On Friday, utilities provider Progress Energy filed a comprehensive settlement agreement with the state Public Service Commission — an agreement that specifically addresses outstanding issues with the company’s nuclear plant at Crystal River, which was closed for repairs in 2009 and hasn’t opened since.
Progress Energy was expected to ask for a base rate increase this coming year, to help pay for nuclear cost recovery repairs on the Crystal River plant. Legislators, including state Sen. Mike Fasano, R-New Port Richey, have supported the repeal of a 2006 law that gave the company the opportunity to collect that money.
The driving force behind the attempt to repeal the law is the high cost of repairs projected by Progress Energy, a number that has increased exponentially in the years since the company first botched a maintenance and upgrade project at the Crystal River plant.
“The main issue is that Progress Energy came before the state Legislature, and testified what they projected costs to be,” says Fasano’s chief legislative aide, Greg Giordano. “But since then, the costs have increased significantly.”
Those costs would be passed directly on to consumers who rely on the plant for their energy needs.
“Progress Energy is owned by shareholders … so they should take the brunt of investing in new technology, not the customer,” says Giordano.
Much criticism was lobbed at Progress over the way the company handled repairs at the plant. The utility was the first in the nation to manage a steam generator replacement project itself, a decision that backfired.
“People said they should have had outside repair people,” says Giordano. “But they fixed it themselves, and it caused even more damage.”
The settlement agreement would resolve many of the issues consumers have with the repair costs and, though customers will see a rate increase, they will also be awarded credits over the next four years. The settlement must still be approved by the Florida Office of Public Counsel Public Service Commission in a meeting slated for February.
The settlement details include the following:
- Over the next five years, Progress Energy can collect $350 million from its customers — a charge broken down into $3.45 per 1,000 kilowatt hours.
- Progress Energy is prohibited from seeking any additional cost recovery dollars prior to January 2018.
- The Crystal River plant must refund $288 million back to customers (in the form of credits on their bill) over the next four years.
- The Office of Public Counsel also waives its right to challenge the repair plan, unless that plan is found to be fiscally irresponsible, or has any outright inappropriate charges in it. (The commission had originally scheduled hearings for June 2012.)
Without the settlement, Giordano says, customers would have been paying $40-$50 per month just for the nuclear recovery costs.
One possible penalty included in the settlement is that if Progress Energy does not start its repairs by end of 2012, the company will owe $100 million for costs of replacement fuel, to be charged over the next four years. That money would be owed to the consumers.
The Office of Public Counsel has preemptively agreed to a $150 million base rate increase starting in 2013. The company was expected to ask for three times that originally.
Progress Energy has hovered at a 9.5 percent return on equity since the Crystal River accident (about 1 percent less than a “normal” return on equity). If the company’s earnings fall below 9.5 percent, according to the settlement, they can ask for an increase (but only up to 10.5 percent).
According to Giordano, Fasano is supportive of the settlement, which he believes will “put an end to a lot of customer uncertainty.”
“[Customers] will know what they have to pay and [the company] has an incentive to get the plant fixed quickly,” he says. “If you had a crystal ball, to see what the situation would have been in 2018, I think most people would agree that this is the better deal. Who knows what [Progress] would have asked for, or would have been granted.”
Based in St. Petersburg, Progress Energy serves central and north Florida. In a statement about the settlement, company president and CEO Vincent Dolan said the agreement would help ensure “the continued safe, reliable and environmentally sound operation of the electric system that serves more than 1.6 million Florida families and businesses.”