The CPS Energy Board of Trustees has called for an investigation into how and when CPS Energy management became aware of a substantially higher preliminary cost estimate from Toshiba, the contractor chosen to build Units 3 and 4 at the South Texas Project (STP) in Matagorda County.

This information caused the postponement last week of a proposed $400 million bond issue for nuclear development. 

“In January, the Board directed CPS Energy management to enter into an agreement to participate in new nuclear development at STP,” said Aurora Geis, CPS Energy Board chair.  “The much-higher Toshiba cost estimate is very troubling.  My Board colleagues and I are intensely interested in this matter, and thus we have requested a thorough examination as to what transpired.”

In response to recent news reports about a $4 billion increase in the cost estimate, Interim CPS Energy General Manager Steve Bartley said the estimate was preliminary and subject to ongoing scrutiny and challenge.  “In any event, a cost estimate that exceeds our preliminary total project cost of $13 billion is not acceptable and will result in CPS Energy exploring other options,” he said.

Bartley said the cost-estimate investigation is in keeping with the company’s long history of service based on the community’s trust in the organization.

“Right now, the trust our community has placed in us for many years is being tested,” he said.  “Our forthrightness has been called into question.  That’s why it’s important that the investigation be completed as expeditiously as possible and, based on the findings, that appropriate action be taken.”
Preliminary findings have resulted in two CPS Energy employees being placed on administrative leave pending the completion of the investigation, Bartley indicated.

Because of the magnitude of the community’s nuclear expansion decision, Geis said it is “our expectation that any pertinent information be shared with the Board, the City Council, customers and other key stakeholders in a prudent and timely manner.”

Bartley noted that changes in internal processes already have been made, and additional emphasis will be focused on information-sharing to prevent a recurrence of the cost-estimate situation.

“My attention remains focused on our upcoming trip to Japan to meet with top-ranking officials of Toshiba, NRG Energy and others involved in STP expansion to discuss the project’s cost estimate,” Bartley said. “I will make sure all our partners clearly understand our position – STP Units 3 and 4 must be affordable for our customers.

“If we can’t achieve this goal, then we will have to look seriously at going another direction for a substantial supply of on-demand electricity before 2020.

Our in-depth analyses over the past three years have indicated STP expansion is the best long-term option for reliable electricity, assuming the cost of building STP Units 3 and 4 is within our budget.”

In late June, based on the best-available information, CPS Energy estimated the construction cost of the two new 1,350-megawatt units at $10 billion, or $13 billion with financing.  CPS Energy currently owns 50 percent of the expansion project along with NRG Energy.  Both companies have agreed to find another buyer for 20 percent of the project.  That will bring CPS Energy’s share down to 40 percent.

On Oct. 13, the CPS Energy Board voted unanimously to participate in STP expansion at a share of 20 to 25 percent.  That decision preceded a proposed Oct. 29 City Council vote on issuing $400 million in revenue bonds for further nuclear development.  The Council vote was postponed.

“Since the City acquired CPS Energy 67 years ago, the company has taken great pride in supplying reliable, affordable energy to this growing community in an environmentally responsible manner,” Geis said. “CPS Energy has a solid record of performance, and despite this unfortunate STP cost-estimate issue, we will continue to work hard to build on the confidence and trust of those we serve.”