By Scott DiSavino
(Reuters) - Dominion Resources Inc plans to shut its Kewaunee plant in Wisconsin in the second quarter of 2013, the first U.S. nuclear plant to fall victim to the steep drop in power prices as rising natural gas production redefines U.S. power markets.
Virginia-based Dominion said on Monday it intends to take a third-quarter after-tax charge of $281 million to decommission the 566-megawatt plant, which will close in the second quarter of 2013. Dominion shares fell 1.2 percent to $52.87 in late-morning trade.
The shutdown is pending a grid reliability review by the Midwest Independent Transmission System Operator (MISO), which operates the Midwest power grid.
Power prices in the U.S. Midwest and across the nation have plunged to 10-year lows this year due to surging U.S. natural gas output and weak demand due to the struggling economy.
Natural gas' share of total U.S. generation has increased to 30 percent this year from about 20 percent in 2006 as record shale gas production pushed gas prices to 10-year lows in the spring, making other fuels like coal uneconomic in some areas.
Kewaunee is the first nuclear plant to shut its doors due to competition from natural gas. Production has jumped in recent years as new technologies like horizontal drilling and hydraulic fracturing, or "fracking," enable energy companies to tap the United States' vast shale reserves.
In April 2011, Dominion said it was seeking to sell the reactor as part of a regular review of its portfolio to determine which assets fit strategically and improve return on invested capital and shareholder value.
But the power company was unable to find a buyer for Kewaunee, even though the plant has a renewed license that does not expire until 2033.
"This decision was based purely on economics," said Thomas Farrell, Dominion chairman, president and chief executive in a statement.
"Dominion was not able to move forward with our plan to grow our nuclear fleet in the Midwest to take advantage of economies of scale."
The station will remain under the oversight of the U.S. Nuclear Regulatory Commission (NRC) throughout the decommissioning process.
Following the station's shutdown, Dominion said it plans to meet its obligations to the two Wisconsin utilities that purchase Kewaunee's generation through market purchases until the power purchase agreements expire in December 2013.
"Kewaunee's power purchase agreements are ending at a time of projected low wholesale electricity prices in the region," said Farrell.
The two Wisconsin utilities are Integrys Energy Group Inc's Wisconsin Public Service unit and Alliant Energy Corp's Wisconsin Power and Light unit, a spokesman at Dominion said.
STILL BELIEVES IN NUCLEAR ENERGY
Dominion said Kewaunee's decommissioning trust was currently fully funded, and the company said it believes the amounts available in the trust plus expected earnings will be enough to cover all decommissioning costs.
Kewaunee is located on Lake Michigan, about 35 miles southeast of Green Bay. It began commercial operation in 1974 and has a Westinghouse pressurized water reactor.
Dominion acquired the station in July 2005, around the time that several reactors were for sale in the United States and several states were requiring utilities to sell power stations as part of the deregulation of the electric markets.
Florida power company NextEra Energy Inc bought the Duane Arnold reactor in Iowa in 2006 and the two reactors at Point Beach in Wisconsin in 2007. Louisiana power company Entergy Corp bought the Palisades reactor in Michigan in 2007.
Exelon Corp, the biggest nuclear power operator in the United States, owns or operates many of the other reactors in the Midwest.
Despite the planned shutdown of Kewaunee, Farrell said Dominion, which owns reactors in Virginia and Connecticut, still firmly believes nuclear energy must play an important part in the nation's energy future.
"The situation Dominion faces at Kewaunee is the result of circumstances unique to the station and do not reflect the nuclear industry in general. The nation will be hard-pressed to meet its energy needs, let alone do so in a secure and affordable manner, without a robust and growing nuclear energy program," Farrell said.
Dominion is one of the biggest power generating companies in the United States, with about 27,400 MW of capacity. The company also serves close to 6 million utility and retail energy customers in 15 states.
(Reporting by Scott DiSavino; editing by John Wallace and Jeffrey Benkoe)
Team Jeb Hits Back at Trump for Being 'Soft on Crime,' Cites Past Support for Legalizing Drugs | Cortney O'Brien
Sen. Chris Murphy Admits That Gun Control Legislation From Washington Probably Won’t Stop Shootings | Matt Vespa
To Hell With You People | RedState
Katie Pavlich - Latest Clinton Email Server Dump Reveals 150 More Documents Flagged For Classified Information
Nick Adams - Not a Single Illegal Immigrant in 7 Months... In Australia
Email shows Hillary 'One Device' Clinton happy to have her new, unapproved Apple 'hPad'
Scarborough: Cable news has put lives at risk, including MSNBC, for “a few ratings points” - Hot Air
Vox "Smart Take" Pushes Gun Confiscation. Here's What Would Happen If They Tried. - Bearing Arms - 2nd Amendment, Gun Confiscation
Doctors Will Be the Scapegoats in the Coming Obamacare Disaster | Human Events