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Duke Energy announces closing of Crystal River nuclear power plant

Seldom, if ever, has an attempt to save $15 million cost so many, so much.

Progress Energy tried to self-manage a project in 2009 to replace old steam generators at the Crystal River nuclear facility. The utility's do-it-yourself approach crippled the plant.

On Tuesday came the announcement that it will never reopen.

The 1.6 million customers the plant once served will pay dearly for their utility's mistake, maybe $3 billion when the cost of building a new power plant is included. So will Citrus County and the city of Crystal River. Those governments, and their local economies, will take a thumping. Some of the 600 workers at the plant may lose their jobs.

Duke Energy, which took over the plant after a merger with Progress Energy last July, will fare better. The utility will pocket roughly $100 million.

If there was any good news Tuesday, it would be that losing the nuclear plant should have no immediate impact on power supply. Duke can easily generate or buy more than enough electricity to meet the needs of the Tampa Bay area. And, in the short run, utility bills may actually drop $5 to $10 a month. That will only last a few years, though, until the full impact of the tab for the broken nuclear plant and a replacement facility kicks in.

Few were looking on the bright side Tuesday.

"All told, customers' bank accounts are emptier, and their wallets are lighter, while the utility will pocket huge sums of money that doubtfully will ever be returned to the people who paid it," said Rep. Mike Fasano, R-New Port Richey. "The lack of transparency during this ordeal, the promises not kept and the false hopes all are dashed with today's announcement."

• • •

Duke Energy argues that closing the plant is the right thing to do, given the risks and costs of repairing the 36-year-old facility.

"We believe the decision to retire the nuclear plant is in the best overall interests of our customers, investors, the state of Florida and our company," said Jim Rogers, chairman, president and CEO of Duke Energy. "This has been an arduous process of modeling, engineering, analysis and evaluation over many months. The decision was very difficult, but it is the right choice."

Alex Glenn, president of Duke subsidiary Progress Energy Florida, said: "We are very sensitive to the impact on our employees at the plant and on the Citrus County economy.''

About 200 of the 600 workers at the plant will stay for one to four years to help maintain the facility. Then the number will drop dramatically.

"We are working to place as many employees affected by today's announcement in other positions within the company, and we are committed to working with Citrus County to lessen the effects as much as possible," Glenn said.

His words came as small comfort to Crystal River resident Dave Finley, 64, who once worked at the plant. Finley said he worried about the hundreds of electricians, mechanics, operators and engineers who could soon be out of work.

"There's people I know out there who have never worked anywhere but there," Finley said. "What are they going to do?

The decision to retire the plant, known as CR3, means it will become the first nuclear plant to close in Florida and the first major one to close in the entire southeastern United States.

• • •

Duke's announcement Tuesday was the culmination of a series of events that began in 2009.

That year, Progress Energy Florida set out to replace two steam generators and do upgrades that would increase the plant's generating capacity by 20 percent.

The work is relatively routine. Thirty four other U.S. plants had successfully replaced the steam generators. But all 34 employed one of two engineering companies to oversee that work. Progress made an unprecedented decision to manage the project itself.

The goal: save $15 million.

The result: disaster.

In the fall of 2009, as workers began the project, they cracked the reactor's 42-inch thick concrete containment building, designed to keep radiation in and bad things out.

They repaired the wall only to discover their efforts had cracked the wall again. The plant has been idle since. It costs as much as $300 million a year just to buy replacement power.

"This is a problem that came about as a result of an effort to extend the life of the plant," said Charles Rehwinkel, deputy state public counsel who represents consumers before the Public Service Commission.

"This is a stark reminder of some of the of the risks you face in nuclear generation and construction," he said. "Unfortunately for the customers, it's a heavy price too, at least it could be."

• • •

The unusual case led to unusual agreements.

On Tuesday, Duke announced that it reached an agreement with its insurance company, the Nuclear Electric Insurance Limited, for damage to the plant. NEIL will pay Duke a total of $835 million — the insurer's largest claim in its history.

That agreement comes about a year after state regulators approved a settlement that requires Duke to refund $388 million to its Florida customers that they have been paying to buy power they formerly got from the nuclear plant.

Mike Hughes, a Duke spokesman, said $530 million of that will go to pay for replacement power, meaning customer bills would go down $5 to $10 a month.

Hughes acknowledged that rising fuel costs could affect that estimate, meaning "the net reduction could be lower. But through the (insurance) settlement, the total cost will be significantly less than it would otherwise be.'' He could not say when bills will go down but, "We will work to make it happen as soon as possible."

Customers will welcome any reduction in their bills. But the insurance money will make just a dent in the bills they face in years to come.

