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Rethinking Nuclear Power in Florida

Tampa Bay Online: RUSSELL RAY - February 21, 2009

http://www2.tbo.com/content/2009/feb/21/bz-rethinking-nuclear-power/

When Progress Energy announced plans more than two years ago to build a nuclear plant in Levy County, the project met little resistance.

Electric bills were a lot lower, the utility's customer base was still growing and the Legislature had just passed a nuclear-friendly law to encourage construction.

Then it came: An economic recession led by a surge in housing foreclosures, a collapse of the banking industry and the loss of millions of jobs. For the first time in memory, Progress Energy began losing customers in Florida.

Last month, homeowners and businesses began receiving the tab for Progress Energy's nuclear plant. The consumer outrage has led lawmakers to call for changes. Suddenly, Florida's appetite for an expensive nuclear plant has diminished.

At least $4 billion of the $17 billion project is still slated to be collected from Progress Energy customers before the plant is even completed in 2017.

Now, state lawmakers are questioning the way Progress Energy is collecting the money, after the utility increased electric bills 25 percent, about $27 for 1,000 kilowatt hours, in January. More than a third of the increase, $11.42, was tied to preconstruction costs for the nuclear plant.

The backlash from consumers was immediate. Progress Energy responded last week by asking regulators for permission to lower the surcharge for its nuclear plant to $3.62 and reduce consumer fuel charges for 2009.

During next month's regular session, the Legislature is expected to revamp the 2006 law that allows utilities to begin charging their customers for nuclear plants years before the plants are built. The controversial law was crafted to help energy companies absorb the high cost of constructing a nuclear plant.

Without the charge, Progress Energy may be forced to cancel the Levy County project.

In addition to creating 800 high-paying permanent jobs, the two-reactor project would create up to 3,000 jobs during the peak of construction. The company expects to begin pouring concrete for the first reactor in 2012.

Sen. Mike Fasano, R-New Port Richey, said he is committed to slowing or halting the early recovery of costs related to the project. To reduce the financial impact on customers, the Legislature may pass an alternative law requiring the utility to spread the collection of costs over a longer period.

Jeff Lyash, president and chief executive officer of Progress Energy Florida, said losing the ability to recover costs early could jeopardize the project. Lyash isn't worried, however, saying conversations between Senate and House lawmakers aren't headed in that direction.

"There's ongoing dialogue on alternatives that would meet the objectives and lessen the customer price," Lyash said. "We are optimistic that dialogue will be constructive and in the end will be productive.

"A substantial revision in the policy would certainly require that we step back and reconsider the trajectory we're on."

Levy County Commissioner Nancy Bell said Progress Energy is very profitable and shouldn't be recovering any of the project's costs from customers early.

"They should be paying their way without increases to the customer," Bell said. "Why should the customer pay for a private company's infrastructure when they're super healthy?"

If Progress Energy is forced to wait until the project is finished to recover its costs, the project's price tag will go up because the company will have to borrow more money, Lyash said.

But Progress Energy's Levy County project faces challenges that go beyond cash-strapped customers in tough economic times.

In addition to a lifeless economy, Florida's population growth has slowed to a 30-year low, and Progress Energy's customer base is shrinking after years of steady growth.

The utility said last week it had 5,000 fewer Florida customers in the fourth quarter of 2008 compared with the same period in 2007.

The sour economy coupled with stagnant customer growth calls into question the need for a hefty investment in nuclear power.

But Lyash said the Levy County project is still relevant because the economic downturn and declining customer base are temporary conditions. What's more, additional nuclear power is essential for meeting new clean-air standards adopted by the state, he said.

Under executive orders signed by Gov. Charlie Crist in 2007, carbon dioxide emission from power plants must be reduced to 1990 levels by 2025.

"There is strong policy support for nuclear as a part of our energy mix," Lyash said. "While there are issues, I don't think that implies that there is not continued strong support."

Progress Energy's nuclear project won unanimous approval from the Florida Public Service Commission last July. The plant also requires approval from the Nuclear Regulatory Commission and the Florida Department of Environmental Protection.

DEP is expected to issue a decision this year. The NRC review is expected to take three to four years.

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