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PSC orders Duke to refund $54 million to customers

Duke had expected to produce more than 3,000 megawatts of power after upgrades to the Crystal River nuclear power plant in Citrus County and building a pair of reactors in Levy County.
Published Oct. 3, 2014

TALLAHASSEE — In the face of growing public outcry, state regulators on Thursday ordered Duke Energy Florida to credit $54 million to customers for nuclear equipment that was never produced for the now canceled Levy County nuclear plant.

The decision was an unusual move by the Public Service Commission in that the panel went against its staff, which opposed the refund.

In what was a momentous day for the commission, the PSC also approved Duke's plan to build a $1.5 billion natural gas plant in Citrus County that would come online in 2018.

The commission's decision about the $54 million credit will provide some rate relief by mid-2015, when a $3.45 charge each month on the average customer's bill will disappear. It otherwise wouldn't have ended until sometime in 2016.

But come 2018, after the natural gas plant comes online, customers will face additions to their bills for the new plant.

The commission determined there were no viable alternatives other than the gas plant to meet the utility's projected needs. The approval of the plant comes as Duke and the state's other investor owned utilities are seeking to gut their conservation goals by more than 90 percent.

Commissioner Eduardo Balbis said he evaluated the cost of conservation and other alternatives and determined the gas plant was more economically feasible. "I'm comfortable that … this is the best option that we have."

But the approval of the gas plant elicited sharp criticism from environmentalists who have pressed the PSC to bolster conservation measures and order an independent analysis of future electricity need.

"It borders on criminal behavior for utility regulators to approve a big new gas plant while Duke is proposing to kill conservation programs," said Susan Glickman of the Southern Alliance for Clean Energy.

Duke has been the source of growing consternation from ratepayers who have been saddled with billions in costs from the utility's failed nuclear ambitions. In recent months, a series of missteps by Duke, first reported by the Tampa Bay Times, regarding its billing, meter-reading practices and the $54 million for nuclear equipment further enraged the public.

Consumer advocates, led by the state Office of Public Counsel, argued that the $54 million belonged to ratepayers since the money just sat in the bank.

The public counsel "believes that the commission action today will go a long way to returning the $54 million for phantom equipment costs to customers in a way that should lower rates in 2015," said Charles Rehwinkel, deputy state public counsel.

After the Times reported about the PSC staff's recommendation to side with Duke, some state lawmakers broke their long silence on matters related to the utility and demanded the credit.

The situation even prompted a rare letter to the PSC from Attorney General Pam Bondi to address an issue before the commission about Duke and later applaud the commission for backing consumers.

The moves by some of Florida's top politicos came just weeks before statewide elections, including for Bondi, who has been criticized by her Democratic opponent George Sheldon for not participating more in utility matters before the PSC.

Commissioner Julie Brown, who hails from the Tampa Bay area, was visibly disturbed during Thursday's meeting by all of the political heat, noting in comments before the vote that the PSC has tried to avoid making decisions based on politics.

She added, however, that the $54 million nuclear equipment issue warranted the commission's attention.

"This is the big issue this year in this docket," Brown, who is the only sitting commissioner facing reconfirmation by the Senate, said during a speech at the meeting. "Sometimes we must take a pause and reflect on what is right. We don't rubber stamp. We scrutinize everything."

After some legal wrangling over the proper way to credit the $54 million back to ratepayers, Commissioner Ronald Brise simply stated in his comments at the close of the vote: "They are receiving a credit."

The PSC vote to credit customers followed warnings from Sen. Jack Latvala, R-Clearwater, during a news conference this week. Latvala said if the money did not get refunded, the issue would "continue building a fervor from the people who elect us all. Somebody's going to pay the price."

The nuclear costs and the need for the gas plant stemmed from Duke's two troubled nuclear projects.

Duke, the state's second largest investor-owned utility, had expected to have more than 3,000 megawatts of power from upgrades at the Crystal River nuclear plant in Citrus County and construction of a pair of new reactors in Levy County.

But a botched upgrade of the Crystal River facility led Duke to permanently close the plant while soaring costs at the Levy nuclear plant led the utility to cancel that project.

The two nuclear projects' cost to Duke ratepayers reached $3.2 billion, though customers will never receive a kilowatt of power from the plants for that money.

An eight-year-old state law enabled Duke to collect the money in advance for the Levy project. The law, the Nuclear Cost Recovery Clause, or so-called "nuclear advance fee," allows Florida utilities to collect money from their customers for nuclear projects before they begin producing power.

The $54 million, though substantial, is small compared to the entire costs ratepayers are shouldering for the nuclear projects.

Duke is suing its former contractor, Westinghouse Electric Co., in federal court in North Carolina to reclaim the $54 million because the company never produced the equipment after receiving the money. Westinghouse is countersuing Duke for $512 million for canceling the contract for the Levy project.

If Duke loses the case, customers could face having to pay the additional half-billion dollars. But the case isn't expected to go to trial until at least early 2016.

With the nuclear plants dead, Duke is depending on the new natural gas plant. Duke argues that it needs the plant to meet future demand. With the commission's approval, the project still must receive a certification for the project from the governor and other Cabinet members.

Sterling Ivey, a Duke spokesman, said the new plant will help allow the utility to close two 1960s-era coal fired plants at its Crystal River power complex and meet proposed environmental regulations. The utility expects all final approvals by late 2015.

Contact Ivan Penn at ipenn@tampabay.com or (727) 892-2332. Follow @Consumers_Edge.

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