Tuesday, June 19, 2018
Business

Duke Energy to cancel proposed Levy County nuclear plant

As it turns out, they were all wrong.

Progress Energy insisted its proposed nuclear power plant in Levy County would provide low-cost energy for generations.

The Legislature promised again and again that a new law forcing customers to pay in advance for the Levy project would get the plant built faster and cheaper, even as the delays piled up and the price soared.

On Thursday, the big talk ended.

Duke Energy, Progress' successor company, pulled the plug on Levy. There will be no cheap power. Customers will still have to pay up to $1.5 billion. And Duke shareholders get to keep $150 million.

State Rep. Mike Fasano captured a common sentiment when he said:

"Shame on Duke Energy, Progress

Energy for taking the public on this ride knowing that they were never going to build the nuclear plants. Shame on them."

Despite initial appearances, Thursday's news was not all bad — for Duke.

As part of a wide-ranging agreement with the state Public Counsel's Office, the utility avoids potentially embarrassing public hearings on the botched upgrade that crippled the now closed Crystal River nuclear plant and left customers facing a $1.7 billion bill.

Further, the settlement guarantees Duke a minimum profit margin of 9.5 percent through 2018.

As for Duke's customers, the settlement stems the financial bleeding from the Levy and Crystal River misadventures at up to $3.2 billion. The PSC will determine how and when customers will pay off that bill.

The deal still must be approved by the five-member state Public Service Commission.

"It's a very fair deal for ratepayers and the company," said J.R. Kelly, the state public counsel, who represents consumers before the PSC. "It's one I support 100 percent. My name is on it."

R. Alexander "Alex" Glenn, president of Duke Energy Florida, called the settlement "an effective balance." He said the utility plans to continue pursuing the operating license for the Levy project from the U.S. Nuclear Regulatory Commission because the process is almost complete.

"We want them to continue to get that license," Kelly said. "To give up now, it doesn't make sense, then you're just throwing all that money down the toilet. Basically, if any additional money is spent on that license, it's on Duke's dime."

But Duke will simultaneously seek to sell off equipment it has acquired for the project to reduce the debt customers must pay for what was spent.

"That will go back dollar for dollar to customers," Glenn said.

• • •

The Florida Legislature overwhelmingly supported the 2006 law that allowed utilities to collect money from customers in advance to help build nuclear plants. They hailed the law as a way to build the plants cheaper and faster, saving customers about $300 million.

Critics countered that there weren't enough safeguards in place.

In 2009, for instance, economist Mark Cooper told the PSC that it was "not prudent" to proceed with the Levy project. Cooper, now a senior fellow at the Institute for Energy and the Environment at Vermont Law School, subsequently called the way the law was enacted "the perfect story of crony capitalism."

Now Cooper and others shake their heads.

"If they had taken my advice four years ago, they would have saved 1.3 billion," Cooper said Thursday.

Last year, a Times report detailed how Duke would profit from the plant whether it got built or not. Duke would make a fixed percentage of whatever it spent on the project. So, the more it spent, the more it made – whether or not the plant got built.

In May, the Times reported that, over a 60 year lifespan, the Levy plant would cost more than an equivalent natural gas plant under any reasonable scenario. The investigation also revealed that Duke would pocket as much as 10 times the profit from the Levy project compared to a natural gas plant.

The Times investigation prompted calls from Tampa Bay area lawmakers for the agriculture commissioner and the PSC to look into whether the plant was still in the best interest of consumers.

Arnie Gundersen, a nuclear engineer who also argued against the project, said Duke's decision shows that the nuclear industry is troubled.

"I've got to give Duke a lot of credit for doing what Progress didn't do," Gundersen said. "Progress dug this hole and Duke is digging out. It's the right decision."

• • •

Thursday's decision still irked some local legislators.

Rep. Dwight Dudley, D-St. Petersburg, who won election largely campaigning to overturn the nuclear advance, still wants the law repealed.

"I don't give a damn how they justify taking our money," Dudley said. "This isn't over yet. We've still got work to do."

During the last legislative session, Sen. John Legg, R-Trinity, sponsored a bill that would have ended the advance fee if utilities failed to obtain a license from the Nuclear Regulatory Commission. He also pushed unsuccessfully to make utilities refund advance fee money to consumers if a project falls apart.

Only a modest revision of the advance fee was passed by the Legislature and signed by Gov. Rick Scott in June.

"It's absolutely infuriating because consumers have basically footed the bill and are now having the rug pulled out from them," Legg said.

The worst part, he said, is that consumers aren't getting any refund from about $1.5 billion spent on the Levy project so far.

• • •

So what do customers get from this latest settlement?

Much of their hopes depend on Duke's ability to peddle equipment it has already purchased for Levy and can salvage from Crystal River. Glenn offered no estimate of how much that might be.

Duke also has agreed to write off $295 million worth of charges that customers would have had to pay for expenses related to Crystal River.

In February, Duke announced the permanent closure of the plant after deciding that it did not make economic sense to repair cracks in the reactor's concrete containment building. The building was damaged during an upgrade and maintenance project in 2009.

Without Thursday's settlement agreement, Kelly, the state public counsel, said the money customers owe to the utility could have continued to grow to as much as $4 billion.

Said Kelly: "We stopped the bleeding."

• • •

Levy is dead for now, but Glenn remained resolute that the utility wants nuclear to be apart of its future energy mix.

"We continue to believe," Glenn said, "Levy is a viable site and a good site."

Still, the cancellation of the Levy project adds to the nation's rocky nuclear history.

There hasn't been a new commercial nuclear plant built in the United States in 30 years. Wall Street has lost interest in financing such risky, expensive ventures.

Widespread use of the drilling technique called hydraulic fracturing or "fracking" helps the nation tap what is estimated at a 100-year supply of affordable natural gas.

Within the last decade, more than two dozen nuclear reactors had been proposed across the country, but only two major projects are under construction: one in Georgia and another in South Carolina.

Duke had already informed federal regulators that it was suspending plans for its proposed new reactors at its Shearon Harris plant in North Carolina and delaying plans for proposed reactors at its Lee Nuclear Plant in South Carolina.

The nuclear renaissance "was just this artificial gold rush," said Peter Bradford, a former Nuclear Regulatory commissioner. "And yes, it does show the renaissance is dead."

Times staff writers Jeff Harrington and Drew Harwell contributed to this report. Ivan Penn can be reached at [email protected]

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