Customers should not pay costs of Florida Power and Lights nuclear plant expansion

Stephen Smith | October 10, 2012 | Energy Policy

This post originally appeared in the Palm Beach Post on October 3, 2012. Read the post and view the comments here.

A misguided state law that allows large utilities to charge consumers for new nuclear reactors before delivering any power is making things more difficult for Floridians trying to recover from the worst recession in recent memory.

The “early cost recovery” law, passed in 2006, allows companies such as Florida Power & Light to bill customers for certain costs before new reactors are built, effectively shifting the financial risk of construction. The law essentially allows power companies to impose a nuclear tax, by forcing customers to pay preconstruction costs, including a hefty return to power company shareholders, through their bills. Customers are charged before the reactor has even produced electricity, and there’s no refund even if the company abandons the project.

Last year, the Florida Public Service Commission approved $196 million in costs that were passed on to FPL customers for nuclear-related projects, including proposed new reactors at Turkey Point, 25 miles south of Miami. This year, FPL is seeking another $150 million. Over the past several years, the commission has approved more than $1 billion for FPL’s and Progress Energy Florida’s dubious nuclear pursuits as a result of this nuclear tax.

Not only are customers bearing the cost of certain construction activities, but they also shoulder all the risk if the projects are never completed. The nuclear tax saddles customers with the responsibility of paying all construction costs, whether the plant produces power or not..

New nuclear plants are prohibitively expensive: the proposed Turkey Point reactors are estimated to cost nearly $20 billion. The in-service dates have been delayed, now to 2022 at the earliest, due to lack of demand.

Similar projects in the ’70s and ’80s were abandoned due to cost overruns and a drop in electricity demand. Back then, many of the losses were shouldered by the companies and shareholders who stood to profit from the projects. Lessons were learned, and utilities moved away from pursuing expensive, risky reactor projects. Today, Wall Street won’t take that bet, and these projects are almost impossible to finance unless, as has been done in Florida, the company is successful in shifting the risk to customers.

This is a high-stakes game that should not be played with your money. FPL has received a virtual “blank check” while the governor remains silent and state legislative leaders refuse to repeal the nuclear tax. They are protecting a scheme that favors an increasingly expensive way to meet our energy needs while ignoring low-cost resources such as energy efficiency. Astonishingly, FPL concedes that is hasn’t actually decided to build the reactors, yet insists that consumers should cover the costs.

Southern Alliance for Clean Energy appealed to the Florida Supreme Court, challenging the constitutionality of the law and overturn the commission’s 2011 decision awarding cost recovery to FPL and Progress. We believe that the lack of standards in the legislation allows the commission to approve unlimited expenses for companies claiming to pursue new nuclear generation. The court will hear arguments Thursday. The arguments will deal with the merit of the commission’s 2011 decision, as well as the constitutionality of the early cost recovery law.

Regardless of how the court rules, all Floridians should be troubled by legislators who are unwilling to revisit a nuclear tax that is unfair and by a commission that is willing to help big power companies, by heaping more costs and risk on customers. Rather, we would be better served if the state instituted a transparent utility planning process that truly allows lower cost and lower-risk energy resource choices.

Additional information and resources:

  • SACE blog post detailing the Supreme Court challenge.
  • Opinion piece by Florida’s Lee County Commissioner Ray Judah.
  • SACE Take Action page with extensive history of this issue and links to many additional resources.
Stephen Smith
Dr. Stephen A. Smith has 30 years of experience effecting change for the environment. Since 1993, Dr. Smith has led the Southern Alliance for Clean Energy (SACE) as its executive…
My Profile