Florida PSC closes the books on Crystal River 3 cost recovery for Duke

The Florida Public Service Commission (PSC) on Oct. 14 approved the settlement of all cost-related issues to retire Duke Energy (NYSE:DUK) Crystal River 3 (CR3) nuclear power plant.

Commissioners are expected to review and decide on a final financing order in November. The development should save Florida consumers millions of dollars, the Florida PSC said in a news release.

Duke announced in February 2013 that it would retire the 800-MW nuclear unit in Florida that it acquired as part of the merger with Progress Energy. Duke decided that it did not want to make the potentially multi-billion-dollar investment to repair cracks in the plant, which had been idle since fall 2009.

The securitization financing order, if approved, allows Duke Energy Florida (DEF) to issue approximately $1.3bn in bonds to cover CR3 retirement costs and, ultimately, lower customer bills.

The utility has estimated that, by lowering interest costs, the order decreases the 20-year overall customer cost by about $600m. Based on those numbers, a 1,000 kWh-per-month residential customer’s bill would see an estimated $2.42 reduction compared to the traditional rate base method of recovery.

This year, the Florida Legislature passed a law allowing Duke to securitize its asset recovery. Duke expects to offer the Nuclear Asset Recovery Bonds to investors via a public offering registered with the Securities and Exchange Commission (SEC), which is typical of utility securitizations.

On July 27, DEF filed its plan with the PSC to assess customer fees for up to 20 years and sell this income stream to a “special purpose entity” that will use the fees as collateral for bonds. The nuclear asset recovery charge will be paid by all existing and future customers receiving transmission or distribution services from DEF. The funds Duke receives will be used to recover the amount of the CR3 regulatory asset. 

Parties agreeing on the financing issues include DEF, the Office of Public Counsel, Florida Industrial Power Users Group, PCS Phosphate, and the Florida Retail Federation. With all issues settled, latest hearing concluded Oct. 14.

The PSC selected Saber Partners to advise on this bond transaction. The firm also assisted the PSC on the nation’s first “hurricane-recovery securitization” for NextEra Energy (NYSE:NEE) Florida Power & Light in 2006. DEF serves approximately 1.7 million retail customers in Florida. 

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.