Duke cancels Florida nuke plant contract

Duke cancels Florida nuke plant contract

By Bruce Henderson

Duke Energy Florida will sideline plans for its
Levy County nuclear plant and resolve costs to
customers of retiring the Crystal River nuclear
plant under a settlement Thursday with consumer
advocates.

The agreement, which would cost Duke Florida $360 million in second-quarter charge-offs, still has
to be approved by the Florida Public Service Commission. The 1.7 million Florida customers make it
Charlotte-based Duke Energy's second-largest territory.

Duke said it will cancel an engineering and construction contract for the Levy County plant because
of delays by the Nuclear Regulatory Commission and recent push-back from state legislators on
recovering its costs. The two-unit plant had been expected to cost up to $24 billion.

Duke will continue to seek a federal license, which it expects the NRC to award in late 2014 or early
2015, as it decides whether to build on the site.

In May, Florida legislators toughened a controversial law on recovery of nuclear-construction costs.
Thursday's agreement allows Duke Florida to start recovering $200 million in outstanding costs of the
project.

Duke Florida president Alex Glenn said license requirements, future energy needs, construction costs
and other factors will determine whether Duke later revives the plant.

"We continue to believe the Levy site is a viable option for future nuclear generation, and we want to
keep that option open," Glenn said.

Anti-nuclear advocates applauded the contract's cancellation.

"Since the (Duke Energy-Progress Energy) merger, Duke's leadership has taken a fresh look at these
unnecessary nuclear projects and has absolutely made the right decision for Florida consumers," said
Stephen Smith, director of the Southern Alliance for Clean Energy. "While important details are still
being resolved, Florida consumers should rejoice in knowing that the fleecing associated with this
nuclear project will end."

The Crystal River portion of the settlement would resolve several issues, including Duke's decision in February to retire the crippled plant and accept an $835 million insurance settlement.

Duke closed the plant, which suffered concrete problems after a botched repair, rather than risk up to $3.4 billion to fix it. The plant was built in 1977.

The settlement allows Duke to begin recovering from its Florida customers $135 million of the value of Crystal River in 2014, three years earlier than previously decided. The remaining value of the plant, nearly $1.5 billion, will be recovered over 20 years.

Duke agreed to extend a freeze on rate hikes through 2018.

"It's an effective balance between moderating rate impacts on customers and providing clarity on recovery of the investment," Glenn said.

Duke Florida will write off $295 million in the second quarter related to Crystal River and $65 million related to the Levy County plant. The charges will be treated as special items that won't affect adjusted earnings per share.

The settlement, which replaces a 2012 version, is among Duke Florida, Florida's consumer-advocacy Office of Public Counsel, industrial and retail customer groups and PCS Phosphate. Duke said it expects the state utilities commission to rule on it by the end of the year.

Duke will decide in a few months whether to retire two coal-burning units at Crystal River. New federal air-pollution standards would force the units to shut down in 2015-16, Glenn said. The potential use of low-sulphur coal could extend their lives, he said.

The settlement allows Duke to build or acquire up to 1,150 megawatts of natural gas-fired electric generation by the end of 2017. The company is evaluating Citrus County, home to the Crystal River plant, as a possible site.