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Rancho Seco Article
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Rancho Seco --
10 years after pulling the plug:
A recharged SMUD seeing better

By Carrie Peyton
Sacramento Bee Staff Writer

(Published June 6, 1999)

It may have been one of the  smartest moves Sacramentans ever made -- for reasons they never guessed.

Ten years ago today, ending a wrenching debate, a slender majority of voters slammed the door on the Sacramento Municipal Utility District's struggling Rancho Seco nuclear plant.

A decade later, energy analysts say, SMUD has lower rates, lower debts and better prospects than it could have achieved even with a smoothly running Rancho Seco.

"Our eggs would still have been in one basket, and the new market would be scaring SMUD to death" if the vote had gone the other way, said Bill Marcus, principal economist at JBS Energy Inc., a West Sacramento consulting firm.

Two things no one expected -- declining natural gas prices and the dawn of electric industry competition -- have contributed to drive electricity costs down and put nuclear plants nationwide in an economic vise.

"Maybe it was fortuitous. Maybe it was the brilliance of Sacramento voters, but the timing was absolutely right," said SMUD General Manager Jan Schori.

The vote shook SMUD to its core, and a radically changed public utility has emerged.

Instead of nuclear power, there are shade trees and solar roofs. Instead of ridicule, there are international media tours. Bond ratings once one notch above junk have risen into the A's.

Rapid-fire increases that nearly doubled rates between 1985 and 1989 have given way to a nine-year rate freeze. After a parade of six general managers between 1985 and 1990, Schori has become one of the utility's longest-serving chief executives.

And in perhaps the toughest internal evolution, instead of close to 3,000 employees, there are now about 2,000.

"That part of it will always end up being a painful memory," Schori said. Everyone at SMUD, herself included, saw good friends lose jobs, said Schori, who was on the district's legal staff during the Seco years.

The 1989 advisory measure asked whether SMUD should keep running the 913-megawatt plant, which had been plagued by shutdowns and malfunctions. By 53 percent to 47 percent -- with about 15,000 people tipping the balance -- voters said no.

It was a time characterized by overflowing SMUD board meetings, threats of fistfights among directors, a community polarized by nuclear and anti-nuclear rhetoric, and internal dismay so deep utility officials even tried boosting morale by buying Rancho Seco workers matching blue blazers.

The nuclear schism would have continued to tear at SMUD if the voters had called for keeping the plant running, those on both sides of the issue say now.

Even 10 years later, opinions are starkly divided. Former pro-Seco director Dave Cox, now a Republican assemblyman, is sure a well-running nuclear plant would have meant lower rates today.

Plant opponent Peter Keat, the only Seco-era director still on the board, believes things would have gone so badly so fast that "we wouldn't have been able to survive as an independent utility."

Built in 1974 for $342 million, the plant devoured hundreds of millions of dollars more in upgrades and repairs. Its backers believed that by 1989, it was finally poised to do better.

But it wouldn't have paid off, Marcus and other analysts said.

"Buying a kilowatt-hour of electricity is much cheaper today than anyone thought it would be 10 years ago," said Robert Kinosian, a nuclear analyst at the state Public Utilities Commission.

Prices for natural gas, which has become the fuel of choice for new power plants, have fallen over the past decade instead of rising as predicted, he said.

That makes other power sources cheaper, for SMUD, than a well-running Rancho Seco would have been, they said.

There were other unanticipated bonuses from shutting Seco.

"In ways no one could have foreseen in 1989, it gave us a leg up into the competitive marketplace," Schori said.

The plant's closure forced SMUD to become one of the earliest shoppers for bulk power just as the wholesale market was beginning to open, she said.

Writing off $660 million of Rancho Seco debt positioned SMUD better for the electric restructuring era, when utilities are working to get above-market power costs off their books, said Marcus.

In addition, closing the plant forced the utility to diversify, building "some pretty efficient and relatively low cost co-generation plants," said Lloyd Harvego, a former energy consultant who now runs a venture capital firm.

If the vote had gone the other way, the plant would still be the "all-consuming" issue for utility directors and managers, drawing energy away from the creative strategies needed for industry restructuring, said Marcus.

Today, Rancho Seco is demanding a different kind of attention -- oversight of the slow, steady process of stripping away the plant's innards, as SMUD works toward removing all radioactivity.

When SMUD completes the $460 million cleanup job, probably in 2008, the buildings, minus their radioactivity, will still be standing, said Steve Redeker, decommissioning manager.

The closure left SMUD with 2,400 acres in southeastern Sacramento County, a park, a lake, a couple of cooling towers, and 10 or 15 buildings that might make a nice power plant -- someday.

"It is a great site, in some respects, to hold in reserve" for a power plant, said Schori.

But after watching the last 10 years evolve so differently from predictions, Schori is in no hurry to make a decision.

It's too early even to guess, she said, what sort of technology might make sense for producing electricity in 2015.


A cooling tower looms over an area where pipes and machinery ahve been removed.

Bee / John Mayer

AquaCalc LLC. telephone +1.916.372.0534 e-mail: sales@aquacalc.com

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