Tuesday, June 19, 2018
Business

Judge: Duke Energy is off the hook for $352 million for canceled Levy County nuke plant

This is one enormous bill that Duke Energy Florida customers won't have to cover.

A federal judge in North Carolina ruled last week that the Florida utility does not owe the Westinghouse Electric Co. $352 million for disputed costs associated with the 2013 cancellation of a Levy County nuclear power plant.

But federal Judge Max O. Cogburn Jr. said in a 29-page order that Duke is contractually obligated to pay Westinghouse a $30-million termination fee plus $4 million in interest.

The judge's Dec. 22 decision, after a bench trial, is a rare dose of good news for Duke over the controversial Levy project, which Duke inherited when it acquired Progress Energy in 2012. Duke's 1.7 million Florida ratepayers were forced to cover about $1.5 billion of Duke's costs in developing the project.

And the utility had been expected to seek approval from the Florida Public Service Commission to pass on the $352 million bill to its customers had Westinghouse prevailed. It remains unclear if consumers will be asked to cover the $34 million.

Duke in 2014 initially sued Westinghouse, the world's largest builder of nuclear plants, for the $54 million paid for Levy equipment that the utility said the contractor never produced. Westinghouse countersued Duke for $512 million for canceling the Levy contract. That sum was later reduced to $352 million.

Cogburn said in his ruling that Duke was not obligated to pay "full freight" for the development of an advanced reactor, noting the utility had the contractual right to opt out of a consortium of utilities partnered with Westinghouse.

The judge said Westinghouse, prior to the project cancellation, had never billed Duke for the hundreds of millions of dollars Westinghouse would later argue it had accrued.

Westinghouse "never notified Duke or its predecessors that expenses of enormous proportions were being amassed for performance of work necessary" for the project, Cogburn ruled.

J.R. Kelly, the public counsel whose office represents consumers before the Florida Public Service Commission, hailed the ruling.

"This is definitely a win win win for the whole state of Florida, Duke and ratepayers included," Kelly said.

Duke had canceled plans for two Westinghouse reactors, citing projected costs that had ballooned to $24.7 billion and delays obtaining the necessary federal licenses.

"While we are disappointed anytime we have to go to litigation with a vendor, we are pleased with the judge's decision not to award the termination cost claim," Duke spokeswoman Rita Sipe said in a written statement Thursday.

Duke Energy won't close the door entirely on building a nuclear facility in Florida years down the road, noting that the Nuclear Regulatory Commission issued a license for the Levy County site in October,

"We have not made a decision to build the plant, but the ability to add carbon-free, reliable nuclear generation is an important element of our long-term resource planning," Sipe said.

But Duke's nuclear ambitions in Florida have dimmed considerably in recent years.

Duke in February 2013 also announced the permanent closure of its Crystal River nuclear plant in Citrus County after a botched upgrade project led to repair bills that would have reached into the billions. Duke decided it would be more prudent to close the plant and build a natural gas facility.

That will cost customers $1.3 billion over the next 20 years.

Cogburn said in his ruling that the different "negotiating cultures" at Duke and Westinghouse may have needlessly escalated a dispute that otherwise might have ended amicably.

A Westinghouse official told the utility in an August 2013 meeting that the company would claim substantial termination costs should Duke cancel its Westinghouse contract. Duke took that as an affront and sign that Westinghouse was "cooking the bill," Cogburn said.

In fact, the judge said Westinghouse's statement "was more akin to posturing and bluster" common in negotiations, not something more nefarious.

"Rather than cooling off when hard positions were taken," Cogburn wrote, "these parties parted ways rather than stepping back and letting cooler heads prevail."

Contact William R. Levesque at [email protected] or (813) 226-3432. Follow @Times_Levesque.

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