Nuclear advance fee case in front of florida supreme court has big implications gas after eating eggs

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Utilities including Progress Energy Florida say the so-called advance fee is the only practical way to finance new nuclear plants. Without the fee, the $24 billion Levy County nuclear plant won’t get built, and the state will have to develop a new strategy for keeping everyone’s lights on.

On one side is the Southern Alliance for Clean Energy, a Tennessee-based environmental group that generally opposes the construction of new nuclear plants in favor of less risky and less costly alternatives such as energy efficiency. The group sued the state’s two largest utilities, Progress Energy and Florida Power & Light, and the state Public Service Commission, which is charged with protecting consumers’ interests.

At the center of the lawsuit is the Nuclear Cost Recovery Clause, which state lawmakers passed in 2006 when Florida’s booming economy was projected to show huge increases in demand for electricity. Relying on fossil fuel plants seemed risky, given the vagaries of foreign fuel sources and growing environment concerns. But nuclear plants have huge up-front costs, which discourage private financing. No plant had been built in the United States in 30 years.

The state saw the advance fee as a way to resolve the financing problem. Forcing customers to pay as nuclear projects are built would provide a steady and ongoing funding source. That would limit the risk for outside investors, making nuclear plants a more attractive investment.

The Southern Alliance makes a two-pronged argument. The Legislature, it says, failed to give the Public Service Commission clear guidance on how to implement the advance fee. That omission improperly left the PSC with the role of enacting the law. The PSC should only administer laws, not be left with "unbridled discretion" to charge customers, the Southern Alliance says.

"Why are we paying this money to utilities for nuclear reactors that are never going to get built?" Stephen Smith, executive director of Southern Alliance, asked Florida Agriculture Commissioner Adam Putnam during a public forum at St. Petersburg College last month. Putnam is the state’s point person on energy matters.

"In accordance with the statute and rule, the commission allowed FPL and Progress to recover the costs prudently incurred for the siting, design, and licensing necessary to construct their nuclear reactors," the commission wrote. "The record shows that both FPL and Progress intend to build their nuclear power plants."

For instance, Duke Energy CEO Jim Rogers told the PSC in August that no decision would be made on whether to build the plant until the federal operating license was secured in about two years. But about a month later, Duke’s executive vice president for power generation, Jeff Lyash, left no wiggle room when he told the same PSC that the company was building the plant and that it would come online in 2024.

When the advance fee law was passed in 2006, Progress projected that the Levy County nuclear plant would cost $4 billion to $6 billion. The cost then jumped to $10 billion in 2007 and $17 billion in 2008. The current estimate is $24 billion, which would make it by far the most expensive nuclear plant ever built.

Florida already sits at a crossroads when it comes to energy policy, and nuclear in particular. The state’s aging nuclear plants provide 9 percent of the state’s electricity. If not replaced with other reactors, they will need a substitute — perhaps sooner rather than later.

The Crystal River nuclear plant, for instance, broke in 2009 and has sat idle ever since. The troubles at the plant — cracks in the concrete containment wall that house the reactor — may force Progress to shut it down for good. Before it broke, the plant produced about 20 percent of Progress’ electricity in Florida.

Putnam’s refrain nowadays emphasizes an "all of the above" approach to energy policy, meaning multiple alternative sources should be considered. He insists that the state needs to develop a solid plan "so you don’t have wild fluctuations in policy or one that picks winners and losers."

In September, the London Financial Times quoted Jeff Immelt, CEO of General Electric, which makes products for nuclear plants, as saying that the low price of natural gas is making nuclear energy less attractive, "and at some point, economics rule."