Duke Energy’s top executive told Florida regulators Monday that he’s committed to a long-term rate settlement they approved with Progress Energy four months before the two companies’ troubled merger.
CEO Jim Rogers also said Duke has not yet made a decision on whether to repair or shut down a nuclear reactor in Crystal River on Florida’s west coast.
The reactor, out of commission since 2009, was a focal point of the agreement between Progress Energy-Florida and consumer advocates. The deal, approved by the Public Service Commission in February, gave Progress a $150 million increase in base rates but also calls for $288 million in refunds over two years for costs related to the nuclear plant shutdown.
Another provision limits how much Progress can collect from customers in advance for preliminary work on a proposed new nuclear plant in Levy County, which may never be built.
“We’re fully committed to honoring that agreement,” Rogers told the five commissioners. “We believe it struck an appropriate balance between customers and our company. It provides greater price stability to customers over the next four to five years. That’s a good thing. Nothing has changed our opinion on that.”
Florida Public Counsel J.R. Kelly, who represents utility consumers, said he was encouraged that Duke is pursing Crystal River repairs as the best option if they prove technically and financially feasible.
The reactor has been cost efficient and would have to be replaced with plants burning natural gas, which now is cheap, but Kelly said that may not always be the case.
“That scares the hell out of us from the standpoint of fuel cost volatility,” he said.
Duke and Progress, both headquartered in North Carolina, merged on July 2. The combined company serves 7.1 million homes, businesses and other customers including 1.6 million in central and north Florida. Its other customers are in the Carolinas, Ohio, Kentucky and Indiana.
Florida commissioners had few hard questions for Rogers in contrast to their North Carolina counterparts. The North Carolina Utilities Commission is investigating a decision by Duke’s board to oust former Progress CEO Bill Johnson only hours after he was handed the top job of the combined company.
Rogers told reporters after meeting with Florida’s commissioners that North Carolina regulators should put the matter behind them and focus on what’s good for customers. The North Carolina commission has the authority to approve mergers while the Florida panel doesn’t.
In response to reporters’ questions, Rogers also said Progress Energy’s recent $500,000 contribution to the Florida Republican Party was “all about good government” and “jobs.” He said the utility has a history of making contributions to Democrats as well as Republicans.
Two of the merged company’s board members, both holdovers from Progress, resigned to protest Johnson’s removal. Rogers said he has been meeting with remaining board members to encourage them to stay on.
Board members said one reason they lost confidence in Johnson was problems with the Crystal River plant. It was shut down initially so its steam generators could be replaced. During that project, the reactor’s containment wall was cracked. It has remained out of service pending engineering, risk assessment and scheduling studies. The utility also has submitted a claim to its insurance company, Nuclear Electric Insurance Ltd., or NEIL.
Rogers told the commissioners that if NEIL turns down its claim it would ask to pass the costs on its customers if a decision is made to repair the facility.
“We may have a different argument,” Kelly said in an interview.
The alternative would be for stockholders to pay. The latest cost estimate is $900 million to $1.3 billion, but Rogers said it’s tending up.
Rogers said he doubted the utility’s claim would be denied in full.
“I’m more worried about how much they will pay,” he said. “That to me is really the issue.”
Mediation is expected to begin in the fourth quarter of this year. If that fails the issue would go to arbitration.
Another factor in the decision to repair or replace are whether the Nuclear Regulatory Commission will approve a license extension for the reactor.
