It will still be months before Progress Energy (NYSE: PGN) decides whether it will repair or retire the Crystal River nuclear plant in Florida, but a proposed settlement with stakeholders should reduce the risks associated with making that decision, company officials indicated Jan. 23.
The future of the 860-MW pressurized water reactor has been in doubt since the discovery of significant concrete damage when Progress Energy started to install new steam generators in the fall of 2009.
Progress Energy officials outlined the proposed settlement in a Jan. 23 conference call with analysts. The proposed settlement covers regulatory issues ranging from the Crystal River outage to funding work on the proposed Levy nuclear plant.
As of last fall, Progress was estimating that it would cost between $900 million and $1.3 billion to repair Crystal River and bring it back online in 2014. Progress had already spet $229 million in repair costs and had received $136 million in insurance compensation at the end of September 2011. Also, as of last fall, Progress had spent $457 million in replacement power costs and had recouped $162 million in replacement power expense from its insurer.
When all the agreement provisions are factored in, the estimated 2013 total adjustment for the average residential bill is approximately $4.93, or 4% more than current rates, Progress Energy said in a news release.
Officials said whether the company opts to repair or retire the plant depends on factors such as regulatory issues, engineering and insurance reimbursement connected with the long-running outage. The proposed settlement, which must still be approved by the Florida Public Service Commission, goes a long way toward offering regulatory certainty. A PSC spokesperson said Jan. 24 that no date has been set to take up the settlement.
The agreement, developed with the Office of Public Counsel and other consumer advocates, provides customers a refund of a portion of Crystal River Nuclear Plant (CR3) replacement fuel costs and rate certainty related to the company’s proposed Levy County nuclear project and base rates.
The Florida PSC has been doing a “prudence review” of the original steam generator replacement plan that preceded the October 2009 separation of concrete or “delamination” at the plant. The settlement would largely settle the prudence review.
The proposed agreement would also refund $288 million to Progress Energy Florida customers through the fuel clause in 2013-2016. The refund is meant to compensate ratepayers for replacement power costs associated with the ongoing outage.
The deal would also remove Crystal River from the rate base while the company considers options for the plant. The deal also limits the costs that customers could be charged through 2017 for the proposed Levy County nuclear plant.
If approved by the PSC, the settlement will take effect with the first billing cycle of January 2013.
The proposed settlement retains Progress Energy’s right to repair or retire the nuclear plant. The deal would also divide the risk between utility ratepayers and shareholders.
Under the settlement, the portion of the nuclear cost-recovery monthly fee (part of customers’ monthly bills) for the proposed Levy County nuclear project, including funding to complete the license application process with the Nuclear Regulatory Commission (NRC), will be fixed from 2013 through 2017.
“We continue to believe additional carbon-free nuclear energy should be a part of our future, particularly as the cost of environmental regulations on other forms of electricity generation become increasingly stringent and expensive,” Dolan said. “This approach helps customers in the short term while we all press through these difficult economic times.”
The company’s application for the combined license for the proposed Levy County nuclear project remains on track before the NRC and the combined license is expected to be issued in early 2013.
The engineering and bidding work must be largely completed before Progress Energy can hash things out with Nuclear Electric Insurance Limited (NEIL). In public statements since the outage began, Progress Energy has expressed optimism that much of the costs associated with the Crystal River troubles can be recouped through insurance.
Progress Energy CEO Johnson said the company now hopes to conclude its merger with Duke Energy (NYSE: DUK) in May or June of this year.