How much does nothing cost?
For Duke Energy customers in Florida, the answer may be $1.3 billion.
Over the next several years, that's the bill they face for expenses and upgrades to the Crystal River nuclear power plant, idled since 2009 when the utility botched a do-it-yourself project usually overseen by specialists.
Here's the gut punch: Within days, Duke could reveal its plans for Crystal River's future, and many expect a decision to shut it down. For its customers, that would mean paying $1.3 billion for not a single watt of power. Duke makes out better. Of that, the utility pockets about $100 million, the Tampa Bay Times has found.
"It kind of blows your mind," said Charles Rehwinkel, deputy state public counsel, who represents consumers before the state Public Service Commission, "the amount of money they've spent creating nothing."
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Duke Energy's 1.6 million Florida customers are, or may become, the victims of a series of unfortunate firsts.
They are the first to get socked with a billion-dollar bill to pay for a power plant upgrade rendered potentially useless because the utility mismanaged the project.
If Duke fixes the plant in Citrus County, customers may get stuck with another billion-dollar-plus bill for repairs and related costs.
And if Crystal River is not repaired, they will be the first in Florida and the entire Southeast to see a nuclear plant — for which they paid — shut down.
"The magnitude of this problem is pretty immense," Rehwinkel said.
Florida Agriculture Commissioner Adam Putnam, the state's point person on energy matters, remains very much an advocate for nuclear energy.
But even he acknowledges that Crystal River is "a whale of a mess."
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There's more to the mess than money.
Public utility executives know they must absolutely, positively provide reliable, preferably cheap, electricity. Even the off chance of disruption in fuel supply or spike in price gives them nightmares. For them, diversity of fuel types — and nuclear power specifically — is a key to a good night's sleep.
Prior to the recession, the economy was booming, energy supplies were tight and the supply of oil from overseas was potentially unreliable, the price volatile. National and state energy policies encouraged construction of new nuclear plants, which have the strong additional benefit of emitting no carbon pollution.
That brings the story back to Florida and what happens if Duke Energy shuts down the Crystal River nuclear plant, known as CR3.
CR3 is Duke's only reactor in Florida. Without it, the utility's reliance on natural gas plants would grow from about 60 percent to about 70 percent by 2017.
One could argue that's fine. Natural gas prices, because of increasing use of a drilling process known as "fracking,'' have plummeted to historic lows.
But utilities remember that, once upon a time, oil was cheap too.
So diversity becomes part of the conundrum Duke faces in deciding what to do about CR3. On top of the $1.3 billion already spent:
• Fixing it could cost up to an additional $3.4 billion plus $300 million a year for replacement power. Duke wants the insurance company to pay for some of that; the insurer is resisting. Duke's own study raises the specter that a repair attempt could fail.
• The price tag for safely shutting down the plant would run about $900 million. And retiring the plant would put almost all of Duke's energy supply eggs in the natural gas basket. So closing CR3 could breathe new life into the stalled Levy County nuclear plant project, whose soaring price has reached a projected $24 billion. State regulators said customers are already paying $1.5 billion toward the Levy project, even though it may never get built.
No matter what, customers are going to pay — a lot.
Suzanne Grant, a Duke Energy spokeswoman, said state regulators vet all of the costs the utility passes on to customers, so no charges will be billed without thorough review.
"As a regulated utility, only reasonable and prudent costs can be collected from customers, and those costs are reviewed by the Florida Public Service Commission," Grant said.
"Our customers are represented by consumer advocate groups and the Office of Public Counsel in public hearings to determine electric rates," she added. "We've worked diligently to reduce spending at the plant, while determining the best long-term option for the plant and maintaining the safety and security of the facility."
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It all started simply enough. Back in 2009, Progress Energy Florida, which became part of Duke Energy last July, planned to replace two steam generators at CR3 and do upgrades that would increase the plant's generating capacity by 20 percent.
The work is relatively routine, having been performed successfully at dozens of plants across the country.
Two things distinguished Progress' handling of the work.
Progress self-managed the steam generator replacement rather than hire one of two companies all the other U.S. utilities used to oversee that work. The idea was to save money.
