Duke Energy Corp. (DUK) will halt plans to build a new nuclear plant in Florida and seek to recover as much as $1.47 billion in costs associated with a shuttered reactor in the state under a settlement with regulatory staff.
Duke will record a $360 million pretax cost from the settlement in the second quarter, the Charlotte, North Carolina-based company said in a statement today. The agreement is subject to review by and approval from the Florida Public Service Commission.
The settlement resolves two issues associated with Progress Energy Inc.’s nuclear program. Duke acquired the company last year for $17.8 billion in a deal that made it the largest U.S. utility owner. Progress Energy’s Florida utility has been billing customers since 2009 to pay for a new nuclear plant and work on the Crystal River reactor near Tampa.
Some lawmakers aren’t happy with the deal.
“It’s grand theft,” Mike Fasano, a Republican state representative from New Port Richey, said in an phone interview before the details were announced. Fasano co-sponsored failed legislation this year to reform state law that lets utilities bill customers for plants not yet built. “There should be an investigation to determine when they decided not to build this plant.”
The company “had always intended to build that plant,” Alex Glenn, president of Duke’s Florida operations, said in a phone interview.
The contract was done in by regulatory delays that would prevent it from starting up before 2024, he said.
Duke shareholders will pay the cost to obtain a license for the site so it will be available as an alternative to natural gas when markets change, Glenn said. That expense won’t be billed to customers unless and until a decision to build the plant is made, he said.
This isn’t the first time Duke has slowed plans to expand nuclear power. The company asked federal regulators in May to suspend their review of its plans to add reactors at a site in North Carolina amid lower forecasts for power demand. NRG Energy Inc. (NRG) and Exelon Corp. (EXC) have also put new reactors on hold as the price of natural gas, which can also fuel power plants, has dropped to less than $2 per million British thermal units last year from more than $13 in 2008 .
Duke decided in February to shut rather than attempt to repair the 36-year-old Crystal River reactor and said at the time it will seek to recover $1.65 billion from Florida customers. The company also has proposed shutting two coal-fired generators at the site that don’t meet tighter clean-air standards.
The settlement would streamline the approval process to build at least two gas-fueled plants, Glenn said.
Duke said today it will continue to seek a license from federal regulators to build at the Levy County site. It will no longer move forward with a contract to get the two reactors built. Progress announced plans in 2008 to build two reactors at an estimated cost of $14 billion, with the first unit to begin operating in 2016. The company last year raised the price tag on the project to as much as $24 billion and delayed the start date to 2024.
As of February, Duke had collected $676 million for Levy and spent about $1 billion, Lloyd Yates, executive vice president for regulated utilities, told investors on a Feb. 28 conference call. The company will retain a 2012 settlement provision that allows it to recover about $350 million from customers for its Levy costs, according to a filing today.
The announcement was made after the close of regular U.S. trading. Duke increased 0.7 percent to $71.51 at the close in New York.
Duke is scheduled to report second-quarter financial results Aug. 7.
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