The delay in finishing the Watts Bar Unit 2 reactor could force electricity rates higher in the Tennessee Valley, according to a new financial assessment of TVA.
Moody’s Investors Services warns that the extra time and expense to complete TVA’s newest reactor “will increase pressure on rates” and push the federal utility closer to its debt ceiling.
“The Watts Bar cost overruns will require between $1.5 billion and $2 billion of additional funding sources over the next three years, which will likely come from a combination of rate increases and additional financings,” said Michael G. Haggarty, senior vice president of the finance group for Moody’s in New York.
Moody’s affirmed its top Aaa rating for TVA with a stable outlook for the utility despite the cost overruns for one of its biggest projects. Haggarty noted that the TVA board may raise its rates to cover higher expenses, and delaying the completion of the Watts Bar unit until 2015, as well as the start of work to finish TVA’s Bellefonte nuclear plant in Alabama, will cushion any blow from the extra expenses.
TVA President Tom Kilgore said last week that finishing Watts Bar Unit 2 will take an extra three years and somewhere between $1.5 billion to $2 billion more than TVA projected when it resurrected work on the unit in 2007. Watts Bar was started in 1974 but has been delayed because of construction problems and a slowdown in power demand.