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Duke Energy customers will pay $108 million a year for canceled nuclear plants

Here’s a view of Duke Energy’s broken Crystal River nuclear plant taken from the top of the Cross Florida Barge Canal bridge.
Published Aug. 6, 2013

TALLAHASSEE — Unraveling Duke Energy's two nuclear power plant debacles in Florida will cost more than expected and customers will have to pay sooner than expected.

The tab for the shuttered Crystal River nuclear plant and the canceled Levy County reactors: $5 billion — and growing.

Duke Energy Florida's 1.7 million customers are on the hook for more than half of that.

And how much electricity will customers get out of the multi-billion dollar Crystal River and Levy fiascos?

Not a single kilowatt.

What customers will get are bills to cover Duke's spending spree. They total about $108 million a year in nuclear fees through 2017.

Customers will have to pay $3.45 per 1,000 kilowatt hours for Levy and $2.17 for Crystal River for a total of $5.62 for the average customer. That includes an extra 89 cents that state regulators approved Monday to cover the cost of increasing power at the Crystal River plant.

The new fees will begin showing up on customer bills Jan. 1.

Those fees don't include the $200 million to $300 million a year for replacement power that Duke continues to buy because Crystal River no longer operates.

"It's no different to me than grand theft," said state Rep. Mike Fasano, R-New Port Richey. "The Legislature needs to investigate. How did this happen?"

Economist Mark Cooper, who has testified against Duke's nuclear projects for years, called the Crystal River and Levy spending "gross negligence."

"Stop paying these damn bills and make them litigate against you to get the money," Cooper said. "We'll have a dandy case of responsibility and negligence. It's certainly not the ratepayers' fault."

The lost $5 billion could have paid for three or four natural gas power plants, Cooper said.

The good news is that customers don't have to pay the entire $5 billion. They will receive $2 billion in credits under the two settlement agreements Duke reached with the state Office of Public Counsel, which represents consumers before the Public Service Commission. The credits may come through lower rates, insurance proceeds and hundreds of millions in write-offs.

"No settlement is perfect," said Charles Rehwinkel, deputy state public counsel. "I think the customers are a lot better off under this agreement. If we had litigated, customers would lose in court."

The latest agreement must be approved by the PSC before customers receive all the credits. The commission is expected to hold hearings by October on a settlement the public counsel and the utility announced Thursday.

Duke Energy, which bought Progress Energy a year ago, announced in February that it was closing the broken Crystal River nuclear plant. The plant suffered cracks in its concrete reactor containment building during a botched upgrade and maintenance project by Progress Energy in fall 2009. Duke decided to replace its sole reactor in Florida with a natural gas plant by mid 2018, which customers ultimately will have to fund.

Then last week, the utility announced as part of the latest settlement agreement that it was canceling the contract for the Levy nuclear plant, a project proposed seven years ago.

Both of the decisions came after state lawmakers and regulators committed customers to paying up to $1.5 billion for the Levy project and much of the $1.7 billion for the now-shuttered Crystal River plant. Customers have been paying on that $3.2 billion total and will for several years to come.

The $3.2 billion in costs to customers could be reduced if Duke is able to sell some of the equipment purchased for Levy and salvaged from Crystal River.

"These are reasonable and prudent costs," said Sterling Ivey, a Duke Energy spokesman.

Ivey said the utility had wanted to fix Crystal River and intended to build Levy. But the economics did not make sense with natural gas — an option to nuclear — at historic lows and delays in licensing by federal regulators.

"The economics for Levy just don't work," Ivey said.

In May, a Tampa Bay Times investigation showed that a natural gas facility would be cheaper than the Levy project over a 60-year period. Yet, also in May, the utility filed testimony stating that Levy was still "feasible."

During an annual review of nuclear spending Monday, PSC commissioners questioned why Duke changed its mind so abruptly. Duke attorney John Burnett told the commission that economics and delays in licensing by the U.S. Nuclear Regulatory Commission convinced his company the project didn't make economic sense.

Members of the PSC on Monday said they were concerned customers would be hurt by the settlement. Nevertheless, the panel approved an additional 89-cent charge each month for the average Duke customer to pay for some of the Crystal River expenses.

Duke and the public counsel's office said the increased rate, which will take effect Jan. 1, already was among projects the state regulators approved in the past.

"I'm still not comfortable raising customer rates without a hearing," said Commissioner Eduardo Balbis. "I think we're in an awkward procedural position."

The 89-cent increase in customer power bills is related to Duke's effort to increase power at Crystal River. That cost totals $265 million.

Cooper and others blamed Duke's exorbitant nuclear tab on the failure of the state's nuclear advance fee, which lawmakers created in 2006. Cooper was among those warning for years against use of the advance fee in Florida and elsewhere.

The law, marketed as a way to speed up construction of nuclear plants, allows utilities to charge customers in advance for expenses like siting, planning development and financing.

The law did not require the utilities to actually build the plants nor did it make companies refund money to customers if it did not build the reactors.

Fasano and other lawmakers for years attempted to repeal the law to no avail.

During the last Legislative session, lawmakers tweaked the law but refused to repeal it, even as the Crystal River and Levy tabs continued to grow.

"If there's anything that highlighted the failure of the advance cost recovery laws, it's the ($5 billion) number," said George Cavros, a lawyer for the Southern Alliance for Clean Energy, an environmental group that has opposed the nuclear fee and settlements with Duke. "It's an, 'I told you so' moment."

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

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