those fees were put there by City of Memphis government along with putting some city expenses, such as street lights, onto MLGW’s budget.
Dwain: City of Memphis has been told that it’s up to city government to determine how almost $500 million a year will be spent. Also, cost of transmission lines is built into company’s cost, based on comments to City Council.
Steve: We posted it because it’s our opinion. Everything on this blog is our opinion. We post about things that interest us. As for this one, it seems illogical to take a hard and fast position on an issue at this point when you could open up a conversation about the possibilities of what can be done, to determine risks, and allow the public to have a voice in this decision.
Also, City Council was not asked to approve anything. It was a presentation for their information.
Everyone has an opinion that’s kneejerk about nuclear energy. It’s the safest. Coal and oil much less safe. If we are serious about global warming and alternative energy, it’s stupid for nuclear power not to be on the table. The plant is three hours away so anybody acting like we’re at risk are just fear-mongering. There are 60 nuclear power plans in 30 states, and somehow, the news isn’t full of problem and catastrophes.
To use your metaphor, some people on this blog just want to slam the door on a conversation. That’s easy for all the arm chair experts, but what about a city that needs cheaper power or money to spend improving neighborhoods. MLGW may kick this idea to the curb but there’s not enough information now to make a decision. Just a week ago, I was calling for more information about Kavanaugh and that’s a good thing to have on almost every issue even this one.
Everyone in my neighborhood says yes.
It’s a letter of intent that in effect triggers a community conversation while checking TVA. What’s the harm ? An das far as studies go in this town, they are often used as delay or protection tactic for the benefit of the Statue quo….
It matters to me that TVA’s former COO is pushing this. After all, TVA owned this nuclear plan until a few years ago. I’m thinking he knows how TVA strong arms cities it serves. Whether this ever comes to pass or not, it’s way past time to shake up TVA that does little to support Memphis except take our money.
I don’t understand why everyone’s not as outraged as I am with MLGW keeping this a secret from customers and councilmen.
MLGW is politically stupid. Why not sign a nonbinding letter which is what Joe Kent says it is and then kill the project in negotiations? The arrogance in saying no and dragging out the study is unbelievable.
How about a debate between MLGW’s experts and the company’s experts and then let us who pay the bills decide.
Lots of opinions. How about a process that gives us facts? MLGW has been sitting on this since January, according to media. No excuse for that. We could have discussed and resolved this by now.
I’m a millennial and I’m not concerned about nuclear power if it’s a good deal for Memphis. But, here’s what I bet. There no business model that will make this work.
Matt is right and our elected officials should get us the answers. Mayor?
It never costs anything to talk.
SIERRA CLUB RESPONSE TO BELLEFONTE PROPOSAL
Memphis and MLGW SHOULD NOT lend their names to a financing scheme promoted by a self interested investor that decided to make a go of a nuclear generation facility that was deemed undoable by the Tennessee Valley Authority. TVA has already cannibalized Bellefonte and there is little of any value left on site.
Nuclear Development, LLC has been disingenuous, at best, suggesting that they could lower MLGW ratepayers’ fees by one half. Nuclear Development, LLC has no real idea of what their final costs will be, and as evidenced by recent experiences in Georgia and South Carolina, the costs (and subsequent rates) would eventually be much higher.
Sierra Club is glad that MLGW is pursuing the study of alternate energy providers. We hope that MLGW is looking at clean, renewable energy sources like solar and wind power to meet our future demands. MLGW CEO J.T. Young is appropriately cautious about wedding Memphis to Nuclear Development’s pie-in-the-sky pursuit of new nuclear power plants when other such ventures are failing all around us.
MLGW breaking with the 100% mandate contract with TVA that currently bars us from making direct investments in local solar generation, contracting wind power from the midwest (Clean Line) or developing substantial energy efficiency (demand reduction) strategies is a good idea. Investment in renewable energy alternatives would significantly reduce costs to MLGW ratepayers and unburden Memphis from financial responsibility for TVA’s bad choices in the past.
NOTHING about Nuclear Development’s proposal addresses outages experienced by people hit with storm events. Their claims that this proposal would, in any way, address these problems is a lie. If we are to address the concerns of outages, we need need to invest in underground transmission services or much better above ground maintenance.
Memphis needs to embrace a broad based supply of clean energy–solar, wind and efficiency–and not be locked into sole reliance on dirty fossil fuels or nuclear energy. Sierra Club says YES to breaking with TVA’s 100% requirements, YES to embracing renewable energy, and NO to nuclear energy.
Agree with all of this by Sierra Club but there’s no reason nuclear energy isn’t on the table as well. If we’re serious about alternative energy, let’s really be serious. I can’t understand why people are so scared to talk and get the facts to the public about this project.
Also, I hate the kinds of weasel words like self-interested investors. What investor isn’t self-interesting? I question whether there is actually a way this works but let’s find out without defaulting into our special interests.
Thanks, Scott, for posting Sierra Club’s statement.
