Five years ago, Peter Bradford warned that a Florida law allowing utilities to charge customers in advance for nuclear power projects could have “ruinous economic impacts.’’
Now Bradford, a former member of the U.S. Nuclear Regulatory Commission, has a message for state lawmakers who today will announce plans to fix the law.
Not in any way that would both significantly help utility customers and still get nuclear plants built, Bradford said. Utilities won’t accept changes that shift the financial burden back onto them.
“You couldn’t do anything fundamental without scaring (the utilities) away,” Bradford said.
Sen. Jack Latvala disagrees. He’s confident lawmakers can find “a happy medium” that makes it possible to keep some sort of advance fee intact and keep open the possibility of new nuclear construction.
“I would be doubtful that the Legislature would do anything that would send utilities packing in Florida,” said Latvala, R-Clearwater.
If lawmakers fail, the Legislature has two incompatible choices:
Let utilities keep charging customers for new reactors, knowing the probability is high that many projects will fail and ratepayers will get nothing for their money.
Or effectively give up on new nuclear power, pushing Florida into over-reliance on natural gas, abundant and cheap now but historically unpredictable.
The law at the center of this conundrum is called the Nuclear Cost Recovery Clause, put in place in 2006 to encourage construction of new nuclear plants and upgrades to older facilities. At the time, nuclear plant projects had become synonymous with long delay, cost overrun and failure. Wall Street and other outside investors had no interest in supporting them.
In the name of energy security and diversity, Florida lawmakers eliminated the upfront risk for utility shareholders and investors. The law shifted the danger to power company customers. Now, customers would pay the early financing costs of nuclear projects — and utilities would get their cut — while the plant was still in the design phase.
Progress Energy Florida, which helped write the law, enticed lawmakers with the promise that making customers pay in advance would actually save them money, in the same fashion as paying off a credit card each month avoids finance charges.
The law included no penalties should the utilities mess up. No benchmarks. No caps on spending. No caps on how much a utility could pocket if a project failed. No deadlines.
Lawmakers voted to pass the bill 158 to 1.
The law, as Bradford later warned state regulators, would open up a financial blackhole.
Progress Energy Florida’s 1.6 million customers forked over almost $500 million for upgrades to the Crystal River nuclear plant, knocked offline by a botched upgrade project. Progress Energy’s new owner, Duke Energy, said earlier this month that it would close the plant forever. Customers shouldn’t expect a refund, and the utility gets to pocket $50 million.
The law also did nothing to protect customers as Progress Energy’s two-reactor project in Levy County ballooned from an original estimate of about $5 billion to $24 billion. Construction has not begun and the plant might never get built. Still, customers are already on the hook for $1.5 billion. Duke gets to pocket about $150 million of that money.