Duke Says No Decision to Fix or Shut Florida Reactor

Duke Energy Corp. hasn’t made a decision yet on whether to repair or retire the idled Crystal River nuclear plant, acquired as part of its $17.8 billion purchase last month of Progress Energy Inc.

The company is completing engineering studies, determining what it can recover from an insurer and whether it will be able to renew the reactor’s license, Duke Chairman and Chief Executive Officer Jim Rogers told the Florida Public Service Commission at a hearing in Tallahassee today. Rogers said he “can’t predict” when a decision will be made on Crystal River 3, which has been shut since 2009.

Duke faces as much as $40 million in customer payments if it doesn’t begin repairs by the end of this year, under a settlement with Florida regulators. Rogers said on Aug. 2 that the cost of repairing the plant 80 miles (130 kilometers) north of Tampa, Florida, was “trending up” from a 2011 estimate of $900 million to $1.3 billion

The state commission sought the briefing by Rogers on how the company’s acquisition of Progress “will affect Florida consumers,” according to a July 17 press release. The agency’s approval wasn’t required for the July 2 acquisition. Duke’s board voted to replace Progress CEO Bill Johnson as head of the combined company hours after the merger closed, in part because of questions about the reactor, Lead Director Ann Maynard Gray told North Carolina regulators at a July 20 testimony.

Progress was “prejudiced” toward repairing the reactor, Gray said. She said Johnson delayed responses and failed to promptly report to the board communications with the plant’s insurer.

Johnson said he was fired because Duke had “buyer’s remorse” about the deal.

Insurance Mediation

An independent report on the reactor is expected in a “couple of months,” Rogers said today.

Duke has entered into non-binding mediation with Nuclear Electric Insurance Ltd., which insures the reactor and is facing its biggest claim ever, Rogers said. That process is expected to take place in the fourth quarter.

If mediation fails, the claim will go to arbitration, which Rogers said may delay a decision.

“We feel like there’s money due on this claim and we intend to pursue it,” Vincent Dolan, president of Duke’s Florida unit, said at the hearing.

License Renewal

The reactor’s license is set to expire in 2016. The company has asked the Nuclear Regulatory Commission to renew the license for another 20 years. The nuclear agency said last week it’s halting final decisions on licenses while it completes a review of waste storage.

Progress, the owner of utilities in Florida, North Carolina and South Carolina, said costs associated with the Crystal River plant reduced per-share earnings during the second quarter. The company has previously said the reactor would be able to resume operation in 2014 if regulators approve a repair plan.

The silo-shaped concrete building that houses the Crystal River 3 reactor cracked in 2009 as crews replaced the steam generators, huge pipe assembles that transfer heat from the nuclear reactor to power-generating turbines. The building was patched and cracked again in March 2011 as workers tightened steel tendons intended to strengthen it.

“We are going to try to make a prudent decision,” Rogers told reporters after the meeting today. “We understand the consequences of not getting it done by year-end.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE