Arizona Republic
Mark Shaffer
Feb. 23, 2007

Federal regulators on Thursday downgraded Palo Verde Nuclear Generating Station into the category of most-regulated nuclear plant in the country.

The decision by the Nuclear Regulatory Commission to place the plant in Category 4 means the nation's largest nuclear plant will face much more rigorous oversight and up to 2,500 additional hours of federal inspections annually for at least two years.

Only one other nuclear plant, Perry in Ohio, is Category 4, and it is expected to be upgraded next month, agency officials said.

Officials at Palo Verde, 50 miles west of downtown Phoenix, will have to develop a detailed performance improvement plan so "we can determine the scope of the problems," said Victor Dricks, a spokesman for the NRC in Arlington, Texas.

Jim McDonald, an Arizona Public Service Co. spokesman, said, "We want to work with the regulators, we want to improve the plant and we want to safely generate electricity for Arizona and the Southwest."

How much money the downgrade will cost APS and other utilities vested in the plant, as well as how it might affect APS' bond rating or possibly affect rates, remained unclear Thursday.

The NRC has five categories for ranking the performance of the nation's nuclear power plants. A ranking of five means the plant is shut down until corrective actions are taken. Only one of the nation's more than 60 nuclear power plants has ever been listed in that category.

NRC Chairman Dale Klein today will visit Palo Verde, the largest producer of electricity in the state, to meet with workers about oversight issues and tour portions of the three reactors.

After a series of problems at the plant, the final straws for the NRC were electrical relays in an emergency diesel generator that did not function during tests in July and September. Regulators said problems in the electrical relays made the generator inoperable for about 18 days last year.

The agency issued a finding of white, or low to moderate safety significance, for the violation.

But, coupled with other past problems, the finding means Palo Verde will be relegated to the most-heavily monitored plant in the country.

Jeff Hatch-Miller, chairman of the Arizona Corporation Commission, said he was "very disappointed in Palo Verde and APS for allowing this to happen."

"Early next week, we are going to call APS in (before the commission) and get a complete explanation and what they are going to do to fix it," Hatch-Miller said.

Commissioner Kris Mayes said an ongoing review of Palo Verde's unplanned outage costs in 2006 should be extended through this year to include costs caused by the NRC downgrade, with possible refunds to ratepayers.

"APS became complacent starting in the late 1990s in operating Palo Verde, and now the chickens have come home to roost," Mayes said.

Federal regulators charge inspection rates of $250 an hour, and any problems encountered with the increased oversight also would have to be repaired and paid for by the utilities.

Randy Edington, a longtime troubleshooter in the nuclear power industry who was hired last month by APS to oversee Palo Verde, also managed Cooper Nuclear Station in Nebraska after it was downgraded to Category 4 four years ago.

"It cost well over $100 million there but that involved huge equipment rebuilds," Edington said.

"I don't see the need for huge infrastructure changes here. I'm not seeing the large number of dollars needed here but that's subject to change," he said.

The problems for Palo Verde began in 2004 when a so-called dry pipe that could have disrupted the flow of water to the emergency core-cooling system was found.

APS repaired that problem, but federal inspectors discovered other issues during investigations afterward, most of them not directly tied to safety.

In a letter sent to Palo Verde management in August, agency officials noted 24 minor violations over a six-month period, including issues with decision-making systems, not always following technical requirements during nuclear reactor restarts, ineffective communication and poor interaction between engineering and operations workers.

Then, after that letter, a problem was found in the plant's chemistry-control program in its emergency spray ponds. A bad chemical mix had been used since 1994 to try to solve problems of corrosion, and it had affected heat transfer within the system.

Reach the reporter at mark.shaffer@arizonarepublic .com or (602) 444-8057.