With Florida in a deep economic recession, the timing could not be worse for Progress Energy's utility bills to start rising by 25 percent this month to cover increased fuel costs and construction of a nuclear plant in Levy County. It's easy to see why two Republican legislators, Sen. Mike Fasano of New Port Richey and Rep. Peter Nehr of Tarpon Springs, have called for Progress Energy to postpone collecting the surcharge for the nuclear plant. That is a simplistic solution that could jeopardize the construction of the plant, but legislators and Progress Energy officials should explore whether there might be a more viable option for helping utility customers in the months ahead.
A 2006 law, which Fasano voted for, allows utilities to assess customers for partial construction costs for a nuclear power plant before it's operating. Besides reducing utilities' risks, the law was aimed at shoring up confidence among lenders and spreading the cost over a longer period of time. The law shifted the expense to utility ratepayers long before they see the benefit of the less expensive nuclear power. Fasano says he didn't realize the impact on consumers, but the time has passed for debating whether this is sound public policy for this particular project. Progress Energy has proceeded based on the change.
The utility's plan calls for customers to pay up to $5-billion toward the $17-billion Levy County plant before its projected completion in 2017. In 2009, the charge will mean an $11.92 surcharge per 1,000 kilowatt hours. The average customer uses 1,200 kilowatt hours a month.
Building a nuclear plant requires expertise and special materials far beyond that of a fossil-fuel plant. It requires contracts and agreements for supplies across a global marketplace. Progress Energy president and chief executive officer Jeff Lyash said many of those deals have already been signed, often at better terms than would be available now in the wake of the world economic downturn. Simply postponing customers' payments for a year — without any replacement funds — could kill the project, Lyash said. He said the utility doesn't have the money to bridge the gap, and he warned that suppliers would likely charge more in the future if Progress Energy breaks contracts now.
But Lyash said he's willing to review whether there are other options to help ratepayers without putting the nuclear project at risk. For example, the state could offer some kind of bridge loan to lengthen the time consumers are assessed for the plant, which would likely increase the long-term costs of the project but reduce monthly surcharges. Such a solution could be hard to come by as the state's own budget crisis leaves little room for flexibility. But such an idea deserves discussion.
The nuclear plant's surcharge is just part of the problem facing utility customers. The lion's share of the increase Progress Energy customers face next year is due to increased costs in fossil fuels. Roughly $14 of the $27-per-1,000 kilowatt hour surcharge slated to begin next month is due to higher fuel costs. Only $11.92 is dedicated to building the cleaner, cheaper energy source in Levy County.
If Floridians are ever going to avoid increases in the cost of fuel to operate electric plants, the state must find alternative sustainable energy sources. Nuclear power is one alternative, and legislators and Progress Energy officials should explore whether there is a less painful way to start paying for it.