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Florida's Public Service Commission says Levy County nuclear project is still feasible

The state Public Service Commission on Monday affirmed its position that the proposed Levy County nuclear plant remains "feasible" despite a growing $24 billion price tag and the falling cost of alternatives.

Commissioners unanimously approved $143 million in costs that Progress Energy Florida will pass onto its 1.6 million customers in 2013 for the utility's proposed Levy plant and for upgrades to its idle Crystal River nuclear plant.

Final estimates for the average Progress Energy customer bill are expected today after the commission reviews what fuel expenses will go into 2013 electric bills.

Commissioners said the Levy nuclear plant ultimately will provide stable electric costs as nuclear fuel in the long run is cheaper and less volatile than natural gas, even though natural gas prices dropped to near historic lows earlier this year and remain below $4 due to enormous domestic supply.

Commissioner Eduardo Balbis said natural gas prices would have to remain below $5 over the next 30 years for the fuel to prove more beneficial than building the Levy plant.

"If history is any indicator, I would find that to be unlikely," Balbis said of natural gas prices remaining low. "Everyone out there should know that we are watching this very closely."

But the commission's ongoing support of the Levy project and the push to return the troubled Crystal River plant in Citrus County to service runs counter to the changing views of the utility industry itself.

The Exelon Corp., a major provider of nuclear energy, in August dropped its plans for two new nuclear reactors in Texas, citing the low cost of natural gas.

Then in October, Dominion Resources announced plans to shut down its Kewaunee Power Station nuclear reactor in Wisconsin because of low natural gas prices and a lack of buyers.

The move shocked many in the utility industry because the plant is an active reactor that would seemingly produce cheap electricity since its construction costs were incurred decades ago. But the utility said it was too costly to run.

"Florida is operating in an energy vacuum," said Rep. Michelle Rehwinkel Vasilinda, D-Tallahassee, who argues that there are less costly ways of diversifying the state's energy mix without spending billions of dollars on questionable nuclear projects.

"We are doing nothing like the rest of the country, or frankly the world," Vasilinda said. "We've got our heads in the sand."

Progress Energy Florida, now a subsidiary of North Carolina-based Duke Energy, first proposed building the Levy nuclear plant at a cost of $4 billion to $6 billion. It was to begin operating in 2016. The cost has risen to $24 billion, making it the most expensive nuclear plant proposed in the United States, and it won't be up an running until at least 2024.

Fueling the push to build the Levy project is a 2006 state law that allows utilities to collect money in advance for the construction of new nuclear plants.

Progress Energy has spent more than $1.1 billion on the Levy project, although it has not made a final decision whether it will build the plant. By the end of this year, the utility will have collected $750 million from its customers.

Out of the $1.1 billion in expenses, Progress will get to pocket $150 million for itself.

Legislators expanded the law to allow utilities to use the so-called "advance fee" to increase power at existing nuclear plants such as Crystal River.

Earlier this year, the utility revealed that it plans to spend $600 million on improvements to the Crystal River plant, which went off line in 2009 in a botched maintenance and upgrade. The 42-inch thick concrete reactor building cracked and an attempt to repair the building resulted in more cracks. If it is ever repaired, it could cost as much as $3.4 billion plus hundreds of millions in replacement power while the plant — dubbed by critics as the "Humpty Dumpty Plant" — sits idle.

While Progress Energy Florida continues to spend hundreds of millions of dollars on the Levy project and the Crystal River plant, it has not made a final decision on the future of either one.

The utility says it needs the nuclear power to diversify its energy mix, which relies heavily on natural gas. If Crystal River does not return to service, the utility says natural gas will account for more than 70 percent of its electricity generation by 2017.

In general, more utilities are looking at natural gas as an alternative to nuclear and coal plants due to the abundance of natural gas in the United States. The gas is accessible now thanks to breakthroughs in drilling technologies, which caused prices to fall.

"No one would have imagined the gas phenomenon," Mark Marano, senior vice president of business development for Areva, a nuclear power developer, said at a nuclear energy summit in October. "Nuclear is going to be there. The question is: What form or shape will it be in? The economics are truly hitting home."

And voters, too, are reacting to those changing economics.

During the recent election, Rep.-elect Dwight Dudley, D-St. Petersburg, unseated Republican incumbent Frank Farkas after he campaigned almost entirely on a platform of overturning the advance fee for nuclear plants. He dubbed the fee the "Farkas Fee," because Farkas voted for the legislation.

Dudley has been teaming up with Vasilinda and Rep. Mike Fasano, R-New Port Richey, to repeal the legislation that created the advance fee.

Without the advance fee, Progress Energy Florida has said it would not build the Levy plant.

Stephen Smith, executive director of the Southern Alliance for Clean Energy, has been arguing with state leaders that there are cheaper ways to supply power to Floridians than collecting hundreds of millions of dollars from customers for nuclear projects that may never materialize.

Smith's organization calls for greater use of energy efficiency and renewable sources rather than construction of large, expensive power plants, which serve more to increase the utilities' bottom line.

The Southern Alliance sued the PSC, Progress Energy and the state's largest utility, Florida Power & Light to overturn the "advance fee" law.

The parties presented arguments before the state Supreme Court in October and are awaiting a decision from the justices.

Ivan Penn can be reached at ipenn@tampabay.com or (727) 892-2332.

Florida's Public Service Commission says Levy County nuclear project is still feasible 11/26/12 [Last modified: Monday, November 26, 2012 10:01pm]

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