Florida Power & Light, Progress Energy Florida customers to pay US$282M in 2012 to upgrade nuclear power plants, build new ones even if those projects are never completed, state regulators rule

Graziela Medina Shepnick

TALLAHASSEE, Florida , October 24, 2011 (Associated Press) – Customers of Florida's two largest electric utilities will pay $282 million next year to upgrade nuclear power plants and build new ones even if those projects are never completed.

State regulators on Monday turned aside objections from some consumers and their advocates who argued that policy is unfair.

The Public Service Commission approved the full $196 million that Florida Power & Light Co. sought for pre-construction expenses. The five-member panel, though, agreed to cut Progress Energy Florida's $141 million request by about $55 million, or nearly 40 percent. The votes were unanimous in each case.

FPL's 4.5 million customers in South Florida and along the state's east coast will pay a nuclear cost recovery charge of $2.20 per month next year for 1,000 kilowatt-hours, which is about average residential usage. That's $1.87 more than the recovery charge they are paying now.

Progress Energy's $86 million charge amounts to $2.93 per month for 1,000 kilowatt hours. That's $2.60 less than the company now is charging its 1.6 million customers in north and central Florida.

Some local officials, individual customers and consumer groups objected to the fees on grounds the utilities have not yet made final decisions to go forward with the projects. They also have not yet received all needed licensing and regulatory approval.

The critics say the utilities are keeping their options open while customers are picking up the tab.

"I'm not uncomfortable with the term 'pursuing an option,'" said Commissioner Eduardo Balbis. "The making of an irrevocable decision at this time on a project of this magnitude may not be unreasonable."

Balbis said the commission and utilities do annual feasibility studies. They show the nuclear plants still have a long-term cost advantage over other types of generation although the gap has narrowed, largely because of dropping natural gas prices.

Public Counsel J.R. Kelly, the state's consumer advocate, did not take a position on that issue. Kelly said state law permits nuclear cost recovery and that he must abide by it.

The law is being challenged in federal court and legislation has been introduced to repeal it next year. A similar bill this year failed to get traction in the Legislature, which passed the cost recovery law in 2006 to encourage the expansion of nuclear power. Utilities otherwise would have to borrow the money, but many investors are reluctant to take a chance on nuclear plants.

Lawmakers see nuclear energy as a way to reduce dependence on foreign fuel and cut climate-changing air pollution. Nuclear power critics cite such problems as ever-increasing construction costs, the still unsolved issue of spent-fuel disposal and potential radiation hazards if something goes wrong, such as Japan's nuclear disaster following an earthquake and tsunami.

The commission, though, accepted Kelly's proposal to reduce Progress Energy's request by approving only $60 million to pay for costs carried over from prior years instead of $115 million the utility sought for that purpose.

Progress had agreed in 2009 to let customers pay off those expenses at the rate of $60 million annually instead of all at once to hold down the amount of the cost recovery charge. The utility, though, asked to raise the 2012 amount to partly offset a sharp reduction in the fee because it had collected too much for other expenses. Even without Kelly's proposal the charge would have dropped by 85 cents per 1,000 kilowatt hours.

Commission Chairman Art Graham called it "Wimpy finance" after J. Wellington Wimpy, the burger-loving character in the "Popeye" comic strip.

"I'll gladly pay you on Tuesday for a hamburger today," Graham said, quoting Wimpy's best-known catch phrase.

With Florida's unemployment rate at 10.6 percent, the commission should hold down utility costs to help beleaguered consumers and encourage businesses to expand and add jobs, Graham said.

"The guy who doesn't have a job now would much rather not have to pay that extra money now," he said. "What it comes down to is: How great is the pain today?"

The panel may have saved consumers some pain next year, but staffers warned they'll be hurting more later. Reducing the 2012 payback is expected to raise the nuclear charge by $1.93 for 1,000 kilowatt hours for the next two years.

The nuclear fee is a relatively small component of each customer's bill. The commission next month will begin hearings on similar fuel cost recovery fees for all five of Florida's investor-owned power companies. Also, Gulf Power Co. currently is seeking an increase in its base rates while FPL and Progress plan to do the same next year.

The commission in 2012 also will consider whether to pass on to consumers various costs related to the shutdown of Progress Energy's Crystal River nuclear plant for repairs in 2009. It's still closed and isn't expected to reopen until 2014.

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