In a move that flabbergasts its critics, Progress Energy Florida plans to spend more than $200 million of its customers' money to upgrade the Crystal River nuclear power plant.
This is the same plant that:
• Broke three years ago during another upgrade project.
• Has not produced a kilowatt of power since.
• Would cost at least $3 billion to repair including related power expenses.
• May never be restarted.
Nevertheless, Progress has budgeted millions to increase the plant's potential power output. To pay for it, customers' power bills will increase an estimated $51.5 million this year, $110.2 million next year and $64.5 million in 2014.
And that's not all.
Progress plans to spend hundreds of millions more on the plant for equipment and safety upgrades through 2014. The utility won't be able to charge customers for those expenditures at least until after 2017 because of an agreement with state regulators.
Critics equate it to replacing the drivetrain on an aging, broken-down car that is more likely headed to the junkyard than back onto the street.
"The public should be asking, 'Where is the hall monitor that is watching out for their best interest?' " said Susan Glickman, a lobbyist for the Southern Alliance for Clean Energy, which is challenging nuclear spending in Florida before the state Supreme Court.
"The proper venues are not addressing the problem," Glickman said of Florida regulators and lawmakers. "And consumers continue to foot the bill for something from which they don't see any power."
Jim Warren, executive director of the environmental watchdog group NC WARN, is challenging the utility's spending plans on Crystal River and the rest of Progress Energy's nuclear fleet. Warren said the planned nuclear spending should have been clearly reported prior to Progress' July 2 merger with Duke Energy.
"How do they plan to invest all this in a plant that's shut down?" Warren asked.
Tom Williams, a Duke Energy spokesman, said the budget items were part of Progress' routine long-range planning.
"The nuclear plant, even one that is safely (idle), has a budget of capital and operating and maintenance (O&M) expenses," Williams said. "The budgets are established years in advance and change based on new information, evolving work and many other factors."
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Progress' planned upgrades at the Crystal River plant in Citrus County include modifications to equipment such as high pressure turbines, pumps, motors, main generators and transformers. The upgrades, routine in an industry trying to extend the life of an aging nuclear fleet, can boost power from a reactor by as much as 20 percent.
But the Crystal River plant doesn't work. It broke during another upgrade project in 2009. A crack appeared in the 42-inch-thick containment wall. Progress had chosen to self-manage the project rather than employ companies that had successfully performed similar work elsewhere. The utility also ignored warnings about the process it was using. Two more cracks appeared during the repairs.
The result: a first-of-its kind problem and the most costly nuclear plant fix in U.S. history.
Progress Energy officials publicly remained committed to repairing the damage and bringing the plant back online in 2014.
Three years later, it's still unclear that it can be fixed. Engineers have not completed a repair plan, and the plant sits idle with no projected date for returning to service.
"This is a complex calculus," said Jim Rogers, CEO of Duke Energy, the new parent company of Progress Energy Florida. "What's the cost of repair? What is the risk of repair? Will it work?"
Despite the questions, the more than $200 million in upgrades to the reactor are going forward.
• • •
Even if Progress and Duke find a way to fix the plant, paying for it is an issue.
Progress spent more than a half-billion dollars repairing the first of the three cracks. Until recently, the utility projected $1.3 billion in further repairs and $1 billion for replacement power while the plant remains off line. (Those figures do not include the $200 million in separate upgrades.)
Last week, however, Rogers indicated the repair cost could increase.
"The cost estimate is trending higher," he said. "The repair plan appears to be technically feasible but issues remain."
Former Progress CEO Bill Johnson said in the past that the repair plan requires Crystal River's insurer, the Nuclear Electric Insurance Limited, to cover most of the damages through the plant's insurance policy. Without NEIL's money, the utility would likely shut down the plant and possibly replace it with a new natural gas plant, Johnson said.
NEIL has already balked at paying.
By the end of June 2011, it stopped making payments on costs related to the broken plant. A few months later, the insurer opened its own investigation into what happened at the plant.
By the close of 2011, Progress Energy determined that NEIL would not "voluntarily pay" for any more damages or repairs at Crystal River. But Johnson's focus remained on repairing the plant, until he was fired after Progress merged with Duke on July 2.
Rogers now says the discussions with NEIL have moved from simple negotiations to a "nonbinding" mediation, which will take place in the fourth quarter of this year. If NEIL determines that Progress' own negligence led to the plant going offline, the insurer could have grounds not to pay.
Rogers, who replaced Johnson as the head of the new combined company, has publicly said he is giving more consideration to shutting down the plant rather than pushing for repair.
That has some economists and environmental groups questioning why the utility continues to pump millions of dollars of customers' money into upgrades at the Crystal River plant.
"There is a fistful of imprudent behavior going on here," said Mark Cooper, senior fellow at the Institute for Energy and the Environment at Vermont Law School who provides expert testimony before the Florida Public Service Commission.
"If the (Public Service Commission) had a backbone, they would be whacking away at cost," Cooper said. "Everybody and his grandmother has dropped the ball here."
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So far, Florida regulators are okay with the plan to charge customers for the upgrades.
The state Public Service Commission and the Office of Public Counsel believe repair of the nuclear plant is the best option to keep costs down for consumers.
As long as the focus remains on repair, the utility's plans to continue upgrading Crystal River make sense to Charles Rehwinkel, deputy public counsel, who represents consumers before the Florida Public Service Commission.
While it may seem peculiar to spend $200 million increasing power and another $400 million on other improvements at a broken plant, as long as Progress is working to return the reactor to service, it will benefit customers by producing cheaper electricity than building a new conventionally fueled plant, Rehwinkel said.
"This doesn't look out of line to us," Rehwinkel said.
What troubles Warren, of the watchdog group NC WARN, is that the spending is just the beginning of mounting expenditures that will be heaped on customers.
Warren cites Rogers' recent statement that he planned to "pour money" into nuclear plants that operated under the former Progress Energy to bring them to "excellence."
But Warren says the dollars already on the books are staggering: $2.2 billion on upgrades at all of the former Progress Energy nuclear plants, including more than $600 million on Crystal River, despite its inactivity.
Duke is "trying to say, 'it's all normal,' " said Warren, who then began to question whether the utility simply was angling for a way to collect more customer money. "Was it really time to replace all these things or was it a profit opportunity?"
Ivan Penn can be reached at email@example.com or (727) 892-2332.