Progress Energy could seek to pass along hundreds of millions of dollars in extra costs to customers because of a massive repair project at a Crystal River nuclear plant.
Top Progress executives held a conference call with Wall Street analysts Tuesday, a day after filing documents with the Florida Public Service Commission and federal officials that outlined the companys decision to repair a containment building at the plant.
Progress has insurance that it expects will largely pay for the repairs. But with the plant shut down until 2014, it also will have to spend about $1 billion on other sources of electricity to replace the plants generation.
Insurance will cover only $490 million of those replacement-power costs, which could lead to Progress seeking PSC approval to pass along the rest. Customers already are picking up $112 million in such costs this year, adding $3.57 to the monthly bill of a homeowner who uses 1,000 kilowatt hours of electricity.
Charles Rehwinkel, a state deputy public counsel who is working on the case, said the PSC will have to consider issues such as whether customers or Progress shareholders should bear the extra costs. The PSC will discuss the plant repair July 14, though it likely will not make decisions for months.
The commission really is going to need to get this one right, because there is so much at stake, said Rehwinkel, whose office represents consumers in utility cases.
During the conference call Tuesday, Progress executives said they considered numerous options before deciding on the repair project, which is expected to cost $900 million to $1.3 billion.
But company Chairman and CEO Bill Johnson said repairing the plant would save billions of dollars long-term, compared to the possibility of replacing it with a new natural-gas plant. At least in part, that is because of the ongoing costs of buying fuel for natural-gas plants.
Johnson also used the call to offer assurances that Progress is handling the nuclear project safely.
Safety is our highest priority here, he said. The plant is in a safe condition and will remain so.
Progress is in the process of being acquired by Duke Energy. Johnson said company officials still expect the deal to close by the end of the year.
The plant was first damaged in 2009 during a project to replace a steam generator. Workers needed to create an opening in the containment building to allow the generator to be replaced, but the project caused a separation in part of the buildings concrete.
This March, as the plant was being prepared to operate again, another concrete separation was found in a different part of the containment building. That led to the decision to do the massive repair project to remove and replace concrete in the buildings walls.
Rehwinkel said the issues are complex financially and from an engineering standpoint.
Were reviewing literally millions of pages of documents that weve been getting since last year, he said.
Vincent Dolan, president and CEO of Progress Energys Florida subsidiary, said the PSC will review the companys replacement power costs each year. That makes it unclear how much actually could get passed on to consumers.
But Mike Mulhern, chief financial officer for Progress, said the total replacement power costs likely will total more than $1 billion by the end of the repairs. After taking into account insurance, he said the company would have $500 million to $600 million in additional costs.
Also, Progress could have a smaller amount of other costs that it could try to recoup as part of its base electric rates. The presentation Tuesday listed those costs as $65 million, which includes a $10 million insurance deductible.
__
