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Demand cools for new nuclear reactors

As Florida's growth stalls and demand for electricity ebbs, the state faces a $30-billion question: Do we need a massive investment in new nuclear power?

Florida's largest electric companies are reeling from a one-two punch of stalled economic growth paired with declining household energy use. The combined trends pummeled electricity sales, leaving Progress Energy, Tampa Electric and Florida Power & Light facing the slowest growth they have seen in nearly a decade.

The sluggish economy calls into question the need for the state's "nuclear renaissance," including the $17-billion Progress Energy plans to spend on its Levy County project, and $12-billion or more Florida Power & Light plans to invest in two new reactors near Miami.

Under state law, Progress Energy can recoup some costs by charging customers as a plant is built — an option that mitigates financial risk to Progress itself. If demand dries up, the fear is consumers could get stuck with a multibillion-dollar bill and no power plants to show for it.

It happened before, and the nuclear industry is still haunted by the financial meltdowns of the early 1980s.

Industry experts recite a litany of reasons that this time will be different: streamlined licensing, 30 years of experience, "off the shelf" reactors. But critics say Florida has ignored the lessons of the past.

• • •

When Progress Energy faces the Florida Public Service Commission this week, it faces two simple questions: Is nuclear the most cost-effective way to provide power? Does Florida really need it? Progress Energy thinks so, predicting growth at nearly 1.8 percent a year over the next decade.

But the PSC has to decide if demand will grow quite so rapidly. A recent report from the University of Florida predicted the slowest growth in 30 years, with a 1.1 percent annual increase from 2007 to 2010, edging up to 1.6 percent from 2010 to 2020. Both Tampa Electric and Florida Power & Light predicted less than 1 percent growth this year.

The difference may seem slight, but it's compounded by other trends. New laws tightened energy requirements for lighting, appliances and new buildings. An economic downturn paired with high energy costs has consumers warily eyeing their meters, looking for ways to save.

None of that has scared Progress Energy off nuclear, said Jeff Lyash, president and chief executive officer of Progress Energy Florida. The region remains strong and growth will return, he predicted.

"I don't see anything in this cycle that I think is substantially different than the past."

• • •

The debate today conjures some spectacular failures of the past. In the 1960s and early 1970s, the industry was building nuclear power plants in four to five years at a cost of about $500-million each, according to the Nuclear Energy Institute. Costs ballooned as electricity demand dried up. Within a decade, nuclear plants took twice as long to build and cost up to 10 times as much.

The financial fallout poisoned the nuclear boom. In 1983, the Washington Public Power Supply System, or WPPSS — its detractors dubbed it "Whoops" — defaulted on $2.25-billion, the largest bond default in U.S. history. The Public Service Company of Indiana abandoned a $2.5-billion investment in Marble Hill. Cincinnati Gas & Electric abandoned the almost-finished Zimmer plant.

Shoreham. Seabrook. Watts Bar. Cherokee. For reasons of safety, money and politics, all of these projects were delayed for years or shelved.

Not everyone agrees history will repeat itself.

David Parker, a senior utility analyst for Robert W. Baird in Tampa, contends "a lot of good, smart planning has gone into this next wave of nuclear construction. … I think it looks like a real wise choice for Florida."

Bill Newton, executive director of the Florida Consumer Action Network, dissents.

"We're really concerned about our pocketbooks, and getting into a situation where we have a giant, hugely expensive boondoggle on our hands."

Both Newton and Parker saw the earlier nuclear construction squeeze from the inside.

In the early 1980s, Newton worked for the Washington State agency that oversaw power plant siting. Parker worked in finance for CMS Energy in Michigan, which had invested more than $1-billion in its Midland plant before it ran out of money, turning Midland into a natural gas plant instead.

While Newton fears a "Whoops" redux, Parker believes utilities and investors learned a valuable lesson by getting burned.

"That said," Parker added ruefully, "call me in a decade and ask me again."

Asjylyn Loder can be reached at or (813) 225-3117.


Progress Energy nuclear plant

Why should I care about the hearing?

If the commission agrees with Progress Energy on the need to build a nuclear plant, customers could start seeing the impact on their monthly bills as early as next year. Progress Energy estimates the average residential customer could see an increase of $9 a month in 2009.

When will the commission decide?

The commission's staff is expected to offer an opinion in early July, and the commission is slated to vote on it at its July 15 meeting.

What about the safety and environmental impacts of nuclear power?

Those issues are primarily examined by the Florida Department of Environmental Protection and the federal Nuclear Regulatory Commission. Hearings are not yet scheduled.

>>fast facts

What's happening?

On Wednesday, the Florida Public Service Commission begins a three-day hearing on Progress Energy's plans to build a nuclear power plant in Levy County, several miles north of Crystal River. The utility wants to build two 1,100-megawatt reactors and 200 miles of transmission lines to carry the power to customers at an estimated cost of $17-billion.

Demand cools for new nuclear reactors 05/18/08 [Last modified: Monday, May 26, 2008 11:16am]
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