Frank, the last letter present was NOT a letter of interest but a letter of intent and it is binding. MLGW was told this letter had to be signed by sometime in November 2018. DOE just informed MLGW Friday that is inaccurate and they have not imposed any deadlines.
All that glitters isn’t gold.
Frank says:
October 10, 2018 at 8:54 pm
MLGW is politically stupid. Why not sign a nonbinding letter which is what Joe Kent says it is and then kill the project in negotiations? The arrogance in saying no and dragging out the study is unbelievable.
How about a debate between MLGW’s experts and the company’s experts and then let us who pay the bills decide.
How would we know if it’s glitter or gold if MLGW keeps the due diligence in secret and doesn’t even tell Council. Everyone seems to see that it’s non-binding except the people who wanted to keep it from us. Commercial Appeal and Mayor Jim think it’s worth pursuing. No one will ever know the facts if MLGW acts like it always does and is a lackey for TVA rather than consider its customers its first responsibility.
Tom, much information in this article is inaccurate. Wish you would have talked with me before publishing. Understand that Susan Adler Thorp wouldn’t due to her working for that company.
The first letter of “interest” that former MLGW President & CEO Jerry Collins literally a few days before he retired is different from the letter of INTENT submitted months later and that letter is BINDING. I humbly ask that you do more research. Thanks.
Nonbinding Next Step
To keep this prospect alive, all it takes is for Memphis Light, Gas & Water Division to sign a nonbinding – underline nonbinding — letter of intent with a company selected to be the new owner of Bellefonte Nuclear Plant in Hollywood, Alabama.
And yet, MLGW decided not to sign a letter to keep the idea alive and commissioned a study that won’t be complete until after the U.S. Department of Energy deadline for moving ahead passes next month. It sounds suspiciously like it’s making a decision without really making a decision.
The blog is by nature my opinion. Both you and Susan Thorp work for clients, so I assessed the information I gathered for myself. I heard about this months ago and the first tip was from somebody who would really surprise you. I did plenty of research and as I always try to do. And what I wrote was confirmed by people unconnected to either side – although one MLGW source was helpful. You are always welcome to write your own blog post.
That said, it’s the overall concept that deserves debate and consideration. After all, customers of MLGW, through their bills, helped to pay for the plant.
Thanks for commenting, my friend.
The blog is by nature my opinion. Both you and Susan Thorp work for clients, so I assessed the information I gathered for myself. I heard about this months ago and the first tip was from somebody who would really surprise you. I did plenty of research and as I always try to do. And what I wrote was confirmed by people unconnected to either side – although one MLGW source was helpful. You are always welcome to write your own blog post.
That said, it’s the overall concept that deserves debate and consideration. After all, customers of MLGW, through their bills and TVA rates, helped to pay for the plant. If the Jerry Collins letter was substantially different, how about just submitting the same language and see what happens? MLGW should have listening to your sage political advice on this.
Thanks for commenting, my friend.
Frank:
The Daily Memphian: from Mayor Jim Strickland via email. “I appreciate J.T. Young leading the deeper dive to determine if this is a viable option for Memphis.” Young’s deeper dive is a report MLGW is awaiting in December on the Nuclear Development LLC proposal.
“It has been publicly reported MLGW is conducting its own study, which will look at the utility’s infrastructure needs and energy options. The study is expected to be finished by December. Meanwhile, MLGW is keeping its options open”
He also said it was a proposal worth pursuing in addition to that pro forma political statement.
MLGW’s biggest problem is it has no public credibility that it can use in this debate. Get everything out in the open and shoot straight with our elected Council members and us. We pay the bills.
Frank, you stated above, “the Commercial Appeal think it’s worth pursuing.” Actually, the Oct. 11, 2018 “The 9:01: MLGW weighs high risks, huge rewards of dropping TVA for Bellefonte” article concluded with the statement below:
MLGW shouldn’t rush into an agreement with Bellefonte. Study it. Study it carefully. Vet it thoroughly. And do it in full view of the public, which has so main to gain — and lose. But if the deal dies prematurely because MLGW President J.T. Young didn’t sign a letter of intent, he should be prepared to explain to all of us exactly why.
No one is talking about rushing into an agreement. MLGW has been sitting on this since January.
You might want to read today’s editorial in CA about this.
Someone suggested a debate between your experts and the company’s experts. How about that? Get everything out in the open. Transparency works.
Now Gale Jones Carson and the rest of the crew at MLGW are playing defense after stonewalling the public and City Council about this opportunity. They were so busy trying to make sure it never saw the light of day or that we learned about it that they have shirked their financial responsibilities to the ratepayers who deserve all options to be considered. MLGW should make everything public for a change and quit thinking they work for themselves.
I like the SCM question. If MLGW says letter was not nonbinding and company says it is, why doesn’t MLGW send nonbinding letter to company and see what happens? MLGW attorney doesn’t sound very smart.
So, exactly, where has the board been hiding on this? They are the ones who are supposed to be links to the public.