Unpaid bills, cost overruns alleged at Prairie Island nuclear plant

One of the nation's top power plant contractors is alleging $45 million in unpaid cost overruns during Xcel Energy Inc.'s 18-month overhaul of its Prairie Island nuclear power plant in Red Wing, Minn.

Babcock & Wilcox Nuclear Energy, a Charlotte, N.C.-based contractor, says in a lawsuit filed Wednesday that Xcel has refused to pay the full cost for the complex job of replacing a pair of massive steam generators at the plant's Unit 2. The project was completed last December.

Xcel told Minnesota regulators the project cost $285 million. If the $45 million in disputed charges are added to that, it represents a 16 percent cost overrun.

That's far short of the massive cost overrun on another upgrade project at the Xcel's nuclear power plant in Monticello, Minn. In that project, also completed last year, Xcel admits that costs more than doubled to $665 million. State regulators still are investigating whether the additional expenses were justified.

Xcel generally does not comment on specifics of pending litigation, spokeswoman Mary Sandok said. In an e-mail, Sandok said the Prairie Island lawsuit is solely about claims for additional payment that the company considers without merit. Xcel will file a response within 20 days, she said.

Babcock & Wilcox also alleged that Xcel officials have not told the full story about Prairie Island costs to utility regulators during rate increase proceedings in Minnesota and Wisconsin, where the plant's electricity is consumed. The suit said that Xcel's claim to Wisconsin regulators that the project stayed closed to original costs appears to be "disingenuous and in bad faith."

The suit was filed in Goodhue County District Court, and names as a second defendant the project's prime contractor SNC-Lavalin Nuclear Inc., based in Pittsburgh. SNC hired Babcock & Wilcox as a major subcontractor. The lawsuit suggests that Babcock's main complaint is with Xcel because SNC submitted the subcontractor's billings to Xcel, which then refused to pay.

The suit alleges breach of contract, unjust enrichment and seeks to enforce a mechanic's lien filed on the power plant's property in July. Such liens are more commonly associated with smaller disputes over building construction where subcontractors have gone unpaid. The suit claims interest on unpaid bills of $22,000 per day.

SNC-Lavalin declined to comment as did Babcock & Wilcox and its Minneapolis law firm, Fabyanske, Westra, Hart & Thomson. The Minnesota Public Utilities Commission Wisconsin Public Service Commission, through spokesmen, said they would not comment.

The replacement of the 40-year-old steam generators at Prairie Island was a major project, employing up to 1,500 workers for more than a year. The 330-ton generators were assembled in France, arrived by ship and barge, and were hoisted through a hatch in the containment building with only inches of clearance.

According to the lawsuit, Babcock & Wilcox's contract contained both fixed and "target" prices. The latter are estimates and required Xcel to pay the actual costs, the suit said. Some of the higher costs, the suit contends, grew out of Xcel's decision to perform additional work of its own at the same time, causing delays by interfering with movement of Babcock workers and equipment in the plant.

Babcock & Wilcox contends that much of the work was done in cramped places where workers must put on and take off radiation protection gear every time they passed through a portal. In arguing that its charges were justified, the company's lawsuit quotes statements from Xcel officials defending the cost of the Monticello nuclear power plant upgrade. That project also required work in tight, radioactive areas of the plant.

The cost of the Monticello upgrade, which replaced decades-old equipment and boosted the plant's output, is under review by an administrative law judge, who will issue findings later this year. If regulators decide some of costs were imprudent, Xcel's investors will take the financial hit, sparing customers from at least a portion of the utility's next rate hike.

David Shaffer • 612-673-7090 Twitter: @ShafferStrib