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Progress Energy reaches settlement in broken nuclear plant case

Amid growing scrutiny, Progress Energy has agreed to refund to customers $288 million they were paying in extra charges after a botched upgrade shut down the Crystal River nuclear plant.

In exchange, the utility avoids public hearings on how a relatively routine job broke the plant, at a cost of at least $2.5 billion.

The average customer's bill will rise, but not as much as it would have without the settlement.

The agreement between Progress and consumer advocates announced Friday means the average bill will go up an estimated $4.93 in 2013. After that, Progress generally will not be allowed any rate increase until at least 2018, unless there is a significant increase in costs for things like fuel, energy conservation or environmental protection.

A Progress news release does not say how much rates would have gone up without the agreement. But the utility earlier had projected that monthly fees for just a proposed nuclear plant in Levy County would rise to $7.98 in 2013 and $34.45 in 2018.

The $288 million refund represents money customers are paying for power to replace the nuclear power lost when the Crystal River plant went down. Customers won't get a check in the mail. The settlement will be factored into their monthly bill.

Progress gets something out the deal, too.

The agreement shields the utility from scheduled public hearings this summer on what happened at Crystal River. But it frees the state Legislature to hold hearings of its own, which have been requested by Sen. Mike Fasano, R-New Port Richey.

The settlement comes at a time of increasing customer frustration at bills pushed ever higher by the costs of the Crystal River incident and fees to pay for the Levy plant, which will not begin operations for at least nine years.

The agreement also comes the same week Progress asked federal regulators to reconsider their decision to block the utility's merger with North Carolina based Duke Energy.

J.R. Kelly, the state public counsel who represents consumers before the Public Service Commission, explained why he gave up hearings on the Crystal River accident.

Progress, he said, had a good case for raising rates for reasons aside from the nuclear plants. The settlement, he said, helped temper the impact of those factors. Kelly would not elaborate on what those factors are, because the information was part of confidential discussions.

"There's always risk in any proceeding," Kelly said. "You can present the case . . . and the judges rule against you. We've weighed the risk. Is it everything we would have liked to have gotten? No.''

Progress Energy Florida president Vincent Dolan said the agreement "helps customers in the short term while we all press through these difficult economic times.''

The PSC will have to approve Friday's settlement.

The problems began in 2009 when the utility replaced the plant's old steam generators inside the reactor containment building.

As the Tampa Bay Times has previously reported, two companies had successfully managed all 34 previous upgrade projects at other plants. At Crystal River, Progress managed the work itself, despite its own internal report that it lacked the necessary expertise.

Progress hired subcontractors with no experience in the type of work the project required. Experienced workers warned the utility that its procedures for sensitive aspects of the job were being handled differently than at other plants. Progress ignored those warnings.

The reactor building cracked during the project and then cracked twice more after repair attempts. Progress wants to fix the 36-year-old plant at a cost of $2.5 billion. It hopes insurance will pay three quarters of that.

The insurance company is conducting its own investigation of the accident and has not yet said if it will pay all or any of Progress' claim. If the insurance company refuses to pay any of the costs, Progress may decide to close the nuclear plant.

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

Progress Energy reaches settlement in broken nuclear plant case 01/20/12 [Last modified: Wednesday, July 25, 2012 2:24pm]
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