Experts caution Florida PSC against rate increases

Guest Blog | October 14, 2009 | Press Releases


Public Service Commission Urged to Reject Staff Recommendation for Rate Hikes to Pay for 4 New Reactors; Economic Analyst Warns of Dangerous “Bet the Farm” Risks to Financial Viability of FPL and Progress Energy.

TALLAHASSEE, FL./// October 14, 2009///The Florida Public Service Commission (PSC) should not vote Friday to rubber stamp staff recommendations that would impose a $200 million front-end bite on ratepayers before a single kilowatt of power is produced by new nuclear reactors, particularly since the economic slowdown has already eliminated the need for four nuclear reactors on the scale that both Progress and FPL are proposing, according to statements made today by experts during a news conference.

Progress intends to build two new reactors in Levy County. FPL wants to build two more new reactors at its existing Turkey Point nuclear plant near Miami. The projected construction costs of more than $34 billion for the reactors would require at least $200 million in higher rates for Florida consumers to finance construction before any power is produced, if the reactors are even built.

Dr. Mark Cooper, a senior fellow for economic analysis at the Institute for Energy and the Environment at Vermont Law School, said, “Building four nuclear reactors in a state like Florida, when projections for demand growth have declined sharply, the costs of reactors have skyrocketed and are largely unknown, the cost of natural gas has plummeted, and the nature and scope of carbon mitigation and compliance costs have yet to be defined, is not the prudent thing to do. As a result, the financial risk of these proposed reactors has grown dramatically. The rating firm Moody’s now considers the decision to build reactors a “bet the farm” decision. The last time utilities made such huge bets on nuclear reactors, half of them went bad and consumers were left holding the bag for huge cost overruns and abandoned and cancelled plants. The utilities’ backs are not against the wall. Load growth has slowed and there are much less costly, much less risky options available in the near term to meet the need for electricity and to provide for greater certainty before such major decisions must be made.”

Updating estimates included in his original July 2009 written testimony to the Florida PSC, Dr. Cooper added, “The economic analysis presented by the utilities does not fully reflect the economic reality that these projects face today. The economic recession and the unfolding transformation of economic activity have pushed any possible need for the reactors out by half a decade or more.

The reduction in the capacity needed in 2017 to meet the lower peak for FPL and Progress is well over 4000 MW – the equivalent of Turkey Point 6, 7 and Levy Co. 1 and 2 combined. The result of building these reactors is likely to be excess capacity, and, that is without any major change in federal policy promoting efficiency.”

Sara Barczak, program director of Southern Alliance for Clean Energy’s High Risk Energy Choices program, said, “We have consistently argued that there are low-risk and low-cost resource alternatives available to the proposed new reactors in Florida – such as energy efficiency. The energy efficiency savings levels by Florida’s largest utilities are appallingly low relative to other states. SACE and other intervening parties put together a clear message to the PSC that FPL and Progress should not be allowed to dip into the wallets of Florida customers to pay for costly and risky new nuclear reactors years and years before they produce any electricity – if they ever even get built. The PSC Commissioners can take the road of caution and slow down this process by denying FPL and Progress’ scheme to pick the pockets of their ratepayers. By doing this, the PSC will protect Florida’s families and businesses while forcing the utilities to rethink their shaky plans.”

Barczak added, “We are very disappointed, though not surprised, that the PSC staff failed to protect Florida families and businesses from these risky ventures. We hope that the PSC Commissioners make the right choice to protect Florida citizens, not the big power companies, when they vote this Friday.”

Former Nuclear Regulatory Commission (NRC) member Peter Bradford, an adjunct professor at Vermont Law School, said: “The changes in the circumstances confronting the Levy project over the last 12 months are no ordinary year-to-year fluctuations. No other year in my 40 years of experience with the electric industry has seen such a combination of demand drop, economic slowdown, capital market contraction, natural gas price decline and potential changes in national energy legislation. In addition the project is delayed a minimum of 20 months. These changes are fundamental. They have altered the structure of long-term electricity and energy markets in Florida and elsewhere. If they were ordinary fluctuations, a reasonable likelihood would exist that the next year or two would erase them, restoring the Progress Energy 2008 view of Florida energy markets. No such likelihood exists.”

Southern Alliance for Clean Energy’s filings to the PSC in the FPL/Progress Energy proceedings are available online at SACE promotes responsible energy choices that create global warming solutions and ensure clean, safe and healthy communities throughout the Southeast. Founded in 1985, SACE is the only regional organization primarily focused on developing clean energy solutions throughout the Southeast.

Dr. Mark Cooper has testified over 100 times before public utility commissions in 44 jurisdictions in the U.S. and Canada on energy and telecommunications issues and about twice as many times before federal agencies and Congress on a variety of issues, including energy and electricity. He is the author of the “The Economics of Nuclear Reactors,” a report released on June 18, 2009, which found that it would cost $1.9 trillion to $4.1 trillion more over the life of 100 new nuclear reactors than it would to meet the need for an equivalent amount of electricity with a combination of more energy efficiency and renewable resources. Dr. Cooper’s June 2009 report, “The Economics of Nuclear Reactors,” is available at[1].pdf .

Peter Bradford has served as chair of the New York and Maine utility commissions, and advised many states on utility restructuring issues. He testified in the early cost recovery case before the Florida PSC for one of Progress Energy’s largest industrial users.

EDITOR’S NOTE: A streaming audio replay of the news event will be available on the Web at as of 4 p.m. EDT on October 14, 2009.