Will Florida choose a high-cost energy future?

Stephen Smith | September 4, 2009 | Energy Efficiency, Energy Policy, Nuclear, Utilities

August 2009 was busy in Tallahassee for Florida utilities.

With lots of attention from the media, early in the month, Gov. Charlie Crist and the Cabinet approved new nuclear reactors for Progress Energy. There are now four such nuclear reactors proposed for the state, and the expansion of Plant Vogtle involves both Gulf Power (via its parent, Southern Company) and likely Jacksonville Electric Authority (JEA).

Unlocking Energy Efficiency in the US EconomyMeanwhile, across town, the Florida Public Service Commission (PSC) was hearing over several days why the state’s seven largest utilities — including Progress Energy and Florida Power & Light (FP&L) — can’t pare back the energy they produce through better efficiency and conservation goals.

Then in the last half of the month, the Florida Energy and Climate Commission considered, with extended debate, energy efficiency opportunity for the state and developed advice for the PSC that basically endorsed the utilities’ positions.

The degree to which these development are at odds with the pro-consumer clean energy developments in other states was starkly illustrated by a McKinsey and company report that found “the U.S. economy has the potential to reduce annual non-transportation energy consumption by roughly 23 percent by 2020, eliminating more than $1.2 trillion in waste.” This report was co-sponsored by Southern Company, parent to Florida’s Gulf Power. Gulf Power’s answer – it offered up about 1 percent by 2020, a miniscule effort in contrast to the McKinsey goal.

Hmm. Anyone think there might be a connection between the high-cost new nuclear reactors gamble and utility disinterest in energy efficiency?

Florida’s utilities lag behind at least 22 other states in conservation and efficiency. FP&L, which claims to be in a league all its own when it comes to efficiency, yet it is actually seeking to reduce its conservation goal by 30 percent.

By the reckoning of our analysts at the Southern Alliance for Clean Energy (SACE) and the Natural Resources Defense Council (NRDC), FP&L could, and should, actually be increasing its efficiency and conservation goal. Florida utilities could avoid the unnecessary generation of about 20,000 gigawatt-hours of energy by 2019. That’s roughly the equivalent of cutting out the need to build two new nuclear reactors.

While the cost of energy-efficiency at that scale is significant – perhaps $4 – 6 billion – it pales in comparison to the $12-24 billion estimated by FPL and Progress Energy to build nuclear power plants with similar levels of energy resource benefits.

The bills are already piling up for Florida consumers on these nuclear power plants. Next week (September 8-11), the Florida PSC will hold hearings to scrutinize requests from FPL and Progress Energy to collect over $100 million in just one year of rate increases for their as-yet-unbuilt nuclear reactors. As the Palm Beach Post reports,

FPL’s justification for the rate hike includes the need to cover some of the costs of a proposed nuclear power plant.

The nuclear power plant would cost the FPL, the state’s largest utility, up to $18 billion – more than the $15 billion it takes in from customers annually right now.

“So you’re suggesting that even though the Legislature has allowed dollar-for-dollar cost recovery of pre-construction expense, that in 2010 Florida rate payers should begin to compensate Florida Power and Light for nuclear plans to build a plant that won’t go into service until the earliest at 2018, and for which a decision to build a plant has even yet been made?” said Lino Mendiola, a lawyer representing the South Florida Hospital and Health Care Association. A PSC lawyer objected to the question.

Compelling testimony from expert witnesses representing SACE, Dr. Mark Cooper and Mr. Arnie Gundersen, show that today’s realities make it extremely unwise to approve the utilities request.

Progress Energy and FP&L customers are likely unaware that they are going to see increases to their bills almost immediately to pay for these new nuclear reactors and that the need to build the reactors would fall off rapidly if only the companies raised their efficiency and conservation goals. They certainly won’t hear the news from the utilities – as the Miami Herald reported, Progress energy is only telling half the story:

Jeff Lyash, Progress Energy Florida’s president and CEO, hailed the Levy County plant as a major step toward Florida’s “clean energy” future. He insisted the plant will save customers money over time while creating more than 5,000 jobs and reducing carbon dioxide emissions.

“This will save customers approximately $1 billion a year by lowering fuel costs,” Lyash told the Cabinet. “And it will give this state a much-needed economic boost.”

What Lyash did not mention was the cost to consumers, which will begin years before the proposed new reactors produce any energy, if they ever even come online.

Progress has a request before the Public Service Commission to raise its base rate by 30 percent, a move that company spokeswoman Suzanne Grant said would generate about $500 million for improvements to existing power plants and electricity services.

On top of that, the St. Petersburg-based utility wants state approval to bill residential customers a monthly “nuclear charge” of $6.69 per 1,000 kilowatt hours starting in 2010 to help pay for the nuclear plant. FPL is seeking a similar base rate increase and could request a fee to help pay for its new nuclear plant, which would not be up and running for at least eight years.

In January, Progress’ 1.6 million customers saw a monthly increase of $12.11 per 1,000 kilowatt hours to pay for nuclear projects, sparking such an uproar that the utility then lowered its rates, reducing the monthly nuclear charge to $4.31 per 1,000 kilowatt hours.

The bottom line is quite simple: Florida utilities are resisting calls to set stronger goals and to cheaply and cost-effectively reduce the amount of electricity they need to generate. Instead, they are bent on building high-cost and economically risky power plants — this, in a state that ranks in the top three for household expenditures on electricity and where consumers are demanding ways to reduce costs.

The Southern Alliance for Clean Energy and NRDC, and separately a private consultant hired by PSC staff, have determined that the seven Florida utilities could be achieving goals at least 10 times higher than they’ve proposed. Over ten years, the utilities should be able to help customers cut demand by at least 7.5 to 10.5 percent.

The utilities say they can’t reach the higher goals without creating a massive cost for themselves and their customers. Three utilities actually proposed goals of zero. This is nonsense. Other states have found a way. There is plenty of experience out there to help Florida find its way.

Ten states have recently set annual efficiency goals of two percent or more – twice what NRDC/SACE propose and more than twenty times what FPL proposed. Four states have recently set goals of 1.5 percent. Moreover, in a number of jurisdictions, efficiency programs have been capturing savings of one percent of total electric load per year for decades and some programs have been achieving savings of more than one percent.

When arguing for building new nuclear reactors, the utilities are quick to say that investing now in nuclear will ultimately lead to lower bills for customers down the road, when the reactors start up.

At the same time, the utilities resist acknowledging that investments today in aggressive and far-reaching energy efficiency and conservation programs will actually reap a big savings for consumers today, and down the road.

There is a simple reason for this denial. If the utilities achieved the efficiency we know them to be capable of, they would not have the ability to prove their nuclear reactors are needed.

We can only hope that in the next election season, voters will ask smart questions of candidates for state office on where they stand. Are they in favor of setting strong conservation and efficiency goals for utilities that reduce the need to build more costly power plants, or not?

If the PSC ultimately votes this October to accept the low expectations of the utilities, it would be committing Floridians to pay for a future of ever-continuing growth in electricity demand, and we will miss valuable opportunities to lower consumer costs and reduce significantly our greenhouse gas emissions.

Stephen Smith
Dr. Stephen A. Smith has over 35 years of experience affecting positive change for the environment. Since 1993, Dr. Smith has led the Southern Alliance for Clean Energy (SACE) as…
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