UPDATE 2-Exelon cuts nuclear upgrade spending amid low gas prices

Thu Feb 7, 2013 6:27pm EST

Feb 7 (Reuters) - Low natural gas prices and slow economic growth forced U.S. power company Exelon Corp to cancel plans to spend $2.3 billion on capacity expansion at its nuclear power plants and other projects, Chief Executive Chris Crane said on Thursday.

To support its credit rating and dividend, Exelon officials decided to reduce capital spending after an evaluation of the performance of its 35,000-megawatt generating plants against low commodity prices and lackluster demand growth for electricity.

Crane said on a conference call that Exelon's nuclear, coal and gas-fired power plants remain economical and the company has no plans to shut any units.

Exelon will continue to evaluate the impact of low commodity prices, the economic recovery and competition from what Crane called "subsidized generation" to determine if early shutdowns are needed.

"Nothing that we see today would drive us to do that unless we see further degradation," Crane said.

Exelon operates the nation's largest group of nuclear plants and in 2009 launched a series of nuclear expansions, called "uprates," to add as much as 1,300 megawatts of generating capacity over eight years at about half the cost of building a new reactor.

An Exelon spokeswoman said the company's share of uprate work completed so far is 310 MW.

An abundant supply of natural gas, which reduced gas prices to the lowest level in more than 10 years, has already forced some power companies to abandon plans to build new nuclear units and to shutter older coal-fired plants rather than invest in equipment to meet stricter federal environmental standards.

An announcement earlier this week by Duke Energy that it will retire rather than repair a damaged Florida nuclear unit has been viewed as a sign that continued low power and gas prices may be a threat to some existing nuclear plants.

For the first time, Exelon detailed another area of expenses that may pressure its nuclear fleet - spending on measures to comply with revised safety standards following the 2011 Fukushima nuclear disaster.

The company may spend $350 million over the next five years on Fukushima upgrades, said Jack Thayer, Exelon's chief financial officer.

Thayer said that estimate does not include the addition of filtered vent systems that have been recommended by the staff of the Nuclear Regulatory Commission (NRC) to filter radioactive contaminants from reactors during severe accidents.

Filtered vents would add $15 million to $20 million per unit at Exelon's 11 affected reactors, Thayer said, adding from $165 million to $220 million to the Fukushima-related tab.

The nuclear industry proposed a less-costly plan to filter radioactive contaminants and Thayer said he expects the NRC to rule on the issue before the end of March.

Fukushima-related changes would add less then $50 million in operation and maintenance costs for Exelon's nuclear fleet over the next five years, Thayer said.

Separately, U.S. Representative Edward Markey on Thursday urged nuclear regulators to adopt the staff option calling for the addition of filtered vents to help avert the type of hydrogen explosions that occurred at Fukushima.

"I strongly urge the commission to follow the NRC staff recommendation and require that engineered filters be installed on (boiling water reactor) containment vents and that these vents be operable under severe accident conditions," Markey said in a letter to NRC chairman Allison Macfarlane.

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