Jon Moyle, a lawyer for the Florida Industrial Power Users Group, said the insurance settlement "represents a great deal for NEIL and a bad deal for ratepayers."

"Duke's decision to resolve all of NEIL insurance claims for this amount is disappointing to say the least," Moyle said.

The ill-fated Crystal River upgrade project and operations and maintenance costs since 2009 add up to $1.3 billion.

Going forward, it will cost hundreds of millions to pay for replacement power and the ongoing cost of keeping the nuclear plant safe and properly maintained.

Then, of course, there's the cost of a new plant. Figure another $1.2 billion. That's what Florida Power & Light customers are paying for a new, roughly 1,000 megawatt natural gas plant opening later this year at Cape Canaveral. CR3 had about the same capacity.

Add it all up and you're looking at about $3 billion.

As it stands now, it's all on the customer.

Fasano, the state legislator, wants the Public Service Commission to order Duke to refund the $1.3 billion that reflects all of the costs directly attributable to the Crystal River upgrade fiasco.

"The poor choices made by Duke/Progress Energy's present and former executives leave customers with nothing to show for the huge bills they have been forced to pay," Fasano said.

The Public Service Commission would have to approve such a refund, and it's doubtful it would issue the order, even if it could.

Spokeswoman Cindy Muir said the PSC will review costs related to the improvements at CR3 during hearings in August.

"It's hard for the customer to find much to celebrate here," said Peter Bradford, senior fellow at the Institute for Energy and the Environment at Vermont Law School. "Yes, it puts an end to the seemingly bottomless exposure . . . to imprudent conduct at Crystal River. But there's all that money gone.

"And unless the Florida regulators have a major change of heart — or of brain — there's no prospect of (customer) refunds for imprudent conduct," Bradford said.

• • •

And how does Duke fare in all this?

Not bad.

When Duke or any other Florida public utility spends money on a nuclear project, it gets to keep a share of the cost for itself.

Of all the money spent on the upgrade project, Duke gets to keep about $100 million.

Times staff writers Jeff Harrington, Drew Harwell and Barbara Behrendt contributed to this report. Ivan Penn can be reached at ipenn@tampabay.com or (727) 892-2332.

A troubled history:

Crystal River nuclear power plant

Dec. 3, 1976

The plant, known as CR3, received its operating license and began producing power in early 1977. Cost: $470 million. During construction a flaw turned up in the dome atop the building. Engineers blamed a lack of steel reinforcement in the concrete. So more reinforcement was added to the dome when it was repaired. None was added to the walls. It stood 190 feet high and 130 feet wide on the shore of the Gulf of Mexico in Citrus County. It came online as an 825 megawatt plant and grew to 900 megawatts.

September 1996

The plant is deactivated in response to equipment problems – especially the backup diesel generators. The Nuclear Regulatory Commission eventually places the plant on its dreaded "watch list" as one of the 14 worst-run reactors of the country's 109 commercial nuclear facilities

Early 1998

Plant restarts after record-long shutdown.

October 2009

A panel on the containment building that houses the nuclear reactor cracks, as workers cut a 25- by 27-foot hole in the concrete wall to replace steam generators inside the building.

Spring 2011

A second gap in the reactor's concrete containment wall appears – just before the utility was set to bring the reactor back into operation. Workers would eventually find a third crack.

July 2011

Progress Energy says it wants to spend $900 million to

$1.3 billion to repair the plant rather than shut it down. It had already spent about $440 million on repairs, which did not include hundreds of millions more for replacement fuel.

July 2, 2012

Duke Energy closes on a deal to buy Progress Energy.

Feb. 5, 2013

Duke Energy announces it will permanently close the plant.

Q&A

Why is Duke Energy retiring the nuclear plant?

In short, the plant, known as CR3, is busted and would cost too much to fix. Plus, there was a risk that a fix that could cost up to $3.4 billion wouldn't work, leaving the utility with a still broken plant and an even bigger bill.

Will CR3 be replaced?

It sounds like it. Duke is reviewing alternatives, specifically a new natural gas plant.

How much would a natural gas plant cost?

About $1.2 billion for a plant that can produce about the same amount of power as the CR3 nuclear plant.

Who would pay that?

Most likely, the customers, but state regulators would ultimately make that decision.

How many jobs at the plant will be lost?

Of the 600 workers, 200 will be kept on for up to four years. Duke will try to find new jobs elsewhere in the company.

tampabay.com: David Findley, a co-owner of Castaways Bar and Grill, talks about the effect on Citrus County at tampabay.com/video

Duke Energy announces closing of Crystal River nuclear power plant 02/05/13 [Last modified: Tuesday, February 11, 2014 9:25am]
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