Duke Energy acknowledged the obvious Thursday. The proposed Levy County nuclear plant was too expensive even for the nation's largest utility to stomach, so it shelved the project. This pragmatic decision would have been made sooner if the Florida Legislature and the Public Service Commission had been more interested in protecting consumers than in pleasing the utilities. Instead, Duke ratepayers still are on the hook for more than $1 billion in expenses tied to a nuclear plant that won't be built, plus the cost of future natural gas plants.
The settlement announced late Thursday with Duke, the Office of Public Counsel (which represents utility ratepayers before the PSC) and business groups has some positives. At least it stops the bleeding for ratepayers on the proposed Levy nuclear plant, and Duke will continue to seek a federal nuclear plant operating license at its own expense that would be good for 20 years. The deal also reduces ratepayers' costs tied to the closed Crystal River nuclear plant, which was not worth repairing. And it extends the current freeze in base rates for two years, through 2018.
While those are positives, they do not let those responsible for this fiasco off the hook. It starts with Progress Energy, Duke's predecessor. The Levy nuclear plant might have made sense when Progress first proposed it in 2006 at a cost of up to $6 billion. But the projected cost rose to almost $25 billion, and Progress refused to scrap the plan even as construction costs skyrocketed, the recession reduced demand for power and the price of natural gas dropped. Duke inherited the mess, ordered a thorough review and finally came to the correct conclusion a year after the companies merged.
The Legislature was a co-conspirator. Lawmakers passed a 2006 law that enabled the utilities to bill ratepayers in advance for costs tied to planning or expanding nuclear plants even if the plants were never built. It was a giveaway to Progress Energy and Florida Power & Light, which were generous with their political contributions, and it came without any safeguards for consumers. The Tampa Bay Times reported last year that Duke would keep $150 million in profits from the advance recovery fee even if the plant was never built. But instead of repealing the law, legislators only made minor adjustments this year that did not go nearly far enough.
The PSC, which regulates utilities, also failed to protect consumers. Commissioners contended their hands were tied by state law, but they did nothing to slow down the pursuit of nuclear projects that are not financially viable. While lawmakers tinkered with the advance recovery law this year to give the PSC a bit more discretion, there is nothing in the commission's history to suggest it would have seized the initiative. Instead, here is another negotiated lukewarm deal the PSC is likely to rubber stamp.
For Duke, the agreement cleans up the nuclear mess it inherited and enables the utility to focus on planning future natural gas plants, the role of renewable energy such as solar power, and energy conservation measures. For ratepayers, it provides certainty that they will stop racking up more bills for a nuclear plant that won't be built and freezes base rates. But there is little to celebrate when consumers still will pay up to $3.2 billion for one broken nuclear plant that is closed and another that is imaginary.