Duke Energy Settlement with Consumer Advocates Affects Nuclear, Coal Plants

A revised settlement agreement reached between Duke Energy Florida, the Office of Public Counsel, and other consumer advocates addresses cost recovery issues related to a retired nuclear reactor, a proposed nuclear project, and two coal units.

Under the settlement agreement, Duke Energy will address cost recovery issues for the retired Crystal River 3 plant and accept the Nuclear Electric Insurance Limited (NEIL) mediator’s proposals.

Duke will also terminate the engineering, procurement, and construction (EPC) agreement for the cancelled Levy nuclear project. And it will write off $295 million associated with Crystal River 3 and $65 million related to the wholesale allocation of investments in the Levy nuclear plant.

Following its merger with Progress Energy in February 2013, Duke Energy opted to scrap the Crystal River 3 plant rather than “attempt a complex and costly first-of-a-kind repair.” The plant had been offline since late 2009 due to damage to its containment building caused while workers were creating an opening in the structure to facilitate replacement of the steam generators inside. Repair of the damaged containment structure hovered between $1.5 billion and $3.5 billion.

Under terms of the mediator’s proposal, customers and the Crystal River 3 joint owners will receive $835 million in insurance proceeds—the largest claim payout in the history of NEIL.

Duke Energy also definitively cancelled a 2008-proposed plan to built two 1,100-MW reactors in Levy County, Fla. Progress Energy had in 2010 announced it would postpone development of the Levy plant until a combined construction and operation license (COL) was issued to allow for “greater clarity on federal and state energy policies.” On Friday, Duke Energy said that while the Levy site was no longer considered an option for the original schedule, it would continue to pursue a COL from the Nuclear Regulatory Commission. The project would still be regarded as a “viable option for future nuclear generation,” the company said.

Meanwhile, the company said it was consider retiring the Crystal River 1 and 2 units—comprising about 875 MW of unscrubbed coal capacity—to comply with Mercury and Air Toxics Standards.

“If the company decides to retire these units prior to their normal retirement date of 2020, the settlement allows Duke Energy Florida to continue recovering annual depreciation in customer rates through the end of 2020, and recover any remaining net book value of the units in 2021 through the Capacity Cost Recovery Clause,” Duke Energy said.

To replace lost generation, the company is evaluating various sites in Florida, including Citrus County, south of the Levy County site, for a new 1,150-MW natural gas–fired plant with an in-service date before the end of 2017.

Duke Energy Florida also agreed to extend its current general base rate freeze for an additional two years through the end of 2018 “as long as the company’s return on equity does not drop below 9.5 percent.”

The settlement agreement filed with the Florida Public Service Commission (FPSC) on Friday “represents an effective balance between moderating rate impacts to customers, providing clarity on recovery of past investments and allowing us to move forward with planning for Florida’s energy future,” said Alex Glenn, Duke Energy state president—Florida. The FPSC’s approval is expected by the end of 2013.

Sources: POWERnews, DOE

Sonal Patel, Senior Writer (@POWERmagazine, @sonalcpatel)

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