Florida Office of the Public Counsel
Kelly says utility apparently mismanaged steam generator replacement project.
Courtesy Progress Energy's Florida Public Service Commisssion public filing
Root-cause analysis report by Performance Improvement International identified seven factors contributing to delamination, including tendon stresses and detensioning sequence.

Florida’s Public Counsel J.R. Kelly calls the separation of a concrete wall at Progress Energy Florida’s Crystal River-3 nuclear unit “a huge construction negligence case,” and says that Progress does not appear to have been very prudent in its decision making.

In an interview, Kelly said Progress Energy Florida appears to have seriously mismanaged the steam generator replacement project that it began in September 2009 at its Crystal River-3 nuclear unit. If further analysis confirms that view, the utility should not be permitted to recover costs for repair and replacement power costs from its ratepayers, he said. Kelly represents Progress Energy’s ratepayers in the case pending in front of the Florida Public Service Commission. He said he is also concerned about how much of the $2.3 billion costs for damage and for replacement power will be covered by the utility’s insurance.

"Right now we are smack dab in the middle of discovery and depositions, and we have not formulated a final position on" whether Progress Energy prudently managed the steam generator replacement project, Kelly said.

"But a lot of signs are certainly leading us to believe that Progress was not prudent in its decision-making ... If that turns out to be the case, we will argue very strongly [to the Florida Public Service Commission] that ratepayers should not have to bear the costs" of repairing Crystal River and providing replacement power. "This is becoming a huge construction negligence case," he added.

Kelly says he has several concerns, beginning with Progress Energy's decision to manage the project itself rather than have, San Francisco-based Bechtel or SGT, a nuclear engineering joint venture held by Areva and URS — the two companies that have managed virtually all steam generator replacement projects in the U.S. — take that role.

He also said he is concerned that Progress Energy hired engineers and subcontractors with little or no experience with containment-building construction to plan and undertake the project's tendon detensioning and concrete cutting; and that the tendons were detensioned sequentially, and not non-sequentially as in other similar projects.

Progress, in its filings with the Florida Public Service Commission, says that because there was no way to predict the delamination of the wall, based on standard engineering practices and analyses, and that its actions were reasonable and prudent: “Nothing the Company could have done, based on what management knew or should have known at the time, would have prevented the delamination and subsequent extended outage.”

Forensic report

A root-cause analysis performed by Performance Improvement International, Oceanside, Calif. highlighted seven factors that caused the delamination: tendon stresses, radial stresses, design for stress concentration factors, concrete strength properties, aggregates, de-tensioning sequence and scope and removing concrete.

Progress Energy spokeswoman Suzanne Grant said, "We remain committed to fully addressing the steam generator replacement and delamination issues through the ongoing, open [PSC] docket. As such, it is appropriate for us to only address specific questions related to these matters in the appropriate regulatory arena under the schedule set forth by the PSC."

Grant continued, "We spent five years and tens of thousands of hours carefully planning the steam generator replacement project. Working with outside experts, it was determined that the process of creating a temporary construction opening in the containment building wall was the best option. The process had been used successfully in numerous similar projects throughout the industry.”

"Analysis has shown that the delamination could not have been predicted," Grant said. "Nothing the company could have done would have prevented the delamination and extended outage. This first-of-a-kind event has changed the way the industry analyzes post-tensioned, pre-stressed concrete structures."

Insurance claims

Another unknown in the case, Kelly said, is how much Nuclear Electric Insurance Ltd. (NEIL), a mutual insurance company for nuclear-unit owners, will ultimately reimburse Progress Energy for repair and replacement power costs.

Executives at Progress Energy, Progress Energy's corporate parent, said during a November 3 earnings conference call that NEIL's failure to of to make any Cystal River-3 replacement-power insurance payments to Progress Energy in the third quarter should not be interpreted as a sign of trouble.

"NEIL is going through a very deliberative process and has hired outside help to review the claims" Progress Energy has made, Progress CFO Mark Mulhern said in a response to an energy analyst's question. "I wouldn't read anything into" the fact that NEIL did not make any replacement power-related insurance payments to Progress Energy in the third quarter.

NEIL to date has given Progress Energy $136 million in insurance proceeds for repair costs and $162 million for replacement power costs; Progress executives said during last week's conference call that $48 million in repair-cost proceeds are still due from NEIL, as are $162 million in replacement-power proceeds.

Progress Energy as of September 30 has spent $229 million on repairs. The utility also has spent $459 million on replacement power, $324 million of which it expects to be reimbursed by NEIL.

NEIL insurance coverage rules limit "per-event" reimbursements to $2.25 billion for property damage/repairs and $490 million for replacement power. Asked for a response, Wilmington, Del.-based NEIL declined any comment.