This article appeared in Forbes magazine on February 11 1985 on page 93. The issue featured on its cover another article anyone reading this one should read, i.e. Nuclear Follies (nuclear power is a failing due to internal, not external problems)
The full text of "The best. (Duke Power....)" follows:
If any utility was equipped to cope with the challenge of the nuclear age, that utility was North Carolina's Duke Power Co. Dominated by engineers for all of its 80 years' existence, Duke has an engineer's conviction that the best-engineered plant inevitably also will ble the most efficient, lowest-cost, most reliable and, in the end, most profitable. Things have pretty much worked out that way.
Duke has put five nuclear units into operation so far, the latest of which, McGuire 2, went commercial last March at a cost of a mere $932 a kilowatt, less than one-third the cost of the average new U.S. nuclear plant, roughly 60% of what the Canadians spend, and pretty close to what the French plants cost.
Duke's geographic location doesn't hurt any, of course. Its labor costs (mostly nonunion) are considerably lower than those in such places as New Jersey or New York. Nor has Duke been subject to as much environmentalist opposition as some utilities have been, partly because the company has made an effort to avoid it.
But what really makes its commitment to excellence pay off is that Duke Power is not just an electric utility. It's also an engineering and construction firm. It doesn't subcontract even its biggest jobs; it does those jobs itself, including the engineering and construction work. The engineering and construction staff is on the Duke Power payroll, receiving the same wage scale and fringe benefits as the rest of its employees. Although Duke's way may cost somewhat more, it provides a skilled, experienced and permanent work force that has moved from plant to plant for nearly 20 years now as the company's nuclear program has progressed, first from Oconee, completed in 1974, to McGuire, 1984, then to Catawba, scheduled for 1986.
"The fact that we design, build, test, start up, operate, maintain with essentially the same people is very beneficial from a cost standpoint," says Bob Dick, the engineer who oversees Duke's nuclear construction program. "I feel sorry for people who have 15 contractors they have to interface with. Everybody here knows the way we do things.
"We measure productivity at the beginning and the end of the day, before lunch and after lunch, always looking for small things to make corrections on. We don't perform any work without written procedures and instructions. We originally assumed that, given an experienced crew with experienced supervision, certain tasks were just part of the skill of the craft. But you can't depend on that. We have an intense pride in being the best. It's the tradition, the culture."
Duke also has run a wholesale electrical distribution business for years. As a result, as the nuclear program got under way, the company already had the skills it needed for handling procurement. This has enabled Duke to buy more cheaply than it would have through middlemen, and it has given it greater control and knowledge of its costs than it would have had otherwise. Thus, in design, construction and procurement, Duke does virtually everything itself. "If anything goes wrong," one executive points out, "we know who's responsible. It's us."
Like everyone else in the business, Dick complains about NRC regulation. The agency, he says, sometimes seems more interested in documentation than in quality. "We have actually cut perfectly good welds out of pipes because a piece of paper in the inspection record was misplaced four years ago." But those are the rules of the game, he says, and you try to play by them.
Duke's nuclear program was one of the first to run into financial problems, back in the mid-Seventies, so that it learned early to cut its ambitions to suit its resources. It slashed $700 million out of its construction program at that time and succeeded in peddling a 75% interest in the new Catawba plant to a group of municipal and cooperative electric companies that could finance their investment with low-cost, tax-exempt bonds. Later, when demand began to fall off, Duke was reasonably quick to curtail and then cancel its Perkins and Cherokee projects. Perkins was scheduled to come into production in the early Eighties, Cherokee in the Nineties.
So you do the job right and you do it within your means, or you don't do it. And it works. The three Oconee units cost $194 per kw, the two at McGuire $849, and the two at Catawba $1,703, with capitalized interest accounting for over one-third of the difference between McGuire and Catawba. But for all its success, Duke no longer considers nuclear power a choice. "We would not have gone into the nuclear business if we had realized the instability of the licensing process," says William Grigg, Duke's treasurer. "A nuclear plant with all the regulatory uncertainties, all the investor concern, the environmental concerns, I just don't think would be a viable option for us."
As it happens, Duke is unlikely to need any new power for a decade. When Catawba is complete, Duke will have 49% of its capacity in nuclear, and a comfortable 31% reserve capacity. Its next big venture is the Bad Creek pumped storage project scheduled for 1991. Where Duke's power will come from, the next time it goes looking for some, may depend on how successful the U.S. has been in learning from the mistakes of the past.