Duke Kills Florida Nuclear Project, Keeps Customers' Money

Georgia Power's Vogtle 3 and 4 plant construction site Photograph Courtesy of Georgia Power Company

The decision by Duke Energy to scuttle a proposed nuclear reactor project in central Florida leaves utility customers in the state with a tab of more than $1 billion—most of it already paid to Duke—for unbuilt plants that may never produce a single kilowatt of energy. That’s proved a powerful irritant for customers in the Sunshine State, where air conditioning is a necessity for much of the year.

The company said Thursday that it will halt construction on two reactors planned for Levy County, north of Tampa, after their estimated date of completion had stretched into 2024 at a projected cost of some $24 billion. Duke inherited the project as part of its purchase of Progress Energy last year, which made it the nation’s largest power utility. Duke’s decision also calls into question whether another large utility in the state, Florida Power and Light, will proceed with two new reactors it plans near Homestead, south of Miami.

“Consumers should rejoice that the fleecing will end by one of the companies in this long and unfortunate chapter in Florida energy history, where utilities have conspired with legislators and the Public Service Commission to take advantage of Florida consumers,” said Stephen Smith, executive director of Southern Alliance for Clean Energy, an organization that has criticized plans for nuclear power plants in several states. The group held a conference call Friday to discuss the project’s end. “The bad news about all of this is clearly that consumers have paid literally billions of dollars for a facility that they are going to get no value from.”

The primary reason for those huge sums? Lawmakers in at least three states have allowed utilities to recoup their engineering and planning costs from customers years before any construction begins on new plants. Florida legislators passed the first such law in 2006, followed by Georgia and South Carolina. A lawsuit over the Florida measure went to the state Supreme Court, which ruled it constitutional. Multiple efforts to repeal the law have failed.

Duke has collected $819.5 million in Florida since 2009 for the Levy County project and work at a separate planned nuclear site, according to the Florida Public Service Commission. Under a settlement with the state, Duke plans to collect another $350 million in costs from Florida customers over 20 years starting in 2017. Cindy Muir, a spokeswoman for the Florida Public Service Commission, which regulates utilities operating in the state, said commissioners “followed the laws as directed by the Legislature” when approving funds for the Duke projects.

Southern Co.’s Georgia Power unit is building two new reactors in eastern Georgia, while Scana is building two reactors at a site in Fairfield County, north of Columbia, S.C. Both projects have been funded with so-called advance cost recovery money charged to utility customers.

“The insanity of advance cost recovery has been revealed in Florida—it’s the ‘emperor has no clothes’ time,” says Mark Cooper, a senior fellow for economic analysis at Vermont Law School, who works with the Southern Alliance. “The notion that utilities are going to try to go forward without having a great deal of risk [on shareholders] has suffered a major blow here.” The alliance, based in Knoxville, Tenn., also argued that Florida’s Legislature, the PSC, and the Florida Office of Public Counsel, which advocates for consumers before the PSC, had failed state residents when it comes to nuclear plants.

“Whether I think it’s a good law or a bad law is irrelevant, I don’t have any say-so in that,” responded J.R. Kelly, an attorney who serves as Florida’s Public Counsel. His office is not empowered to lobby state legislators, he said.

In canceling the Levy County reactors, Charlotte-based Duke said its decision was prudent given that the U.S. Nuclear Regulatory Agency would be unable to approve a construction and operating license for the project before January, which would mean the plant would not begin operating before 2024. Duke plans to pursue the license and expects to receive it in 2016, spokesman Rick Rhodes said today. The company considers the project to be merely delayed, he added, with future construction there remaining likely. “Our philosophy at Duke is that you need a diversity of different types of fuel,” Rhodes said. “I think as a utility, and as a country, we have to have nuclear in our future.”

Some observers remain skeptical of the company. “I can’t believe there’s not a good law firm somewhere in these great United States looking at this and saying is there a possibility of a class-action lawsuit” for consumers, said Florida Representative Mike Fasano, a Republican from New Port Richey who has testified against advance cost recovery laws in other states. He alleged that Duke never intended to build nuclear plants in Florida and lied to lawmakers about its plans.

The Duke project’s demise—for the near future, at least—is a further nail in the coffin of the U.S.’s so-called nuclear renaissance, an effort begun during the George W. Bush administration to revive the nation’s nuclear power industry through streamlined regulatory approvals and federal loan guarantees and subsidies. Rival utilities NRG Energy and Exelon have also shelved plans for nuclear reactors over the past four years.

Most of that reversal can be traced to the plummeting price of natural gas, which now trades around $3.35 per million British thermal units. Utilities, which account for about one-third of all U.S. natural gas use, have migrated to the cheap gas to fuel electricity production. Five years ago, when development on several of the Southeastern nuclear projects commenced, gas traded above $13. Its plunge has helped to wreck the feasibility of many planned nuclear plants.

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