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Progress Energy Gets Small Rate Hike; Big Nuclear Costs Ahead

August 15, 2011 - 6:00pm

The Florida Public Service Commission granted a small rate increase to Progress Energy to upgrade the Crystal River power complex, and will rule later on a larger rate hike for the utility's two proposed nuclear reactors in Levy County.

The PSC awarded Progress an 18-cent-per-1,000-kilowatt hike. The commission will decide later on Progress' request to increase rates another $4.99-per-1,000 kilowatt for pre-construction costs at Levy.

Progress spokesman Tim Leljedal said, "Although Progress Energy is currently charging $5.53 on a residential 1,000-kilowatt hour bill under the nuclear cost recovery clause -- including $4.99 for Levy and 54 cents for the Crystal River 3 uprate project -- we are only seeking $4.65 for 2012. We're pleased that the PSC will allow us to collect the 18 cents for the uprate in 2012, and we're seeking the remaining $4.47. We're not requesting $4.99 for Levy for 2012, and we are not seeking 54 cents for the uprate for next year."

In separate cases, Progress and Florida Power & Light are seeking a combined $335 million in higher electric rates for nuclear power plant upgrades and construction. The utilities say investment in nuclear power is crucial to reducing carbon emissions and lowering fossil fuel costs in the future.

"They deliver long-term benefits to customers. Every year Levy is on line, it will reduce fuel costs by $1 billion a year. It's the only carbon-free program working 24/7," Leljedal said.

Mark Bubriski, spokesman for FPL, said, "Our nuclear uprate project alone is already beginning to deliver benefits to customers, and over its operational life, it is projected to save customers $4.8 billion on fossil fuel costs."

But consumer advocates have challenged the utilities' rate requests, as well as the state statute that allows power companies to bill customers years in advance of nuclear-plant construction.

"The industry rule of paying for 'Construction Work in Progress' has become 'Super CWIP' here. It totally throws out the concept of investor-owned utility," said Bill Newton, head of the Tampa-based Consumer Action Network.

"These rate increases are based purely on speculation, on plants that might never be built," he said.

The massive costs of building nuclear reactors is putting ratepayers on the hook for ever-larger amounts.

"Advanced nuclear cost recovery was put into effect by forward-looking lawmakers to take on these capital-intensive projects," Progress's Leljedal said. "We're a $10 billion company taking on a $17 billion project."

Likewise, FPL anticipates that its proposed added reactors at Turkey Point will run $12.8 billion to $18.7 billion.

Bubriski said, "FPLs nuclear projects are expected to save our customers billions of dollars in fossil fuel costs over their operational lifetimes."

Yet multibillion-dollar construction costs come first, and state Sen. Mike Fasano, R-New Port Richey, says he will try again next session to rein in utilities' ability to hike rates in advance.

"Bottom line, they're getting money for projects that are at least 10 years out. People may never get the benefits," said Fasano's spokesman, Greg Giordano.

Progress says it plans to open its Levy County facility in 2027. The U.S. Nuclear Regulatory Commission has not granted a construction permit for a new reactor in America since 1978.

Fasano, who said he regrets voting for the advanced-recovery law, says he plans to tack rate-restriction language onto a yet-to-be-named energy bill next year.

Rep. Michelle Rehwinkel Vasilinda, D-Tallahassee, carried similar legislation last year and plans to do so again in 2012.

"We're looking at a significant increase [in rates]. The costs are getting more exorbitant," said Rehwinkel Vasilinda, who will be sitting on both the Energy and Natural Resources committees.

But Fasano and Rehwinkel Vasilinda face an uphill climb politically. So far, no majority Republicans other than Fasano have expressed interest.

"The public is catching on to this, but the industry has its tentacles wrapped around the Legislature," Newton said. "The more money utilities spend, the more money they make."

Bubriski discounts the suggestion that ratepayers fund all construction costs upfront.

"Utilities only recover preconstruction costs, such as engineering, development, siting, the interest on money borrowed for construction, etc. Customers do not pay for construction costs until after a plant enters service -- which is when customers begin receiving the benefit of enormous fossil fuel savings," he said.

Still, Newton said Florida is far more generous than other states in allowing "advanced recovery" of costs. He notes, for example, that North Carolina, where Progress is headquartered and where it is in the midst of merging with Duke Power, does not allow "Super CWIP."

"Fact is, nuclear power wouldn't be viable economically if it weren't for the giant federal subsidies for [radioactive] waste. Taxpayer money is on the line for any problems that crop up," Newton said.

Currently, Progress is working to fix a containment wall that was damaged during a planned generator upgrade at Crystal River in 2009. Spending a reported $2 billion on prolonged repairs, company officials now estimate the reactor won't return to service until 2014.

On Tuesday, the NRC announced it had begun a "special inspection" at FPL's Turkey Point nuclear plant to investigate a 20-minute loss of the intake cooling water function at one of the plant's two units on Aug. 11. A report is expected within 45 days.

--

Contact Kenric Ward at kward@sunshinestatenews.com or at (772) 801-5341.

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