Progress Energy filing raises costs, delays start of nuclear power projects

Source: Progress Energy 

Progress Energy Florida (NYSE: PGN) has filed its annual nuclear cost-recovery clause (NCRC) projections with the Florida Public Service Commission (FPSC) for consideration for the 2013 billing cycle. In its filing, the utility provided updates on its proposed Levy County nuclear power project and on a project to increase the capacity at the Crystal River Nuclear Plant. These updates include new estimated in-service dates and a revised cost estimate for the Levy County nuclear project and 2013 cost-recovery estimates for the capacity upgrade project. 

"Nuclear power remains a key component of Progress Energy's balanced solution strategy to meet our customers' future energy needs with efficient, carbon-free electricity," said Vincent Dolan, president and CEO of Progress Energy Florida. "The 2006 Energy Act passed in Florida makes it possible for our company to pursue new, capital-intensive nuclear investments that will help ensure clean, affordable and reliable power for customers, now and in the future."

Progress Energy Florida's currently planned nuclear investments include: 

•Constructing two new, 1,100-megawatt (MW) nuclear reactors in Levy County, Fla. 

•Increasing the output of the existing Crystal River Nuclear Plant in Citrus County, Fla.

The NCRC filing is submitted each year in accordance with the Florida Renewable Technology and Energy Efficiency Act of 2006, which encourages the development of nuclear energy by allowing utilities to use a pay-as-you-go approach and recover prudent preconstruction and interest costs of new nuclear construction or expansion of existing nuclear plants. The statute helps reduce the overall cost of new nuclear projects and provides for annual review and approval by the FPSC.

Although states across the Southeast average about 24 percent natural gas generation, approximately 60 percent of Florida's electric capacity is currently powered by natural gas. Overdependence on any one fuel source can expose customers to potential fuel cost spikes and supply disruptions, and the FPSC has repeatedly cited the growing lack of fuel diversity in the state as a major strategic concern. Expanding utilities' nuclear generation capabilities helps balance the generation fleet and reduces these risks.

If approved in its entirety, Progress Energy's total 2013 NCRC charge would be $5.09 on a 1,000-kilowatt-hour (kWh) residential bill beginning with January 2013 billing (compared to $2.86 in 2012). As a result of the previously announced, FPSC-approved rate settlement agreement between Progress Energy and consumer advocates, the portion of the NCRC charge related to the Levy County nuclear project will increase to $3.45 on a 1,000-kWh residential bill in 2013 (compared to the 2012 rate of $2.67) and will remain fixed through 2017. In addition, the utility has requested to adjust the Crystal River Nuclear Plant upgrade-related portion of the NCRC charge to $1.64 on a 1,000-kWh residential bill in 2013 (compared to $0.19 in 2012).

The Crystal River Nuclear Plant has been safely shut down since a delamination - or separation - was discovered within the wall of the plant's containment building during a scheduled maintenance outage in the fall of 2009. The company and outside experts are conducting a thorough and systematic engineering analysis and review and are assessing options to repair the containment building and return the plant to service in 2014.

Also included in the utility's filing are updates to the Levy County nuclear project schedule and cost. Due to lower-than-projected customer demand, the lingering economic slowdown, uncertainty regarding potential carbon regulation and current, low natural gas prices, the company is shifting the in-service date for the first Levy unit to 2024, with the second unit following 18 months later. The revised schedule is consistent with the approach the utility publicly discussed after announcing the recent rate settlement agreement. Although the scope and overnight cost for the Levy County nuclear project - including land acquisition, related transmission work and other required investments - remain essentially unchanged, the shift in schedule will increase escalation and carrying costs and raise the total estimated project cost to between $19 and $24 billion.

On April 27, the Nuclear Regulatory Commission (NRC) issued the Final Environmental Impact Statement for the project. Based on its comprehensive review, the NRC has determined that there are no environmental impacts that would prevent the agency from issuing the combined operating license for the construction and operation of the proposed reactors. This is an important milestone for the project.

"The Levy County nuclear project continues to be the best long-term baseload generation option for Florida when evaluating cost, potential carbon regulation, fuel price volatility and the benefits of fuel diversification," said Dolan. "State-of-the-art nuclear power is important to reduce the carbon intensity and improve the fuel diversity of electric generation in Florida."

By maintaining a diverse mix of generation sources, utilities are better able to mitigate the impact of fossil fuel price volatility, enabling customers to benefit from short-term, downward-price fluctuations while realizing lower and more stable electric rates over time.



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