Hearings begin over who'll foot Duke Energy's bill for failed Crystal River nuclear plant

Published May 1, 2013

TALLAHASSEE — Duke Energy broke the Crystal River nuclear plant, spent a lot of money trying to fix it and now wants its customers to pay more than $1.6 billion in related expenses. And how much of the bill does Duke think its shareholders should pay?

Not a dime.

Those representing Duke's customers disagree and, on Tuesday, the state Public Service Commission took up the matter.

"What the commission is presented with is the case of the billion-dollar elephant in the room," said Charles Rehwinkel, deputy state public counsel. "This is the most important issue that we have seen in decades before this commission."

Consumer advocates told the PSC that the billion-dollar tab is the result of Duke twice victimizing its customers — first in the handling of the upgrades and repairs that led to the first permanent closing of a nuclear plant in Florida and second by failing to collect sufficient money from the insurance company for the loss.

The PSC must decide whether Duke's customers, its shareholders or both will be responsible for the bills left behind after the company's decision in February to close the Crystal River plant. Consumer advocates — including representatives of retailers, industrial power users and phosphate mining companies — asked for more time to prepare their case.

But PSC Commissioner Eduardo Balbis rejected their plea.

His reason: "The ratepayers have waited long enough."

Tuesday's hearing — a presentation of oral arguments by Duke and the consumer advocates — was a prelude to the full trial that was scheduled for next month. Balbis moved the case to October, but the consumer advocates wanted a longer extension to have adequate time to gather testimony, experts and respond to any written arguments Duke might file.

The plant has sat idle since fall 2009, when the utility took it offline for an upgrade and maintenance project that included replacing old steam generators. During the project, workers cut into the reactor's 42-inch-thick concrete containment building and it cracked.

An attempt to repair and bring the plant back online in March 2011 resulted in more cracks.

Duke and the state reached a settlement agreement last year that is returning almost $500 million to customers for replacement power the utility purchased because of the loss of the nuclear plant. In addition, Duke's insurance company agreed to pay just $835 million on policies that could have paid out between $2.7 billion and $5.5 billion.

A bigger insurance payout would not only help cover the outstanding bills, but also help with the construction costs of a planned natural gas plant that Duke says it will likely build to replace the nuclear plant.

John Burnett, a lawyer representing Duke, said at Tuesday's hearing that the utility welcomes a thorough review of the issues. But he said the settlement agreement the utility reached with the state bars any action against the company for its actions since the settlement was reached.

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"We're not going to go back in time and judge the prudence of those decisions," Burnett said. "Everything is prospective in that settlement agreement. It does not look back."

Rehwinkel and other consumer advocates disagreed.

In particular, they said, they never agreed in the settlement that they would not challenge whether Duke got a good deal for customers from its insurance company. The advocates questioned whether Duke simply worked to protect the insurer, the Nuclear Electric Insurance Limited, or NEIL, a mutual company of which Duke is one of the largest members.

"Did they maintain adequate and appropriate insurance coverage," asked Robert Scheffel "Schef" Wright, a lawyer for the Florida Retailers Association? "As one of the largest members of NEIL, did they have a conflict of interest?"

Ivan Penn can be reached at or (727) 892-2332.