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Paying in advance for nothing at all

In 2006, when volatile natural gas prices stoked fears of steep increases in electric bills, it seemed sensible, perhaps even necessary, to charge customers in advance to help build new nuclear projects.

A lot has changed in eight years. Florida's gamble in creating a so-called "advance fee" for nuclear projects will cost consumers billions — for nothing.

The reality of those losses will play prominently in debate about the state's energy policies as the 2014 legislative session begins.

There already are several measures drafted in response to the 2006 law that created the nuclear advance fee, known as the Nuclear Cost Recovery Clause.

Some Democrats want the law repealed entirely. Their efforts — led by Rep. Dwight Dudley, D-St. Petersburg; newcomer Rep. Amanda Murphy, D-New Port Richey; and Rep. Michelle Rehwinkel Vasilinda, D-Tallahassee — are backed by the AARP and a host of community and environmental groups.

The AARP said repeal of the nuclear advance fee is one of its legislative priorities. The organization says the law is an unfair tax on consumers, seniors in particular.

Critics of the law — dubbed the "utility tax " — won a few minor adjustments to the statute during the last legislative session. "It was eyewash," Dudley says. "That tweak last year was total eyewash."

Rehwinkel Vasilinda said the trouble is the investor-owned utilities only act in their interest at the expense of consumers. "They care about their bottom line," she said. "They don't care about the public interest. I think out-and-out repeal is the place to be" with the nuclear advance fee.

Lynn Good, president and CEO of Duke Energy, has proposed expanding the advance fee to include construction of other power plants.

She is likely to face challenges from Florida lawmakers because of two projects that went sour: the botched Crystal River nuclear plant upgrade project that led to the permanent shutdown of the reactor, and the now-canceled Levy County nuclear project.

Both projects, which Duke Energy inherited in its merger with Progress Energy in July 2012, used the nuclear advance fee and are costing consumers billions for not a single kilowatt of power.

Now, a fresh nuclear issue that has come to light at the St. Lucie power plant raises the specter that the Legislature will look more carefully at how to deal with the advance fee law.

St. Lucie nuclear plant Unit 2, about 2½ miles north of Port St. Lucie, is sustaining the similar premature wear to its steam generator tubes that led to the permanent closure of a California plant last year.

St. Lucie also used the advance fee for upgrades that are costing customers hundreds of millions of dollars — money that might be lost if the plant faces the same fate as the California reactors.

St. Lucie's owner, Florida Power & Light, spent more than $3 billion increasing power at its two reactors in St. Lucie and two at its Turkey Point facility in Homestead. Those projects ran $1 billion over budget but created about 500 megawatts of new nuclear power — basically a small nuclear plant. FPL also wants to continue using the advance fee to build two new reactors at its Turkey Point facility in Homestead.

A bill put forward by Sen. John Legg, R-Trinity, a year ago and passed by the Legislature makes it more difficult for FPL, but the project still could move forward and cost customers more money, even if the plant never gets built.

The amendments to the law prohibit utilities from collecting the nuclear fees after July 1, 2013, unless they have shown proof of their intent to pursue a license for a nuclear reactor from federal authorities. The PSC has the power to determine how to interpret intent.

Once a company acquires a license, the bill triggers a review by the PSC to determine if it is moving the project forward.

It also requires the company to justify the entire project instead of just the expenses. If regulators determine that the company is serious about its intentions to pursue a permit for a nuclear reactor, the bill reduces the interest rate on their capital costs, potentially saving customers $800 million over the 20-year life of the project.

There's no move so far by Republicans to make any other changes this year to the nuclear advance fee, but Legg has drafted a bill similar to one Dudley proposed a year ago to reform the PSC.

Legg has said that the PSC should have more aggressively scrutinized utilities' use of the advance fee to avoid having customers foot the bill for the power companies mistakes.

"The Public Service Commission is a function of Florida's legislative branch, and one of the founding principles of our system of government is representation," Legg said. "Florida's taxpayers are best served by decisionmakers who live and work among the people they represent, and utility ratepayers should not expect anything different.

"By establishing five representative districts and limiting commissioners to no more than two consecutive terms, Senate Bill 964 holds the Public Service Commission to the same accountability standards as Florida's governor, Cabinet, and Legislature."

What impact Legg's proposed change would have on the future of the nuclear advance fee is unclear.

But whether it's repeal of the statute or changes to other aspects of the regulatory process, lawmakers are clearly voicing their concerns about how the law has played out so far.

Ivan Penn covers energy issues for the Times. He can be reached at ipenn@tampbay.com or (727) 892-2332.

Paying in advance for nothing at all 02/28/14 [Last modified: Friday, February 28, 2014 5:01pm]

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