And Progress screwed up the work.
In fall 2009, as workers began the project, they cracked the reactor's 42-inch thick concrete containment building. They repaired the wall only to discover their efforts had cracked the wall again. The 36-year-old plant has been idle since.
Work stopped, but for utility customers, the meter kept running, the Times has found.
The $1.3 billion tab includes:
• $403 million to replace the old steam generators.
• $457 million to increase the amount of electricity the plant can produce.
• $458 million (or an average of $115 million a year since 2010) in ongoing operating and maintenance costs such as personnel, security and federal nuclear fees.
• $36 million, or about $9 million a year, in property taxes since 2010.
Much of the $1.3 billion total remains due. Every year, customers pay the operating and maintenance costs as well as property taxes. But, for the most part, only financing charges have been paid on the steam generator replacement and the power upgrades. It's like putting a huge bill on your credit card and only making a minimum payment each month.
The details are a bit complex.
Under state law, utilities can collect only the financing charges or "carrying costs" on capital projects until the projects actually go into service. So far, that adds up to $195 million for replacing the steam generators and upgrading the reactor's potential power output. About half of the $195 million goes to costs that include taxes and paying Duke's investors. Duke pockets the other half.
And that meter won't stop running until Duke fixes or retires the plant.
"Carrying costs will continue to be accrued until the unit resumes commercial operation," said Cindy Muir, a spokeswoman for the state Public Service Commission.
Customers should not expect a refund.
The PSC already approved the projects to replace the steam generators and increase CR3's power. Typically, commissioners allow utilities to pass on costs for projects that already received their blessing, even when the work has flaws or proves unsuccessful.
Grant, the Duke spokeswoman, said the utility suspended most of the work related to increasing the reactor's output after the containment building cracked a second time.
"Only work necessary to maintain the viability of the project has been completed," Grant said. "All work that could be reasonably deferred was postponed pending a repair or retire decision."
Jim Rogers, Duke's chief executive officer, recently told the Charlotte Observer he hopes to make a decision this month about whether to repair or close the Crystal River plant.
Putnam has scheduled a meeting with Duke's Florida president, R. Alexander "Alex" Glenn, to discuss the future of the Levy and Crystal River projects.
But so far, it all looks grim.
"The Duke power situation," Putnam said, "is troubling and frustrating."
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Over the last month, two analysts — one with Fitch ratings service, the other with the UBS investment firm — declared CR3 all but dead.
"Fitch believes it is unlikely management will elect to repair Crystal River 3 given the rising cost estimates, construction risks and low gas-price environment, and instead will pursue the retirement option," the rating agency stated.
If the decision is to close Crystal River, Duke Energy can begin to save customers some money.
For example, closing the plant will reduce fees to the Nuclear Regulatory Commission, which the federal regulator says have run as high as $10 million a year. Property taxes run about $9 million a year for the nuclear plant and would drop by as much as two-thirds.
Operating and maintenance costs of about $100 million a year would fall with decreases in personnel. Interest on money for the upgrade projects would stop accruing. Conceivably, some of the parts installed as part of the upgrade could be resold.
Arnie Gundersen, a nuclear engineer and consultant on utility regulatory matters nationwide, said the spending should have stopped years ago. But, he said, Florida lawmakers and regulators rarely put up much fight against Progress Energy, and now its new owner, Duke Energy.
"Essentially they had a drain line into your wallet, and you didn't know it was there," Gundersen said. "They didn't spend their money. They've spent Floridians' money."
Gundersen points to the Maine Yankee nuclear unit in Wiscassett, Maine, which faced regulatory scrutiny and $400 million in repairs in 1994. The company that ran the plant took just two years to decide to shut it down when it became apparent it didn't make economic sense to attempt the repairs.
Crystal River is the largest insurance claim for a nuclear plant repair in U.S. history. That, Gundersen said, should have been enough for the utility to pull the plug on the power plant.
"The public has been fooled into thinking it would ever come back," Gundersen said. "The patient was terminal and flatlined a long time ago."
Ivan Penn can be reached at [email protected] or (727) 892-2332.