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Duke Energy customers face $1 billion-plus tab whether nuclear plant is fixed or not

It will cost at least $1.5 billion to fix the Crystal River nuclear plant, and possibly twice that much. If the plant isn’t fixed, customers likely will have to pay for whatever new plant replaces it.

WILL VRAGOVIC | Times (2011)

It will cost at least $1.5 billion to fix the Crystal River nuclear plant, and possibly twice that much. If the plant isn’t fixed, customers likely will have to pay for whatever new plant replaces it.

Duke Energy faces a potentially $3 billion decision on whether to fix its busted Crystal River nuclear plant. Regardless of their choice, however, customers will still get stuck paying for the billion-dollar-plus blunder.

If Duke shuts down the plant, customers will have to pay at least $1.6 billion to build another power source and buy alternate energy. If Duke fixes the plant, customers will be on the hook for buying more than $1 billion in alternate power even if they escape paying repair costs.

Those back-of-the-envelope numbers emerged in the wake of the independent review of repair options made public Monday. A close look at the details also reveals a major obstacle to any repair plan: the containment building's long history of structural problems. That, the report says, raises the risk that any attempted repair could itself further damage the plant, potentially doubling the repair cost.

The state Public Counsel's Office thinks the report, by Charlotte, N.C., consultant Zapata Inc., may portend some good news.

"I think this report was probably well done in terms of identifying the risks," said Charles Rehwinkel, deputy public counsel. "It's a valid due diligence that Duke did."

That, he said, may persuade the plant's insurer to pay for more of the repair than it has thus far.

Nevertheless, the bottom line will still be in the billions, and for Duke and its customers, there will be no easy way out.

• • •

As the Tampa Bay Times reported Tuesday, the Zapata report gives a best-case estimate of $1.5 billion to fix Crystal River and a worst case of more than $3 billion. But if Duke fixes the plant, customers also must continue paying for expensive power to replace the cheap energy Crystal River once generated. Replacement power would cost about $300 million a year.

The best-case estimate for the plant to return to service is in 2016 — seven years after it went offline during a botched maintenance and upgrade job. By then, the company will have spent about $2 billion on replacement power.

As part of a previous settlement agreement with the state, the utility agreed to refund customers $288 million of the replacement power costs. If Duke opts to repair the plant but can't begin this year — which appears likely — the utility will have to refund an additional $100 million.

If the plant isn't fixed, customers likely will have to pay for whatever type of new plant replaces it, such as a natural gas plant at roughly $1 billion plus replacement power during a couple of years of construction.

Duke maintains a decommissioning fund for Crystal River with about $600 million, but it could cost hundreds of millions more to completely shut down the facility.

Mitigating those expenses is whatever insurance pays toward repair and replacement power.

The insurer, the Nuclear Electric Insurance Limited, or NEIL, has not paid any money for damage at Crystal River since the second quarter of 2011. The policy includes coverage of more than $2 billion for repairs and $490 million for replacement power.

Duke officials have said negotiations over payment from NEIL would begin in the fourth quarter, but could not give a more definitive date Tuesday. "We're trying to be as diligent and responsible as possible," Duke spokesman Mike Hughes said.

The Zapata report explained just how difficult the repair is, starting with a concrete reactor containment building that has a history of structural weakness.

The dome atop the building cracked in 1976 during construction of the plant. The plant's 42-inch-thick walls cracked three times after workers cut into the building to replace old steam generators.

Engineers are looking at replacing the building's walls. The fear is that replacing the walls will cause the dome to crack again.

Some have nicknamed Crystal River the "Humpty Dumpty" plant.

If Duke makes too many changes to the building, the Nuclear Regulatory Commission could require the utility to file an amendment to its operating license. That would require public hearings.

"It opens the plant up to public participation, again," said Arnie Gundersen, a nuclear engineer and consultant. "They're terrified of letting this process open up."

The Southern Alliance for Clean Energy, an environmental group that has been scrutinizing Duke's nuclear plans in Florida, called on the state to seek other ways to meet its energy needs rather than repairing a 36-year-old nuclear plant.

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

Duke Energy customers face $1 billion-plus tab whether nuclear plant is fixed or not 10/02/12 [Last modified: Tuesday, October 2, 2012 7:55pm]
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