Experts Tell FL PSC: We Told You So

Guest Blog | August 19, 2010 | Press Releases

INDUSTRY SHOULD NOT BE ALLOWED TO WASTE $200 MILLION MORE IN CUSTOMER MONEY Tuesday Marks Start of PSC Hearings on FPL and Progress Requests for Unjustifiable “Nuclear Cost Recovery” That Would Push Bill For Utility Consumers to Nearly $500 Million For Nuclear Reactors That Are Not Needed … and Very Likely Will Never Be Built.
TALLAHASSEE, FL.///August 19, 2010///When the Florida Public Service Commission (PSC) starts its hearings Tuesday on a request for nearly $200 million in additional advance billing of Florida utility customers for the construction of four proposed new reactors by FPL and Progress Energy, the Commissioners will have in front of them the testimony of Mark Cooper, senior fellow for economic analysis at the Institute for Energy and the Environment at Vermont Law School, and Arnie Gundersen, chief engineer for Fairewinds Associates, Inc.

Today, Cooper and Gundersen held a news conference to send a very simple message to the PSC: We told you so!

In testimony provided in 2009 and then reiterated in 2010, the two national experts told the Commission that a combination of rapidly deteriorating circumstances – including fast-rising reactor costs, project delays, unresolved AP1000 reactor design issues, falling natural gas prices and reduced demand due to the recession and increased energy efficiency – all made it unlikely the FPL and Progress Energy reactors would ever be constructed. (See the lengthy list below of 2010 setbacks for FPL and Progress Energy.)

Testifying on behalf of the Southern Alliance for Clean Energy, Cooper and Gundersen are both recommending that the PSC reject the nearly $200 million combined hike in utility rates – which could eventually add up to over $40 per month for Progress customers and would be in addition to $269 million in cost recovery from utility consumers already authorized by the PSC in 2009. Now closing in on a potential $500 million in higher utility bills, Florida’s “nuclear cost recovery” arrangements for new reactor construction allow for hundreds of millions of dollars to be taken from electricity customers — even if the reactors in question fail to be constructed and never generate a single kilowatt of power.

Mark Cooper, senior fellow for economic analysis at the Institute for Energy and the Environment at Vermont Law School, said: “In 2009, we told the Florida PSC that it should deny the FPL and Progress requests for recovery of hundreds of millions of dollars of costs for the proposed nuclear reactors at Turkey Point and in Levy County because they were no longer necessary and would result in billions of dollars of excess costs being needlessly imposed on consumers. A year later, that reality is finally starting to impose itself on the utilities. The proposed Florida reactor delivery dates have been pushed back by half a decade and FPL now goes so far as to say it has not yet decided whether to actually build the reactors. Unfortunately, both utilities have asked to continue charging ratepayers for costs for these reactors that may never be built, insisting that they have to continue to pursue their license applications to keep their place in line at the Nuclear Regulatory Commission. This just puts Florida utility consumers in the position ofpaying for FPL and Progress to hold their place in a line that is most likely going to end up going nowhere.”

Arnie Gundersen, a nuclear engineer and energy adviser at Fairewinds Associates, Inc., said: “FPL and Progress Energy are relying on the AP1000 reactor design, which is not currently approved and has at least two major unresolved design and safety issues that U.S. regulators are insisting be addressed. That is going to mean even more delay and higher costs. When the selected design for a proposed Florida reactor is not certified as hurricane proof, it is very difficult to see how things are going to get anywhere any time soon. Small wonder then that top executives at three leading U.S. utilities — including the president of FPL itself — have acknowledged the uncertainties surrounding attempts at licensing and constructing new nuclear generation. Given the design problems with the reactors alone, the least-cost option would be the immediate cancellation of these reactors, rather than bleeding consumers for what may end up being nothing more than the nuclear equivalent of white elephants.”

Stephen Smith, executive director, Southern Alliance for Clean Energy: “It is unprecedented that a state PSC is giving this level of early cost recovery for projects that are now over 10 years out before any reasonable chance of completion. We believe that the appropriate action here is for the PSC to suspend this docket and stop granting any additional cost recovery that will further burden ratepayers. These plans can be evaluated in a couple years when and if these proposals are relevant and when the utilities have a better understanding of what their legitimate needs are. By doing this, the PSC will protect Florida’s families and businesses while forcing the utilities to rethink their shaky plans. 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 – it’s time for more to be done there versus wasting billions on new reactors. ”


In his 2009 and subsequent 2010 testimony, Cooper presented evidence that the fundamental economics of nuclear reactor construction no longer supported the construction of new reactors in Florida, if they ever did.

In particular, Cooper emphasized the dramatic changes in key variables that rendered nuclear reactors uneconomic and unnecessary:

• Declining natural gas costs;
• Declining estimates of carbon prices;
• Declining demand due to the economic slowdown;
• Reduced need for nonrenewable generation due to increased energy efficiency;
• Fast-rising projections of nuclear construction costs; and
• The high degree of uncertainty in the economic environment that new reactors face.

As Cooper explains: “What looked bad for more nuclear in Florida in 2009 looks even worse on every single front now in 2010. All of these factors are still at work and many have continued to develop in a manner that further undermines the long-term feasibility of ever completing these proposed nuclear reactors in Florida. As a result, it is neither reasonable nor prudent to incur additional costs for these proposed reactors.”


• January 2010: FPL announces that they’ll suspend plans for Turkey Point reactors based on decision of Florida PSC to reduce proposed rate hike from $1.26 billion to $75.5 million.
• January 2010: Progress Energy announces that they’ll slow the Levy County process based on the same Florida PSC decision, in which they got none of a $500 million rate hike request.
• January 2010: Fitch puts FPL (Turkey Point reactors) on ratings watch ‘Negative’ after decision by Florida PSC to not provide FPL’s full rate increase request.
• February 2010: Progress Energy extends delay on Levy County reactors to at least 36 months.
• February 2010: Toshiba/Westinghouse indicate that regulatory problems could cause up to 3 years in delay for Florida reactors (Turkey Point and Levy County).
• March 2010: FPL announces delay of Turkey Point reactors past 2018, signals interest in federal loan guarantee bailout.
• April 2010: Moody’s downgrades FPL from low to moderate risk over pursuit of Turkey Point reactors.
• May 2010: Cost estimates move from $17.2 billion for the two reactors to $22.5 billion for Levy County reactors.
• May 2010: Fitch downgrades Progress Energy to just above junk bond status.
• May 2010: The timeline for the two Levy County reactors are pushed back again, with the first projected to be online in 2021, the second some 18 months later. The original timeline had the reactors set to come online in 2016 and 2018 respectively.
• June 2010: FPL President Olivera meets with the Sun Sentinel editorial board and admits that FPL may never build these new nuclear reactors due to licensing and economic concerns, cheap natural gas prices, and unresolved design issues as to whether or not the proposed reactors can withstand hurricanes.


Southern Alliance for Clean Energy (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.

CONTACT: Ailis Aaron Wolf, (703) 276-3265 or [email protected].

EDITOR’S NOTE: A streaming audio replay of the news event will be available on the Web here as of 6 p.m. EDT on August 19, 2010. For Cooper and Gundersen’s July 2010 and July 2009 testimony, click here.