Tuesday, February 20, 2018
Business

Duke Energy CEO wants pay-as-you-go construction

RALEIGH, N.C. — The newly installed chief executive officer of Duke Energy wants to change how the utility is regulated in the Carolinas and Florida so that America's largest electric company can more easily pass along the cost of big power plants a little at a time.

The company's desire to get consumers to start paying for big-dollar projects with price tags that could run into the billions is high on the agenda of Duke Energy CEO Lynn Good, who stepped into the company's top job Monday. That's what she told a Wall Street analyst shortly after her hiring was announced two weeks ago.

Good told Sanford Bernstein analyst Hugh Wynn that her first priority is fully integrating the operations of former in-state rivals Duke Energy and Progress Energy, which Duke bought out in a deal that closed a year ago.

A second top goal is changing how the company charges for big projects in the states where Duke Energy has the bulk of its customers, Wynn wrote in a note to investors. North Carolina and Florida basically follow a build-now, collect-later process in which utilities must show regulators their costs and justify requested profit margins. The cost of new power plants can't be passed on to customers until construction is done and the power flows.

Good's comments about regulatory changes represented her long-range thinking and the company had not made any specific proposals, spokesman Tom Williams said.

Those who support charging consumers for plant construction while it's still under way say it reduces the overall price tag of a power plant because starting payments early in the multiyear process reduces financing costs, holding down the price consumers ultimately pay. Opponents argue allowing utilities to charge for construction work in progress shifts risk to ratepayers by forcing them to pay now for a plant that may not produce power for years, if ever.

Florida regulations bar utilities from billing customers for building costs or upgrades until generating facilities go into service, but a 2006 law made an exception for nuclear power plant construction. That allowed Raleigh-based Progress Energy to charge for upgrades to a shuttered nuclear plant in Crystal River and a planned new one for nearby Levy County.

Duke Energy, which later purchased Progress Energy, decided in February to close the damaged Crystal River plant, allowing it the possibility to earn a $50 million profit on the $500 million that customers already paid. Florida customers also paid $1.5 billion for the Levy plant. Duke could earn $150 million if that project is not built.

Florida lawmakers this year made changes to that 2006 law.

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