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Duke Energy’s defunct nuclear plant north of Crystal River serves as an example of what happens when customers bear the capital risks that should be carried by investors or lenders, according to a report released Thursday. Those customers get soaked when investors and lenders would have been paid dividends and interest.
“To understand why customers take a bath under these arrangements, you need look no further than the recently canceled effort to increase the output of the Crystal River nuclear unit in Florida,” said Peter A. Bradford, adjunct professor at the Vermont Law School, a former member of the U.S. Nuclear Regulatory Commission (NRC) and a former utility commission chair in New York and Maine.
“Pursuant to Florida’s law compelling customer investment, Crystal River (power plant) customers advanced tens of millions of dollars to buy equipment and pay for construction,” Bradford said. “But the utility bungled the job so badly that the plant is now closed for good.”
Work in an effort to repair a cracked containment building was performed by Progress Energy Florida prior to Progress merging into Duke.
When Duke Energy closed the Crystal River reactor, it announced it would seek $1.65 billion from Florida customers for its failed investments.
“Most of the money is gone. Refunds are unlikely,” Bradford said. “This is what I mean when I say that customers who take on large risks for which they are not being paid are a classic attribute of what Wall Street calls dumb money.”
Bradford and Mark Cooper, senior fellow for economic analysis with the Institute for Energy and the Environment, Vermont Law School, and author of “Policy Challenges of Nuclear Reactor Construction, Cost Escalation and Crowding Out Alternatives” (2009), spoke during a Thursday teleconference about reactor projects in Florida, South Carolina and Georgia, where state legislation has enacted advanced-cost-recovery financing in construction to shift the risk to customers, now amounting to $6 billion they will have to “eat.”
The authors contend ratepayers caught up in this financing would be better off to abandon such projects, forget about any refunds and encourage the development of other energy sources.
“Reactors simply cannot be built at a cost that makes nuclear power competitive with the alternatives available,” Cooper said.
The report, available at tinyurl.com/agxv9jz, also makes the case construction of the Levy County nuclear plant does not make economic sense. If Duke Energy does not want to spend $1.3 billion to $3 billion to repair the Crystal River unit, why spend $24 billion to build Levy?
As the Levy plant would not be in power production for at least 10 years, better alternatives already are being found, the authors argue. And natural gas currently is cheap.
Contact Chronicle reporter Chris Van Ormer at 352-564-2916 or email@example.com.