UPDATE 1-Exelon drops Texas reactor plan, cites cheap natgas

Tue Aug 28, 2012 11:54pm BST

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* NRC has issued licenses for four new reactors in U.S.

* Only one Texas nuclear expansion still moving forward

Aug 28 (Reuters) - Exelon Corp will halt efforts to gain regulatory approval to build a new nuclear plant in southeast Texas, the company said on Tuesday.

Chicago-based Exelon, the nation's largest nuclear operator, said it notified the U.S. Nuclear Regulatory Commission that it will withdraw its application for an early site permit for land near Victoria in southeast Texas.

"The action is in response to low natural gas prices and economic and market conditions that have made construction of new merchant nuclear power plants in competitive markets uneconomical now and for the foreseeable future," said Charles Pardee, Exelon Generation's chief operating officer.

In 2008, Exelon announced a plan to develop two new reactors at the Texas site, becoming the 12th applicant to seek a combined construction and operating license (COL) from nuclear regulators as power companies rushed to qualify for financial incentives offered under the Energy Policy Act of 2005.

By 2010, however, industry enthusiasm for new nuclear plants began to wane as the recession cut into electric demand, costs for nuclear construction soared, carbon legislation was delayed and natural gas supplies began to rise, making nuclear plants less competitive.

Exelon withdrew its COL application, but continued to pursue the early site permit to allow it to keep the project alive but defer construction for as long as 20 years.

"Today's withdrawal brings an end to all project activity," Exelon said in a statement.

"This is all about the economics of the project, which are driven by commodity and financial markets," said Marilyn Kray, vice president of nuclear project development.

While abandoning the Texas nuclear project, Exelon remains active in Texas' $32 billion deregulated market, officials said.

Following its merger with Constellation Energy, Exelon operates more than 4,000 megawatts of gas-fired and wind generation capacity in the Texas deregulated market.

Its StarTex unit sells electricity to more than 144,000 residential customers and its Constellation New Energy unit sells power to nearly 35,000 commercial accounts.

Of the dozens of new U.S. reactors proposed, only six or so may be built in the next decade.

The NRC has so far approved licenses to allow Southern Co to build two new reactors in Georgia and Scana Corp to build two reactors in South Carolina.

After the March 2011 nuclear disaster in Japan, NRG Energy said it would stop investing in development of two new reactors at the existing South Texas Project station 90 miles southwest of Houston, but partner Toshiba continued with the project.

Late last year, the NRC said it would not issue a license to build the new STP reactors because current project ownership does not meet foreign ownership restrictions.

Dallas-based Luminant, a unit of Energy Future Holdings , has delayed the completion schedule for its proposed two-unit expansion at the Comanche Peak nuclear station in north Texas until 2021 and 2022.

Earlier this month, the NRC said it would suspend issuing final decisions on nuclear licenses until the agency resolves the complicated issue of spent nuclear fuel.

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