Customers Might Prefer to Be Shareholders in New Nuclear Plant Construction
Over the past several days, I have read a number of stories about the political and legal challenges that companies like Southern Co., FPL, and CPS are facing as they attempt to roll some of the costs of efforts to expand their nuclear plant capacity into their current rate structure. In most cases the numbers are quite small – CPS, for example, has asked for permission to raise rates by 5% every two years, and FPL has asked permission to add approximately $6.70 per month, less than the cost of a typical paperback book , to every customer’s bill. (Note: My number has been updated, though the linked source shows what I originally posted – “67 cents”. I should have checked the source more carefully. The corrected number was suggested by a commenter and verified by a post on NEI Nuclear Notes titled The Money Trap.)
Even with these small monthly fees, the total amount of money made available to the utilities is large enough to make a difference in the projected financing costs. It is also large enough in total to make certain types of lawyers salivate at the prospects of legal battles to overturn the fees, and to attract the involvement of people who have been adamantly opposed to nuclear power plant construction projects for many years.
The numbers are even large enough to attract a significant number of negative comments on the articles discussing the fees from people who have enough electricity in their homes to operate computers and who have enough disposable income to purchase those computers and pay for internet access.
Though I think that the costs are pretty reasonable, especially compared to the fuel surcharges that could result if natural gas prices begin misbehaving again when the economy picks up, I have been thinking about a way to avoid the battles. I am not afraid of fighting, but I have always admired the methods of martial artists who use their opponent’s momentum as a weapon and who avoid direct collisions. Perhaps with a little creative thinking, it is possible to encourage people to become excited about the prospects for constructing new nuclear power plants. After all, Americans love innovation and progress, fighting against it is not really part of our natural DNA. (There are some exceptions to that rule, but they are fringe elements.)
So here is my modest proposal. What if public companies like FPL, Constellation, and Southern Company offered people a “piece of the action”. Suppose instead of using government agencies to force customers to pay higher monthly bills to allow the companies to buy new plants why don’t companies interested in building new nuclear power plants figure out a way to issue special stock in the project so that people can choose to become owners? After all, some customers may very well have plans to move away or realize that they will probably pass away before the plants begin producing and potentially lowering electric power bills. Instead of being the big, bad monopoly corporation that demands tribute, the project developers could turn themselves into a Main Street darling by offering to share in the bounty that will accrue once the plants begin operating and selling low marginal cost power.
Taking a page from technology start-up companies, the special stock would not even have to pay a dividend. It would not be suitable for widows and orphans like traditional utility stock with a large, predictable dividend, but it would be great for those people – like me – who believe in the value of nuclear technology and would like to bet that the value will eventually be recognized by more and more people.
The companies could even structure the deal to provide a continuing cash flow that resembles what they would get by charging customers. Instead of a fee added to the bill, they could set up something like their traditional DRIPs (Dividend Reinvestment Plans) that would allow customers to sign up to invest a certain amount every month. Investors could write the check at the same time as they pay their normal monthly bill and even put it in the same envelope. Their monthly electric bill could be modified slightly to show how their investment is growing. Like a DRIP, there would be no need to pay any middleman commissions in this transaction.
This could be a huge win-win for the utilities. They could attract the low cost financing that they need to build the new facilities, they would turn potential enemies into investors and they would build a cadre of interested people who will fight to support the plant’s construction progress against those fringe elements mentioned earlier who seem to be willing to go to public meetings to fight just about any kind of progress. With a stock investment plan like this, the utilities might not need to go to Wall Street to borrow money, but if they did, they would stand a better chance because of the equity stake they could demonstrate.
I know there are hurdles to overcome in implementing this kind of plan and new regulators to deal with, but that is nothing new for large investor owned utilities. They deal with regulators all of the time; they have a large customer service work force and they even have a pretty substantial investor relations organization.
I have not yet figured out how to overcome similar issues for city owned utilities like CPS, but I am working on it.
What do you think? Could something like this finally offer small investors the opportunity for a “pure play” in nuclear energy growth and development?
