Duke should keep nuke in the mix

THE ISSUE: Duke CEO lukewarm on future of CR3.
OUR OPINION: Don’t pre-decide if the plant is worth repairing.

When the Duke-Progress Energy merger was announced, one of the benefits to Citrus County was the expectation the larger post-merger company would be better positioned to raise the capital needed to repair the Crystal River nuclear plant (CR3) and return it to service.

Further, in announcing the merger, the two companies said Progress Energy CEO Bill Johnson would become CEO of the new company. This offered some measure of assurance that commitments made by Progress Energy would be carried out by the new company.

However, within minutes of the merger being signed July 2, the new board — with a majority of former Duke directors — first hired Johnson and, on a split vote within the board, removed him as CEO and installed former Duke CEO Jim Rogers as chief executive of the merged company.

The boardroom coup led to questions and criticism of the company from several quarters, including former Progress Energy directors and the North Carolina Utilities commission, which had been repeatedly assured in company filings and hearings that Johnson would be CEO of the merged company.

The commission immediately set a hearing to question Rogers about the sudden change in leadership. During that hearing, Rogers told the commission Duke directors had lost confidence in Johnson. One specific issue he mentioned was the decision by Progress Energy to repair — rather than to potentially retire — the Crystal River nuclear plant. Rogers said Duke directors had read stories critical of Progress Energy published in Florida media outlets.

On the day of Rogers’ testimony before the utilities commission, three former Progress Energy executives who had been selected for executive leadership roles in the merged company resigned, leading to questions about turmoil within leadership of the new company. Since that time, the North Carolina commission has asked former CEO Johnson to testify, and has directed four Duke directors to testify, including two former Progress Energy directors and the two directors who were named by Rogers as having been the ones to tell him they had lost confidence in Johnson.

Given the regulatory issues facing the company and possible conflicts within Duke’s executive leadership and board of directors, our concern is whether the company will fully evaluate the long-term benefits of repairing the plant and make the long-term commitment to fund the work, or make a short-term decision to simply get past the CR3 issue by closing the plant and assigning that cost to the cost of the merger.

We hope that even with a desire to move past the post-merger drama of the executive leadership changes, Duke will look at the long-term benefits of the Crystal River nuclear plant for Florida’s energy supply. Today, natural gas is relatively cheap and available, and the easy short-term choice for electric power generation is to build natural gas plants rather than make the investment in nuclear plants that cost more to build but have more stable long-term fuel costs.

However, short-term decisions often have negative long-term impacts, as companies learned years ago when oil was cheap and oil-burning plants were being built across the country. When oil prices skyrocketed, these plants became expensive dinosaurs.

All of the electric-generating facilities Progress Energy has built in the past few years have been fueled by natural gas. With two of the coal-fired units at Crystal River slated for closing within the next few years, should CR3 be retired, Duke’s only non-gas-fueled electric generation in Florida would be the two newer coal units at Crystal River. This places Duke’s Florida customers at the mercy of natural gas prices that historically have fluctuated widely. This is not good long-term planning.