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Robert Trigaux

Progress Energy slowly raising more doubts about future of Levy County nuclear plant



Billjohnsonprogressenergyceo Wake up and good morning. Reading Progress Energy's corporatespeak is an art form but the company that provides electricity to much of central Florida seems to be raising the stakes over the future of its planned Levy County nuclear power plant. As in: Maybe it's not such a good time to build a nuke plant in Florida after all.

That's may take, at least, after listening to Progress Energy CEO Bill Johnson's (in photo) remarks to analysts Thursday in discussing fourth quarter earnings (up 53 percent over 2008!) and emphasizing his second thoughts about a Levy nuclear site. Said Johnson:

"At the state level in Florida, it’s not at all clear that the current atmosphere is conducive for an investment of this type and size, particularly if it raises electric rates in the near term.

"At a minimum, if we move forward with the project we expect that it necessarily will be on a slower schedule with much less spending in the near term."

There's obvious'y a political strategy afoot here, as there would be when any project costing close to $17 billion is under way. Progress Energy is annoyed and, in Wall Street's lens, probably embarrassed to have the Florida Public Service Commission deny its request for a base rate increase in a state whose electric utility regulator historically does what companies want. The company may appeal the rate denial, or simply submit a new request for a rate increase.

And Progress Energy has some significant leverage in slowly increasing the rhetoric that the new nuclear power plant -- you know, the company says, the Levy plant that would help support future growth of population and industry in Florida at (in the long term) relatively low electric rates -- may not be worth Progress Energy's headaches with a state so obviously obsessed with suppressing short-term electricity rates. The power company, based in Raleigh, N.C. and the parent of St. Petersburg's Progress Energy Florida, will soon be in need of seeking rate hikes specifically to help pay for ongoing expenses related to the Levy construction.

What else did Johnson tell analysts? (Here's the complete transcript.)

"Naturally, all of this gives us pause, even though nuclear expansion is clearly part of the right long term solution for reducing greenhouse gas emissions and increasing our nation’s energy independence. So we have much to consider in this changing regulatory and policy landscape as we make our decisions on the future of the Levy Project.

"At a minimum, if we move forward with the project we expect that it necessarily will be on a slower schedule with much less spending in the near term."

It does not help Progress Energy that it seeks new nuclear support at the same time its one existing nuclear plant in Crystal River, north of Tampa Bay in Citrus County, is out of commission and under regulatory review as experts figure out the cause of a crack in the concrete in the wall section of the nuclear plant's containment building (that's the large cylindrical building you see in photos). The Crystal River plant will stay offline until mid-2010, the company says.

Progress Energy still forecasts a declining economy in Florida, though it says the pace is about half that of last year's decline. Says CFO Mark Mulhern:

"This is a significant issue for us and why we were disappointed that the regulators in Florida failed to recognize the impact of declining revenues in a heavily fixed cost business... You can see trends improving. But again, we expect a long slow recovery. And in Florida in particular it is very much dependant on the rest of the country’s economic recovery."

Indeed, Florida's struggling. One way to measure economic vitality is to see how many new customers an electric utility adds to its base. In the Carolinas, for example, Progress Energy says it saw a 12,000 net increase in the average number of customers in the 2009 fourth quarter compared to the same period in 2008.

And in Florida? In the same time period, Progress Energy Florida reported a 6,000 net decrease in the average number of customers.

As pro-nuke as the company is, it seems unfathomable that Progress Energy would choose to walk away from a planned nuclear power plant. Despite the current saber rattling in Florida, the odds remain strongly in favor of the company pursuing the project. But then again, these are unusual times.

-- Robert Trigaux, Times Business Columnist

[Last modified: Tuesday, June 1, 2010 11:27am]


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