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Duke Energy Florida proposes $600 million in savings for customers

Duke wants to change how expenses related to cleaning up the Crystal River nuclear plant are paid. [MAURICE RIVENBARK | Times (2013)]
Duke wants to change how expenses related to cleaning up the Crystal River nuclear plant are paid. [MAURICE RIVENBARK | Times (2013)]
Published Apr. 7, 2015

For the second time in a week, Duke Energy is moving to change its troubled image with Florida customers.

The latest: a proposal by the utility to credit customers $600 million — or $2 to $3 per month for the average residential consumer.

That proposal will be discussed at a hearing Tuesday before the state Senate Communications, Energy and Public Utilities Committee.

The proposal comes less than a week after Duke announced plans for construction of large-scale solar power plants as a bipartisan coalition pushes the Sunshine State to produce more of its electricity from the sun.

Sen. Jack Latvala, R-Clearwater, said senior executives from Duke Energy's corporate offices in Charlotte met with him over recent weeks to discuss how the much-maligned utility can boost the low customer satisfaction ratings it regularly receives.

"They're tired of the bad press," Latvala said.

While the credit would mean some relief for customers who have seen their electric bills rise from the utility's failed nuclear ambitions and changes to its billing policies, the proposal won't cause Duke much pain.

Duke wants to change how expenses related to cleaning up the Crystal River nuclear plant are paid.

Instead of paying Duke as much as 7 percent for financing charges over 20 years, the utility would sell that debt to investors who would get a lower 3 to 4 percent return on their money. Lowering the financing charges would save customers about $600 million.

Duke in turn gets to collect its money up front rather than gradually over 20 years, an immediate windfall for the company and removal of debt from its books, even as the overall cost to customers is reduced.

Duke, the state's second largest investor owned utility, has higher rates than Florida Power & Light, the state's largest investor owned utility, and Tampa Electric, the third largest.

FPL's monthly rate for the average residential customer is about $25 lower than Duke's and reducing the finance charges would cut that gap by about 10 percent. Tampa Electric's rates are roughly in between FPL's and Duke's.

Latvala said the plan appears to be "good for the ratepayers. I wouldn't be doing it otherwise."

If there is any potential harm to consumers in the legislation to allow the transaction, Latvala said he "will pull it in the blink of an eyelash."

Charles Rehwinkel, the deputy public counsel who represents consumers in front of the Public Service Commission, said they are reviewing the proposal for the $600 million savings. "We are aware that there is a financing proposal/amendment … that could yield benefits in those amounts," he said in a statement.

Added Jon Moyle, a lawyer for the Florida Industrial Power Users Group (FIPUG): "We're open to the concept and want to make sure anything that moves forward is done in a way to protect ratepayers. One of the points FIPUG wants to ensure itself is ratepayers will indeed realize significant savings."

Sterling Ivey, a Duke spokesman, said the concept is similar to a 2005 law related to expenses for hurricane restoration.

"We are continually looking at innovative ways to help reduce the cost of our service to our customers," Ivey said. "This is one example of an innovative solution to accomplish this and we appreciate Senator Latvala's leadership in proposing this legislation."

Duke announced the closing of the Crystal River nuclear plant in February 2013 after a botched upgrade and maintenance project cracked the reactor's 42-inch-thick concrete containment building. Attempts to repair the building and bring it back online led to more cracks.

The utility considered repairing the plant but it proved too expensive.

Still customers are paying about $1.7 billion for expenses related to the upgrade and repair attempts, though they never received a kilowatt of electricity for that money. In addition, Duke is set to spend $1.5 billion on a new natural gas plant to compensate for the loss of the Crystal River facility and the cancellation of a proposed nuclear plant in Levy County.

Duke canceled the Levy project after it proved too costly at $24.7 billion. Still, customers have paid $1.5 billion for expenses related to that project.

After almost $5 billion in spending, customers will get one natural gas plant worth $1.5 billion.

Last week, Duke announced that it wants to build 500 megawatts of solar power — the equivalent of a small power plant — over the next 10 years.

That reversed years of resistance by the utility to embrace solar, even as the energy source grows in popularity.

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