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Alliant Looks To End Nuclear Power Purchases

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CEDAR RAPIDS, Iowa -- Alliant Energy has notified Iowa's only nuclear power plant that it doesn't intend to renew an agreement to buy most of the plant's output.

The agreement with NextEra Energy Resources to buy power from the Duane Arnold Energy Center near Palo expires in February 2014. Alliant's chairman and CEO, Bill Harvey, told investment analysts Thursday, Nov. 3, that "We believe it is unlikely that we will renew this purchased power agreement with NextEra."

Harvey said the utility is continuing to make plans related to construction of a new 600 megawatt natural gas power plant, and could file for regulatory approvals in mid 2012.

NextEra Energy Resources, based in Florida, is the majority owner of the Duane Arnold Energy Center, controlling 430 megawatts of its 615 megawatts of output and managing the plant for its two minority owners.

NextEra spokesman Steve Stengel said Interstate Power & Light, Alliant's Iowa-based utility, has notified NextEra that it does not intend to sign a new contract to buy power from Duane Arnold Energy Center. IP&L supplies power to 984,500 electric customers. Its demand peak is 5,425 megawatts.

The plant would remain viable even without Interstate Power & Light as a customer, according to Stengel. He said NextEra regards it as a well-run plant producing low-cost power.

"We are seeing strong interest for base load nuclear power in the Midwest," Stengel said, adding that NextEra is in discussions with "several counterparties" interested in buying the plant's output on a long-term basis.

Interstate Power & Light spokesman Ryan Stensland said the utility hasn't ruled out extending its contract with NextEra for Duane Arnold's ouput. Interstate Power & Light's studies indicate that building a 600 megawatt combined cycle power plant could provide the company with the needed electricity without affecting customer rate impacts more than extending the contract with NextEra, however, Stensland said.

The natural gas-fired plant is estimated to cost $650 to $750 million, less than half as much the proposed Sutherland Unit 4 coal-burning power plant project at Marshalltown that the company canceled in January 2010.

The fuel portion of generating costs for electric power are higher for natural gas than for coal. Using natural gas produces less carbon emissions, however, and Stensland said that the Interstate Power & Light eventually expects that high carbon emissions will be penalized by federal regulation.

Another advantage of the natural gas plant would be more flexibility in dispatching power. Stensland said the plant could be switched on or off depending on the market need for power and the cost of buying comparable power off the grid. A coal-burning power plant lacks such flexibility.

Interstate Power & Light is studying over a dozen different potential locations for the natural gas power plant, Stensland said. They include both existing power plant locations, and undeveloped sites.

The company is looking at sites in Iowa, Stensland said. Sites will require access to a large natural gas supply line, ample water for producing steam, and access to the transmission grid, he added.

Alliant is considering upgrades to its existing power plants to meet environmental regulations as part of the same planning process that includes the natural gas power plant studies. Harvey said the utility plans to invest $850 million in its larger power plants between 2011 and 2015 at Interstate Power & Light and Wisconsin Power & Light. It plans to invest about $100 million for environmental controls at its smaller power plants.

The work will include a major environmental upgrade to Interstate Power & Light's Ottumwa Generating Station that will include equipment for removing particulate matter and sulfur dioxide from plant emissions. Another project will add equipment for removing sulfur dioxide emissions at the company's coal-fired Lansing 4 power plant in Lansing.

Iowa's other major regulated utility, MidAmerican Energy, has expressed interest in building a nuclear power plant using a modular, scalable power plant design.

Alliant Energy, which sold the Duane Arnold Energy Center to NextEra several years ago, continues to regard nuclear power as safe and clean energy, Stensland said. He said it appears, however, that building and owning a power plant may have financial advantages for Alliant shareholders while not costing Interstate Power & Light customers more than extending the contract with NextEra.

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