Progress Energy will be encouraged to repair the multi-million dollar damage at its Crystal River nuclear unit 3 as soon as possible, and terminate its engineering, procurement and construction contract with Shaw and Westinghouse for a new nuclear plant under a global settlement reached by the Florida’s office of Public Counsel, Progress Energy and other parties on Jan. 20.
Under the settlement, which must still be approved by the Florida Public Service Commission, Progress would seek recovery of the costs to repair the damage from its insurer, the Nuclear Electric Insurance Ltd. (NEIL). If the costs exceed the amount paid by NEIL, Progress would have to go to the PSC in a case to get the remaining costs from ratepayers. If repairs exceed the approved repair estimate, Progress will split the cost of those repairs, up to $400 million, 50/50 with ratepayers.
“It’s prudent, that way both sides have skin in the game,” said Public Counsel J.R. Kelly Friday afternoon. “It will keep Progress mindful of any cost overruns.”
The settlement pushes Progress to begin the work on repairing the damage this year and requires Progress to refund $288 million in replacement fuel costs that its customers have been paying. If the repairs don’t begin by the end of 2012, Progress would have to refund an additional $100 million in fuel costs.
If Progress begins the repair work this year, the parties would waive their right to challenge their decision to repair the plant.
The damage at the plant occurred after Progress decided to self manage the replacement of a steam generator at the plant, which required a hole be cut into the side of a containment wall. The concrete of the 42-inch containment wall began to separate during the work in October 2009 and a second delamination was noticed in March 2010.
The office of Public Counsel questioned Progress’ decision to self-manage the job and was fighting Progress’ attempt to have ratepayers cover the cost of repairs. In most, if not all other steam generator replacements at nuclear plants around the country, either San Francisco-based Bechtel or SGT, a nuclear engineering joint venture held by Areva and URS, were hired to manage the work at all previous nuclear steam generator replacement projects.
The settlement also gives Progress a $150-million increase in its rates, and caps fees charged to ratepayers for advance work on planned AP1000 in Levy County, Florida, to $3.40 a month. The $150 million increase in the annual base rate is “ a huge concession on our part,” Kelly said. But ratepayers may be made whole by another settlement provision, which caps the amount Progress can collect for its proposed Levy nuclear plant to $3.40 a month for 1,000 kWh for the next five years. That amount will pay the costs to finish licensing for the Levy plant, and costs associated with getting out of its contract to build the AP1000 with The Shaw Group and Westinghouse.
Shaw did not immediately have a comment about the possibility of losing the EPC contract.
"We continue to believe additional carbon-free nuclear energy should be a part of our future, particularly as the cost of environmental regulation on other forms of electricity generation become increasingly stringent and expensive," Vincent Dolan, Progress Energy Florida president and CEO said in a statement. "This approach helps customers in the short term while we all press through these difficult economic times."
Kelly said that the settlement parties have asked the PSC to take up the agreement during an agenda hearing in February.