UPDATE 1-Dominion shuts Kewaunee power reactor in Wisconsin

Tue May 7, 2013 3:29pm EDT

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By Scott DiSavino

May 7 (Reuters) - U.S. power company Dominion Resources Inc shut the 566-megawatt (MW) Kewaunee nuclear power plant in Wisconsin on Tuesday, as planned.

"We planned to shut at about noon today but are running a little ahead of schedule. We closed the breaker a little bit ago," Dominion spokesman Mark Kanz told Reuters before noon.

Dominion said in October it would shut Kewaunee, even though its operating license does not expire until 2033, after failing to find a buyer for the plant due to economic reasons related in part to low natural gas and power prices.

"This closing does not herald the end of our company's commitment to nuclear power," David Heacock, president of Dominion Nuclear said in a release.

"It is a safe, reliable and carbon-free technology, but as with all forms of generation, it must compete on economics, including the necessity of being price competitive on a regional level," Heacock said.

Kewaunee, a pressurized water reactor, entered service in 1974 and is located on the shore of Lake Michigan, about 27 miles (43 km) southeast of Green Bay, Wisconsin.

Kewaunee is the second U.S. reactor to be retired this year. The last group of reactors was retired in the late 1990s.

Earlier this year, Duke Energy Corp said it would retire its 860-MW Crystal River 3 reactor in Florida, due in part to the uncertain cost of replacing the unit's containment structure.

Crystal River 3 had been shut since 2009 when its containment structure was damaged during a power upgrade and replacement of the unit's steam generators.

Kanz said there are 632 workers at the plant. Dominion plans to lay off about 200 people at the end of May and another 100 or so at the end of June, he said.

By September 2014, the company expects to have about 293 workers and will stay at about that level for the plant decommissioning.

Kewaunee does not pay property tax but it does pay utility tax on the generation it produces. Kanz could not say exactly what the plant paid in total taxes but that it gave just under $1 million a year to Kewaunee County and about $425,000 a year to the town of Carlton, Wisconsin, where the plant is located.

Kanz said the company and the state were in discussion about future taxes.

NO ECONOMIES OF SCALE

With the deregulation of the power market in Wisconsin, Dominion bought Kewaunee from Wisconsin utilities Wisconsin Public Service, now a unit of Integrys Energy Group Inc and Wisconsin Power and Light, a unit of Alliant Energy Inc , in July 2005 for about $220 million.

But since it was unable to grow a Midwestern nuclear fleet to take advantages of economies of scale and Kewaunee's power purchase agreements were ending at a time of projected low wholesale electricity prices in the region, Dominion said in the release Tuesday it decided to shut the reactor.

Dominion continues to own nuclear reactors at Millstone in Connecticut, and Surry and North Anna in Virginia.

In October, Dominion said it would record a $281 million after-tax charge in the third quarter of 2012, related to the closing of the reactor.

Dominion also said in October that the reactor's decommissioning trust is currently fully funded and the company believes the amount available in the trust plus expected earnings will be sufficient to cover all decommissioning costs.

Kanz said the decommissioning fund was $578 million at the end of 2012.

In the weeks ahead, Dominion said it will remove all 121 fuel assemblies from the reactor and store them in the used fuel pool. Under federal law, the company said it must decommission the unit and return the site to a green field condition within 60 years.

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