NRG, Constellation deny utilities' challenge to Texas nuclear plant stake sale

NRG Energy Inc. and Constellation Energy Corp. asked the US Nuclear Regulatory Commission to dismiss claims by two Texas municipal utilities that an application for transferring a stake in the South Texas Project nuclear plant did not properly obtain the co-owners' approval.

NRG and Constellation on June 1 announced a deal under which NRG would sell its 44% share of the two-unit 2,660-MW South Texas Project plant to Constellation for $1.75 billion. Co-owners City Public Service of San Antonio, known as CPS Energy, and Austin Energy challenged the proposed deal on the grounds that the operating entity, South Texas Project Nuclear Operating Co. (STPNOC), did not approve the application. The utilities also told the Nuclear Regulatory Commission (NRC) that they are still deciding whether to exercise their right of first refusal to buy all or a portion of NRG's interest.

CPS Energy owns a 40% share of the nuclear plant and Austin Energy owns the remaining 16%.

NRG and Constellation responded in separate filings on Aug. 4 that a parallel lawsuit filed by CPS Energy in Matagorda County (Texas) Court over the right of first refusal, with Austin Energy as an intervenor, is the proper venue for a commercial dispute.

"To acquire undue leverage and extract commercial concessions, the cities are attempting to use the NRC to obtain a de facto stay of the transaction — a stay they have chosen not to seek in the court where their contractual dispute currently and appropriately resides," NRG said. The company noted that the deal must close by the end of 2023 to "avoid considerable adverse tax consequences."

Constellation told the commission that whether the utilities have any right of refusal at all is "a hotly disputed question," and it agreed with NRG that "no consent of a co-owner is required for the NRC to approve an indirect transfer of control of another co-owner holding a licensed ownership interest."

CPS Energy and Austin Energy contended that the application submitted for transferring NRG's stake did not obtain a requisite "vote of two or more participants having in excess of 60% ownership."

Constellation disagreed. "Petitioners' core argument — that STP Nuclear Operating Company somehow did not have authority to submit an application on behalf of Constellation — is fundamentally flawed," Constellation told the commission. "STPNOC, as the licensed operator and pursuant to its governance — not the STP Owners Committee — has 'sole' authority to submit the [long-term agreement]."

Constellation President and CEO Joseph Dominguez told investors Aug. 3 that the company believes that the "claims are meritless and will be dismissed."

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