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Tue January 8, 2013
Progress Energy's $100-Million Dilemma: Retire Or Repair Crystal River Nuclear Plant
Still undecided about whether to repair or permanently shut down an idled nuclear-power plant, Progress Energy Florida faces the likelihood of eventually refunding up to $100 million to customers.
The refunds stem from a wide-ranging settlement agreement that Progress reached in early 2012 with representatives of consumers and business groups. Under that settlement, the utility would not have been subject to refunding money if it started repairs on the Crystal River nuclear plant by Dec. 31.
That did not happen. The settlement says Progress will be required to make refunds if the plant doesn't start operating again in 2015.
Progress attorney John Burnett said Monday during a briefing at the Florida Public Service Commission that the utility expects to make a decision about repairing or permanently shutting down the plant by this summer. But even if Progress decides to repair the plant, it is projected that the repairs would take roughly three years.
State Deputy Public Counsel Charles Rehwinkel, whose office represents consumers in utility issues, said that makes it virtually certain that Progress will be "on the hook" for $100 million in refunds, whether it decides to repair or permanently shutter the plant. The settlement calls for $40 million in refunds if the plant does not operate in 2015 and $60 million if it does not operate in 2016.
The briefing Monday shed little light on how Progress' parent company, Duke Energy, ultimately will handle what has been described as an unprecedented situation at the Crystal River plant.
The 1970s-era nuclear plant faced an initial shutdown after a containment building was damaged in 2009 during a project to replace a steam generator. In early 2011, as the plant was getting prepared to operate again, additional damage was discovered in a different part of the building.
A consultant's report last year put the minimum repair costs at nearly $1.5 billion, but said a "worst-case scenario" would cost $3.43 billion. A major question centers on how much money an insurer, Nuclear Electric Insurance, Ltd., will pay to offset costs.
Burnett said the utility and the insurer have held two mediation sessions aimed at resolving the payment amount. If mediation does not work, the parties would move into arbitration.
Robert Scheffel Wright, an attorney for the Florida Retail Federation, which frequently intervenes in utility cases at the PSC, said the decision about repairing or permanently closing the plant involves "a lot of moving parts." That includes Progress working with consumer and business representatives, along with its attempt to resolve the insurance issue.
"It's not just knocking down a bunch of concrete and putting up a bunch of concrete,'' Wright said.
Jon Moyle, an attorney for the Florida Industrial Power Users Group, which also intervenes in utility cases, alluded to the major financial stakes in the decision. "The dollar number starts with a 'b,' not an 'm,' '' Moyle said, referring to billions of dollars instead of millions.
The 2012 settlement agreement includes the $100 million in potential refunds for what are known as "replacement fuel" or "purchased power" costs, which relate to electricity needed to make up for the lost generation at the idled plant.
That amount would be in addition to $288 million in refunds that the settlement already requires Progress to make to customers. The first $129 million installment of those refunds starts this year.
Monday's briefing was one in a series held by PSC member Eduardo Balbis, who has a lead role in overseeing the issue for the commission. Also, utility officials have regularly met with representatives of consumers and business groups --- engaging in what Rehwinkel described as "rather robust discussions."
Burnett said the utility also has had four teams of employees working on various issues related to the decision about repairing or permanently closing the plant.
But George Cavros, an attorney for the Southern Alliance for Clean Energy, which was not a party to the settlement, said after the briefing that he thinks a repair would be "very risky" for customers.
"It's critically damaged, and we definitely have concerns about the ability to actually repair,'' Cavros said.
Jim Saunders reports for the News Service of Florida