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Monday March 25, 4:10 pm Eastern Time

Ohio nuke woes raise fear of lengthy plant outages

By James Jelter

SAN FRANCISCO, March 25 (Reuters) - The startling discovery last month of deep corrosion in the ``lid'' capping the reactor at an Ohio nuclear power plant is raising the specter of long, costly shutdowns at other plants using a similar design.
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That fear also is pushing up electricity and natural gas prices as energy traders brace for the possibility of shrinking nuclear supplies in the market over the next few months.

Nuclear accounts for 20 percent of U.S. power generation.

In the Midwest, prices for wholesale electricity delivered during the summer rose about 12 percent last week.

The move spilled into the natural gas market, pushing futures prices 15 percent to 20 percent higher last week as traders bet gas-fired plants would be called on to close the gap left by outages at one or more nuclear units.

``The markets are behaving as if lengthy outages are a strong possibility. But it's still too early to tell,'' Sam Brothwell, utility analyst with Merrill Lynch in New York, told Reuters.

Triggering the alarm was a corroded cavity found in the reactor vessel head at FirstEnergy's (NYSE:FE - news) 25-year-old Davis-Besse nuclear power station in Oak Harbor, Ohio.

During a scheduled refueling outage that began Feb. 16, engineers found boric acid -- used in the primary coolant bath surrounding uranium rods in the reactor core -- had leaked at the base of five of the 69 control rod nozzles that penetrate the reactor vessel head.

At one of the nozzles, the acid had eaten all the way through the 6-inch (15-cm) thick vessel head, a massive 150-ton, 17-foot (5.2-metre) wide piece of carbon steel bolted down on top of the rector.

The corrosion was so severe that a 3/8-inch (1-cm) thick stainless steel liner inside the reactor was the only barrier left between the reactor core, which operates under enormous pressure, and the metal shroud surrounding the reactor vessel.

``NOT ANTICIPATED''

While FirstEnergy and federal Nuclear Regulatory Commission (NRC) officials described the corrosion as ``serious'' and ``not anticipated,'' they point out it posed no danger to the public since the entire reactor is housed in a steel-reinforced concrete containment building.

But the economic implications are huge.

FirstEnergy, based in Akron-Ohio, estimates that in a best-case scenario, repairs to the reactor head will take three months and cost $10 million to $15 million.

In a worst-case scenario, it could take two years. That's the time it would take to manufacture a replacement head.

While the company hopes judicious welding work can patch the hole, FirstEnergy officials confirmed that in February they ordered a new reactor head from Framatome ANP, Inc. in France for delivery in 2004.

FirstEnergy estimates the cost of replacing the reactor head at about $20 million.

But downtime at Davis-Besse, which generates 7 percent of FirstEnergy's electricity, will force the company to spend anywhere from $10 million to $15 million a month buying replacement power for the 4.3 million customers served by its seven subsidiary utilities, they said.

THE WIDER PROBLEM

Concerns raised by Davis-Besse have spread far and wide through the industry, prompting the NRC to order operators of 69 pressurized water reactors -- more than half of the nation's 103 nuclear generating units -- to double check the condition of their reactor heads and report back by April 1.

Boiling water reactors, the other basic design used at U.S. nuclear power plants, were exempt from the order.

The NRC has been aware of tiny cracks forming around nozzles in some reactor heads for over a year and repairs have already been carried out at some plants.

But none of the reactors inspected so far has shown anywhere near the damage found at the 860 megawatt (MW) Davis-Besse unit.

The problem has focused industry attention on six other plants, all sharing the same Babcock and Wilcox design as Davis-Besse and all built about the same time.

The plants in question include the 860 MW Crystal River 3 nuclear power station in Florida, owned by Progress Energy (NYSE:PGN - news), and Duke Energy Corp's (NYSE:DUK - news) three reactors at the Oconee plant in South Carolina, each rated at 846 MW.

The other two units in the group are Entergy Corp's (NYSE:ETR - news) Arkansas 1 unit in Arkansas, and Amergen's 786 MW Three Mile Island 1 reactor in Pennsylvania.

Amergen is owned 50 percent each by Chicago-based Exelon Corp. (NYSE:EXC - news) and British Energy plc (quote from Yahoo! UK & Ireland: BGY.L) of Scotland.

Entergy, Progress Energy and Exelon officials said reactor heads at their plants had all been inspected and repaired as needed during scheduled refueling outages last autumn.

Duke Energy, the first to grapple with this problem, found small cracks and boric acid leaks at one of its three Oconee units back in November 2000.

Since then, the Charlotte, N.C.-based company has checked and repaired all three Oconee reactor heads, and ordered new heads for each unit, scheduled for delivery next year.

Meanwhile, the energy markets are anxiously awaiting the NRC's review next month of the inspection and maintenance reports requested from plant operators, on which it will decide the need for further inspection outages.

``This is the next big thing to watch,'' said Merrill Lynch's Brothwell. ``So far, this is still a single-plant and single-company issue. However, if it spreads, it could rekindle the nuclear risk premium of yesteryear,'' he added.

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