Nuclear power plant safety to be object of debate

New information has come from the field of a never-ending battle between oblenerho regional electric companies, thermal, and nuclear power plants for their cut of the electricity rate pie. The Enerhoatom Company intends to persuade the National Electrical Energy Regulation Commission (NEERC) to revise its decision on nuclear electricity prices before the end of this year, company President Serhiy Tulub announced. According to nuclear experts, the existing rates could undermine the plant safety program. This program is so far not being fully implemented. The company will press for new tariffs as soon as the program is spelled out in detail and submitted for approval to the Ministry for Fuel and Energy.

In August the NEERC cut the then charge of 7.45 kopiykas per kW/h to 6.5 kopiykas because of increasing company outlays. “Is it normal that the company has spent 7 million hryvnias on charity?” NEERC Chairman Yury Prodan said then. At first, the reduction of this tariff for nuclear plants was initiated and lobbied by thermal power station managers. Minister for Fuel and Energy, Vitaly Haiduk, also favored cutting the nuclear rate, claiming that the stations were overstaffed and not cost-effective (only 70% last year, according to some sources). But when Enerhoatom President Yury Nedashkivsky was replaced by Serhiy Tulub, government circles began to change their attitude. The new top executive is the president’s man and does not hide that he was appointed to this office in order to put the sector in order and do away with “charity.” This factor turned out to be a solid political argument because the Ministry for Fuel and Energy had already declared a new rate policy for the nuclear people.

The ministry will support the idea of revising rates if the Enerhoatom power station safety program is found to be solid enough. Oleksandr Zeniuk, chief of the ministry’s nuclear power plant department, noted that his agency takes a no-nonsense approach toward nuclear safety. “The minister has also said that if the company proves the necessity of a rake hike, we will support its position,” Mr. Zeniuk says. According to him, it is quite possible that the nuclear sector will get good news about rates late this year.

Enerhoatom has already drawn up and is about to finish consultations on its station safety program. The cost of the work this project entails is an estimated $800 million. It is planned to raise this money within five years. Highest on the agenda is the problem of metal wear at the stations. The Rivne Nuclear Station unit will see its warranty period expire in 2010, and similar problems are expected to arise at other stations. If the metal is replaced and other most important operations are carried out, the power units’ warranty period can be prolonged in theory, although this will involve considerable costs.

Incidentally, as the Ministry for Fuel and Energy claims, the approval of the nuclear power plant safety program is being unexpectedly opposed by the Ministry of Finance. It will be extremely difficult to coordinate the project with the latter. The point is Enerhoatom’s investments will be recorded in its accounts as its expenditures, so the company’s net profit will decline, as will, of course, the company’s payments to be budget under the profit tax and VAT. Enerhoatom sells an annual UAH 6 billion in products. If we subtract from this amount the expenses for fuel purchases and other expenditures, the 180 million dollars annually spent on station safety could bring Enerhoatom profitability to zero. This means one of this country’s largest and most stable facilities would vanish into thin air as a taxpayer. It will be recalled that last year Enerhoatom’s taxable profit reached 3.2 billion hryvnias.

The electricity rate struggle is expected to intensify by the year’s end because the thermal stations and oblenerho enterprises will never agree to give up their share, while Prime Minister Anatoly Kinakh vehemently opposes any rises of electricity charges for consumers. The fray has also been joined by the European Bank for Reconstruction and Development, which has promised to allocate funds for finishing the Rivne and Khmelnytsky power units provided prices are raised to 2.5 cents per kW/h. The Enerhoatom management is known to have already stepped up its consultations with EBRD envoys.