Senate committee hears arguments over advance fee for building nuclear plants

TALLAHASSEE — State Sen. Anitere Flores had a bottom line question for the president of Progress Energy Florida: "The 800 lb. gorilla in the room . . . is Progress going to build another nuclear power plant or not?"

The response: Progress still didn't know for sure.

That question, and the noncommittal answer, went to the heart of the Legislature's first meeting Monday on the controversial law that allows utilities to charge customers in advance for new nuclear plants, whether they actually build them or not.

The Senate's energy committee called on utility and nuclear industry officials to discuss why the advance fee law that has so far cost Progress Energy customers $1.5 billion should remain in effect if it's uncertain it will help construct any new nuclear plants.

The meeting comes after four Tampa Bay area senators supported a bill that would require utilities to start building new nuclear plants before Oct. 2, 2016 or the advance fee would end. The bill would also limit the amount utilities can pocket from the advance collections and require them to refund any money they pocket if they don't build the plants.

Sen. John Legg, R-Pasco, who sponsored the bill, urged the energy committee to stop allowing utilities to use the advance fee as a "blank check" to collect money for plants that may never materialize.

"It's very hard for us to look our constituents in the eye and say trust us," Legg said Monday. "Is there accountability and transparency in the nuclear cost recovery process . . . or is it a shell game?"

Progress Energy Florida president R. Alexander "Alex" Glenn attacked Legg's assertion that the utilities have a blank check.

"That is simply not the case," Glenn said. "We have to prove that those costs are reasonable and prudent."

Progress Energy Florida, which became part of Duke Energy last year, has proposed building a two-reactor plant in Levy County. The cost has exploded from an original estimate of about $6 billion to $24 billion. The completion date has also moved from 2016 to 2024 at the earliest.

Glenn told the Senate committee that the next step is securing its federal operating license, which allows utilities as long as 20 years to start construction. Glenn expects to get the license at the end of next year, at which time the utility will evaluate its options.

Glenn said it's difficult to know today what the economy and cost of other energy sources will be almost two years from now.

"Once we get that license, we have to look at what is the price of natural gas," Glenn said. "Is it still feasible to move forward with the project?"

The Legislature passed the advance fee law in 2006 to encourage the construction of nuclear plants. The idea was to save customers' money by paying financing and other charges in advance, similar to paying off a credit card balance each month to avoid higher charges later.

For years, legislators overwhelmingly supported the law, often saying that it would save customers money in the long run. As the delays and costs of the Levy County project piled up, a small band of lawmakers began to question the law. Then last year, after the Tampa Bay Times wrote a series of stories about just how much Progress Energy profited from the advance fee, more lawmakers including Sen. Jack Latvala, R-Clearwater, wanted to take a fresh look at the law.

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The $1.5 billion already collected from Progress customers can keep growing unless the advance fee is modified or repealed. Of that, Progress gets to keep $150 million. Under the law, Progress is not required to refund any of that money even if the plant isn't built.

Proponents say the law is necessary if the state wants any new nuclear projects, which require huge up-front costs. Paul Genoa, senior director policy development for the Nuclear Energy Institute, an industry lobbying group, described the fee as a critical piece of building nuclear plants, which "on average" are the lowest cost source of electricity available.

"Altering or repealing this legislation would be a grave mistake," Genoa said.

Steve Scroggs, senior director nuclear development for Florida Power & Light, which wants to build new reactors at its Turkey Point power station in South Florida, told the committee that the state Public Service Commission reviews the utilities' nuclear proposals every year and that should be enough.

"Every year they look at whether it is feasible," Scroggs said.

That response wasn't enough for Sen. Rene Garcia, vice chairman of the energy committee.

"Are the ratepayers evergoing to be compensated?" Garcia asked.

Rep. Dwight Dudley, D-St. Petersburg, who watched the meeting, was not encouraged by what he heard. Dudley, who wants the law repealed, wondered why the committee didn't schedule testimony from experts who oppose the advance fee.

"This was the nukes for Florida hearing," Dudley said. "There's a golden goose here in Florida and nobody wants to kill that goose."

Flores said the committee will continue reviewing the law to determine what action it will take.

"This is obviously step one," Flores said. "Stay tuned."

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