A former Tennessee Valley Authority chairman wants the federal utility to scrap its plan to invest billions in scrubbing old coal-fired units. Instead, he recommends the TVA complete unfinished nuclear units and add a gas-fired plant via a public-private partnership.
Dennis Bottorff, a private-equity firm partner, proposes the P3 approach to finish TVA's 1,256-MW Bellefonte-1 unit in Alabama. TVA approved the $4.9-billion completion in 2011 but said work could begin only after the Watts Bar-2 unit in Tennessee was finished. Bottorff's plan would finish Bellefonte-1 in 2018 and Bellefonte-2 by 2020. Work halted in the 1980s, when Unit 1 was 90% complete and Unit 2 was 58% complete, TVA said.
Under Bottorff's proposal, debt for construction of the 1,100-MW Watts Bar-2, set to finish in 2015, should be refinanced using $2 billion of TVA cash on hand and $3 billion in private finance. Bellefonte would be completed with a 10% equity contribution and the remainder funded with debt. TVA would put up $4 billion in cash, enter into power-purchase agreements with a new special-purpose entity, operate the units and, when capital is repaid, take ownership.
Bottorff says industrial power rates would drop 30% in 2014, though others would stay flat. While TVA would be allowed to use its debt to finance the addition of scrubbers, he says, the nuclear units could be completed using the P3 approach so that the cost would not count against the statutory debt cap, he adds. A 620-MW natural-gas plant could meet the projected power demand for 2020. TVA would retire 29 coal units that do not meet U.S. clean-air rules or are un-economical, Bottorff says, which would free up $8 billion for operations and pollution control. TVA and Tennessee's congressional delegation are reviewing the plan, say spokespersons.