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Progress Energy to review whether insurance will cover nuclear plant repairs

Progress Energy's insurer has launched its own review of the outage at the Crystal River nuclear plant to determine whether insurance will cover repairs to the broken reactor building.

Bill Johnson, Progress' president and chief executive officer, told investors Thursday that the utility's insurer has appointed a special committee of its board and hired engineering consultants to review the Crystal River plant.

Progress wants the insurer, Nuclear Electric Insurance Limited (NEIL), to cover three-quarters of the $2.5 billion it will cost to fix the nuclear plant, which first broke during a maintenance and upgrade project in fall 2009. Costs not covered by NEIL would rest on the shoulders of the utility's customers or investors.

The plant's concrete containment building cracked when workers were replacing old steam generators, and again when the utility tried to repair it and bring it back online. The reactor is not expected to return to service for at least two more years — if at all.

"This is a complex matter, and it's in our best interest to work cooperatively with NEIL to provide them with all the information they need to make their coverage decisions," Johnson, who sits on NEIL's board of directors, said during a quarterly report webcast Thursday.

NEIL declined to comment, saying it does not "disclose comments or any information involving its members."

NEIL insures Crystal River and the 103 other nuclear plants across the country.

NEIL had been making payments for some of the repairs and for Progress to purchase electricity to replace power the Crystal River plant used to supply.

But no such payments were made during the third quarter of this year.

In addition, Progress said during hearings this week before the state Public Service Commission that repair work since mid December 2010 has not been covered by NEIL as of yet.

That raised concerns among investors about whether NEIL might not pay for any more of the costs related to Crystal River or even order repayment of money already paid, if the insurer determines the damage to the nuclear plant is not covered under the policy.

"In the event that NEIL determines this is not a covered event, would they claw backwards the proceeds you've already received?" asked Paul Ridzon of Keybanc.

"I'm not going to entertain the notion that they don't think it's a covered event," Johnson responded. "So we haven't given any thought at all to the question you've asked."

Johnson said he expects NEIL to make a determination by the end of the year.

Ivan Penn can be reached at [email protected] or (727) 892-2332. Follow him on Twitter at www.twitter.com/Consumers_Edge and find the Consumer's Edge on Facebook.

Progress Energy to review whether insurance will cover nuclear plant repairs 11/04/11 [Last modified: Friday, November 4, 2011 10:55pm]
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