Florida legislators hope to fix nuclear advance fee law

Duke Energy announced earlier this month that it will permanently close the crippled Crystal River nuclear plant.
Duke Energy announced earlier this month that it will permanently close the crippled Crystal River nuclear plant.
Published Feb. 11, 2014

Five years ago, Peter Bradford warned that a Florida law allowing utilities to charge customers in advance for nuclear power projects could have "ruinous economic impacts.''

It did.

Now Bradford, a former member of the U.S. Nuclear Regulatory Commission, has a message for state lawmakers who today will announce plans to fix the law.

They can't.

Not in any way that would both significantly help utility customers and still get nuclear plants built, Bradford said. Utilities won't accept changes that shift the financial burden back onto them.

"You couldn't do anything fundamental without scaring (the utilities) away," Bradford said.

Sen. Jack Latvala disagrees. He's confident lawmakers can find "a happy medium" that makes it possible to keep some sort of advance fee intact and keep open the possibility of new nuclear construction.

"I would be doubtful that the Legislature would do anything that would send utilities packing in Florida," said Latvala, R-Clearwater.

If lawmakers fail, the Legislature has two incompatible choices:

• Let utilities keep charging customers for new reactors, knowing the probability is high that many projects will fail and ratepayers will get nothing for their money.

• Or effectively give up on new nuclear power, pushing Florida into over-reliance on natural gas, abundant and cheap now but historically unpredictable.

• • •

The law at the center of this conundrum is called the Nuclear Cost Recovery Clause, put in place in 2006 to encourage construction of new nuclear plants and upgrades to older facilities. At the time, nuclear plant projects had become synonymous with long delay, cost overrun and failure. Wall Street and other outside investors had no interest in supporting them.

In the name of energy security and diversity, Florida lawmakers eliminated the upfront risk for utility shareholders and investors. The law shifted the danger to power company customers. Now, customers would pay the early financing costs of nuclear projects — and utilities would get their cut — while the plant was still in the design phase.

Progress Energy Florida, which helped write the law, enticed lawmakers with the promise that making customers pay in advance would actually save them money, in the same fashion as paying off a credit card each month avoids finance charges.

The law included no penalties should the utilities mess up. No benchmarks. No caps on spending. No caps on how much a utility could pocket if a project failed. No deadlines.

Lawmakers voted to pass the bill 158 to 1.

The law, as Bradford later warned state regulators, would open up a financial blackhole.

Progress Energy Florida's 1.6 million customers forked over almost $500 million for upgrades to the Crystal River nuclear plant, knocked offline by a botched upgrade project. Progress Energy's new owner, Duke Energy, said earlier this month that it would close the plant forever. Customers shouldn't expect a refund, and the utility gets to pocket $50 million.

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The law also did nothing to protect customers as Progress Energy's two-reactor project in Levy County ballooned from an original estimate of about $5 billion to $24 billion. Construction has not begun and the plant might never get built. Still, customers are already on the hook for $1.5 billion. Duke gets to pocket about $150 million of that money.

Public outrage, following a series of stories in the Tampa Bay Times outlining the financial realities, began to weaken the law's once unshakable support in the Legislature. Nuclear supporters like Latvala, who will be joined by Sens. John Legg, R-Lutz, Jeff Brandes, R-St. Petersburg, and Wilton Simpson, R-New Port Richey, at the news conference Thursday, began to hear from voters.

"It's an issue of concern to my constituents on an increasing basis," Latvala said.

Duke Energy spokesman Sterling Ivey said the utility is "committed to a reasonable discussion" about the law.

"When specific legislation is introduced we will have the opportunity to determine the impact on our business and customers," he said.

• • •

But what's the perfect fix?

Repealing the law, a proposal championed by a small group of legislators, would stanch customers' financial liabilities. It would also doom any new nuclear projects.

"There's no question that repealing the law would effectively kill all investment in new nuclear power for Florida," said Mark Bubriski, spokesman for Florida Power & Light, which has two new nuclear reactors in the planning stages.

Legislators could force utilities to refund the money to customers if a project isn't built. But that, essentially, is the same as shifting all the risk back to the utilities. They have said they won't build nuclear plants under that condition.

How about setting construction deadlines? The nuclear industry has an infamous history of delay, cost overruns and failures. Given that, utilities are unlikely to accept any hard deadlines that would require paying customers back or that could cutoff the flow of money in the middle of a project. It would be too much of a financial risk. And if the deadlines were too wishy washy, they would not do much to protect customers. Besides, it isn't easy for utilities to control the timing of federal regulatory decisions on new reactors.

Lawmakers could attempt to cap the amount customers would have to pay, exactly what Bradford said he recommended to Florida regulators years ago. Progress' response at the time: Not if you want a nuclear plant built.

The legislators could remove utilities' ability to profit on the advance fee. That fix might make customers feel better, but it would be largely symbolic. In the case of the Levy project, for instance, Progress Energy Florida would have to forgo its $150 million cut. That would still leave customers on the hook for more than $1.3 billion.

House Speaker Will Weatherford, R-Wesley Chapel, and Senate President Don Gaetz agree that the law needs review.

"I'm going to make sure it gets a full debate, gets considered," Gaetz told the Tampa Bay Times recently. "Absolutely."

• • •

The debate could be a long one.

Some utilities and legislators remain fixated on nuclear projects, concerned that Florida is becoming overly dependent on natural gas. The state now gets more than 60 percent of its electricity from natural gas, more than double than just a decade ago.

Even so, Bradford doesn't see much hope for new nuclear projects in Florida. Even a successful fix to the advance fee law would not change the reality that new nuclear plant projects have huge upfront costs that often lead them to get canceled.

"You can't make the cost of these things go away." Bradford said.

His solution? "Build something else."

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