Cost of new nuclear power plant rises in Progress' annual cost-recovery projections

Progress Energy Florida, a unit of Progress Energy (NYSE: PGN), on May 1 filed its annual nuclear cost-recovery clause (NCRC) projections with the Florida Public Service Commission (FPSC) for consideration for the 2013 billing cycle.

In its filing, Progress provided updates on its proposed Levy County nuclear project and on a project to increase the capacity at the single-unit, 860 MW Crystal River Nuclear Plant. Progress said these updates include new estimated in-service dates and a revised cost estimate for the Levy County nuclear project and 2013 cost-recovery estimates for the capacity upgrade project. Progress Energy Florida plans to construct two new 1,100 MW Westinghouse AP1000 nuclear reactors in Levy County, Fla.

Progress said due to lower-than-projected customer demand, the lingering economic slowdown, uncertainty regarding potential carbon regulation, and current low natural gas prices, it is shifting the in-service date for the first Levy unit to 2024, with the second unit following 18 months later. Progress said the revised schedule is consistent with the approach the utility publicly discussed after announcing the recent rate settlement agreement. Although the scope and overnight cost for the Levy County nuclear project - including land acquisition, related transmission work and other required investments - remain essentially unchanged, the shift in schedule will increase escalation and carrying costs and raise the total estimated project cost to between $19 and $24 billion.

On April 27, the Nuclear Regulatory Commission (NRC) issued the Final Environmental Impact Statement for the project, stating there are no environmental impacts that would prevent the agency from issuing the combined operating license for the construction and operation of the proposed reactors.

The NCRC filing is submitted each year in accordance with the Florida Renewable Technology and Energy Efficiency Act of 2006, which encourages the development of nuclear energy by allowing utilities to use a pay-as-you-go approach and recover prudent preconstruction and interest costs of new nuclear construction or expansion of existing nuclear plants. The statute helps reduce the overall cost of new nuclear projects and provides for annual review and approval by the FPSC.

If approved in its entirety, Progress Energy's total 2013 NCRC charge would be $5.09 on a 1,000 kWh residential bill beginning with January 2013 billing, compared to $2.86 in 2012.

As a result of the previously announced, FPSC-approved rate settlement agreement between Progress Energy and consumer advocates, the portion of the NCRC charge related to the Levy County nuclear project will increase to $3.45 on a 1,000 kWh residential bill in 2013, compared to the 2012 rate of $2.67, and will remain fixed through 2017. In addition, the utility has requested to adjust the Crystal River Nuclear Plant upgrade-related portion of the NCRC charge to $1.64 on a 1,000-kWh residential bill in 2013, compared to $0.19 in 2012.

The Crystal River Nuclear Plant has been shut down since a separation was discovered within the wall of the plant's containment building during a scheduled maintenance outage in the fall of 2009. The plant is expected to return to service in 2014.

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