Delays and cost overruns hit Watts Bar work

Delays and cost overruns hit Watts Bar work

February 4th, 2012 by Dave Flessner in Business Around the Region

The biggest construction project in Southeast Tennessee will take longer and be more expensive than originally forecast.

The Tennessee Valley Authority disclosed Friday that finishing the second reactor at its Watts Bar Nuclear Power Plant will take at least a year longer than the five years planned for the project. In its quarterly financial filing, TVA also said the Watts Bar project likely will cost significantly more than the $2.5 billion price tag put on finishing the reactor when TVA directors approved the project in August 2007.

TVA officials blamed the delays on the sluggish pace of equipment installation by construction crews and the potential for extra requirements imposed after the meltdown in Japan of the Fukushima nuclear plant.

An environmental critic of the Watts Bar project said he fears TVA oversold the Watts Bar project with optimistic cost and schedule estimates prepared by contractors later hired to perform much of the work on the multibillion-dollar project.

"The trend is very disconcerting and really shows that this is a high risk project with a very high cost," said Stephen Smith, executive director for the Southern Alliance for Clean Energy. "I fear they are throwing good money after bad and this should raise some real questions about finishing the Bellefonte plant, which is infinitely more complicated than Watts Bar."

Productivity Ills

A study is under way to determine the completion costs and schedule for Watts Bar Unit 2, TVA Chief Executive Officer Tom Kilgore said. TVA has already spent more than $2.2 billion on finishing the new Watts Bar reactor since work was restarted there four years ago, and Kilgore said the project is probably only 70 percent complete.

"As we realized that we were not going to be able to finish the project at the set amount, we started to looking at all of the work and we still haven't completed that study," he told financial analysts Friday. "We've experienced less productivity than we expected. That is one area where our estimate has to be revised."

Kilgore promised a new price tag by spring for finishing Watts Bar, but he declined to make any preliminary cost estimate.

"I don't want to be wrong a second time," he said.

TVA suspended all work at the plant and sent more than 1,000 contract workers and employees home for three days in January after finding cables had been erroneously removed in December from its operating unit rather than new adjacent unit still under construction. TVA also cited workers for removing a valve from Unit 2 without following proper guidelines.

Kilgore said TVA simply may have had too many workers on site.

From its peak of 3,200 workers last year, TVA has had three rounds of layoffs to trim the number of contract and TVA employees working daily on the completion of Unit 2.

"Actually, the productivity of our work has improved as we reduced the number of people there because we have less people working in crowded spaces," Kilgore said.

Plan Still In Favor

Despite the cost overruns, Kilgore said finishing Watts Bar Unit 2 still makes good economic sense. Watts Bar is still expected to be far cheaper than the $4.9 billion expense of finishing one of the reactors at Bellefonte, which TVA determined last year was still the best way to meet future power demand.

"We could spend up to $4.58 billion and still have an economical plant," Kilgore said of the Watts Bar project. "I don't think the estimate is going to be anywhere near that, but we know this is going to be a good plant and that is why we continue to work on it."