FPL wins, Floridians lose and why is FPL still pursuing new nuclear reactors at Turkey Point?

This blog was written by Sara Barczak, former Regional Advocacy Director with the Southern Alliance for Clean Energy.

Guest Blog | September 20, 2013 | Energy Efficiency, Energy Policy, Nuclear

Yesterday the Florida Public Service Commission (PSC) staff issued their recommendation in the 2013 nuclear cost recovery clause docket and it unfortunately reflects business-as-usual despite an attempted fix passed earlier this year by the Florida Legislature to the flawed nuclear cost recovery law (Florida’s “nuclear tax”). The big power company, namely FPL, wins to the tune of over $43 million with more than $17 million alone for speculative new reactors — while consumers, once again, lose. Our media statement expressed our continued disappointment. We can only hope that the PSC Commissioners carefully scrutinize the evidence in front of them and reject the staff’s recommendation before they render a decision on October 1.

Below is some insight we gleaned as an intervening party during this docket, specifically about FPL’s continued plans to pursue two more nuclear reactors at their existing Turkey Point nuclear plant near Miami despite the fact that Duke Energy recently (and rightly) cancelled their proposal to build two new reactors in Levy County.

How does FPL continue to justify the feasibility of constructing new nuclear reactors in Florida?

FPL provides weak energy savings opportunities for customers to reduce energy use and save money on their bills. Energy efficiency programs can meet demand at a fraction of the cost of building new power plants. Smarter energy use can lower overall utility system costs and insulate customers from price spikes for fuel used to generate electricity. That’s why 14 States have regulatory programs in place that are achieving 1%, or more, energy savings through energy efficiency programs according to ACEEE’s 2012 scorecard.

Energy efficiency delivers immediate customer savings and helps avoid power plants. Nuclear power costs five to ten times more than energy efficiency. Florida’s utilities are well behind national leaders on energy efficiency.

But, that lesson on the benefits of energy efficiency appears to be lost on FPL as was revealed in the most recent nuclear cost recovery proceedings. FPL meets a meager 0.2% of annual electricity demand through energy efficiency programs. (Refer to SACE’s brief.) In other words, leading peer utilities in other states are achieving five times the level of energy efficiency of FPL. What would happen to the need for the proposed Turkey Point nuclear reactors if FPL achieved similar energy savings? No one knows since the FPL feasibility analysis did not consider increased levels of energy efficiency above the company’s business-as-usual scenario in its feasibility analysis.

But FPL’s lack of commitment to energy efficiency should come as no surprise. Given a choice, an investor owned utility will pick resource options that maximize shareholder value. FPL shareholders stand to earn a 10.5% return on equity (ROE) on their share of the investment in the proposed Turkey Point reactors. They earn no ROE on efficiency programs that help customers slash energy use and save money on their bills. In fact, there is a distinct disincentive for FPL to pursue too much energy efficiency because it reduces energy and capacity needs into the future, thereby delaying or avoiding the very supply-side options, such as new nuclear reactors, that directly benefit FPL shareholders.

The levelized cost of the proposed Turkey Point project is expected to be over 15 cents per kilowatt hour (kWh).

That’s well above the Company’s retail rate of electricity, as referred to in our brief. A cost-effective energy efficiency program can meet demand at a fraction of that cost. Yet, the FPL planning process never pits energy efficiency against the proposed nuclear project to see which resource can meet demand more cost-effectively. Therefore, it’s clear that: 1) demand side resources, such as energy efficiency, are not placed on a level playing field with supply-side resources, such as nuclear reactors, in FPL’s planning process, and 2) the regulatory policy in Florida needs to evolve to incentivize companies to provide energy services that help keep costs low for customers.

Wait until you’re 106 years old to possibly benefit from the projected fuel savings from the Turkey Point project!

SACE inquired into the net cumulative benefits of the proposed Turkey Point nuclear reactors. Net cumulative benefit is a measure of going back to 2013 and looking back at all the costs that have been incurred and all the benefits that have been received by customers – and determining the benefit crossover point for customers. The net cumulative fuel savings benefits of the proposed Turkey Point project, extolled by FPL as the prime benefit for customers, will not be realized by customers until 25 years to 36 years from today – assuming the project is built at all. This practically means that a 60 year old FPL customer today may not realize a cumulative net fuel savings benefit, if at all, from the project until the customer is 96 years old. If the FPL customer is 70 years old, the net fuel savings benefit won’t be realized until the customer is 106 years old. Read this in our brief or by viewing the August 5, 2013 hearing (this excerpt begins at approximately 4:34:00).

FPL cannot guarantee that the proposed Turkey Point project will meet its projected in-service dates on 2022/23, or whether it will be built at all, and cannot guarantee that its non-binding cost estimate for the plant won’t be exceeded.

The estimated cost for Turkey Point has increased over the years and the project schedule has been delayed. This is not a new phenomenon. Duke’s cancellation of the Levy reactors was preceded by skyrocketing costs that reached over $24 billion coupled with a delay of at least 8 years. Florida State House Speaker Will Weatherford recently highlighted the high costs of pursuing new nuclear reactors and the frustration with the nuclear cost recovery law that led, in part, to the nuclear woes in Florida. Even AP-1000 proposed reactor projects actually under construction are running into trouble. For instance, the proposed new reactors at Southern Company’s Plant Vogtle in Georgia, which is considered the country’s ‘lead’ reactor project, are likely delayed 21 months and are experiencing cost overruns. Projects still on the drawing board also are experiencing difficulties. The Nuclear Regulatory Commission recently signaled a significant delay in the processing of the combined operating license application for Duke’s proposed Lee nuclear reactors in South Carolina.

So in spite of these key points, the PSC staff recommended to grant FPL’s nuclear cost recovery request. If you have concerns, there is still time to contact the Commission before they make their final decision.

–George Cavros, SACE Florida Energy Policy Attorney, contributed to this blog post.

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