May 18, 2016 - 6:30 PM EDT
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FPL postpones Turkey Point nuclear expansion -- for at least four years

May 18--Florida Power & Light has put its Turkey Point nuclear expansion plans on the back burner -- for at least four years.

The decision to postpone the controversial project, revealed in filings with the Florida Public Service Commission, comes as the utility faces increased scrutiny over troubles in the canals that cool two aging reactors at the plant on south Biscayne Bay. It also reflects the economic realities of the energy industry, which has increasingly turned to cheap natural gas and solar development while backing away from expensive nuclear plants that can cost $20 billion or more.

While FPL told regulators that it still intends to pursue a federal license that would clear the way for construction, the delay means two next-generation reactors initially projected to go online as early as 2018 and 2020 likely would not fire up for perhaps another decade.

FPL has been planning the addition of two new nuclear power units -- Units 6 and 7 -- at the Turkey Point site on Biscayne Bay since 2008. Using a "nuclear cost recovery" law it helped to push through the Legislature in 2006, it is allowed to charge customers in advance of the project's construction -- $281 million for the planning and licensing costs so far.

In a letter to the PSC filed April 27, FPL said it expects to be granted its license for the two new nuclear units in 2017 but rather than begin the "pre-construction" process, it now wants to maintain its "current state" until at least 2020

Despite the delay, the company is asking to be able to charge customers another $22 million in 2017. The utility also asked the PSC to waive the requirement that it prove the project remains "feasible."

FPL has routinely filed the required feasibility study detailing its commitment to build the $20 billion project every year for the last seven years and the PSC routinely gave the company approval to charge customers in advance for it.

This year, FPL sought the waiver on the same day the feasibility study was due, arguing that the feasibility report "would impose a substantial hardship upon FPL and violate principles of fairness."

It said the "decision to 'pause'....is in keeping with the incremental project approach" sought by legislators when they updated the cost recovery law in 2013. Lawmakers now require utility companies to prove that a nuclear project is feasible before the Public Service Commission gives the company permission to move into the pre-construction phase of the project.

The announced delay has raised questions and concerns from the City of Miami, consumer groups, the state's largest electric power users and the Office of Public Counsel, the lawyers who represent the public in rate cases.

In motions filed this week with the PSC, they each urged utility regulators to reject the FPL request for a waiver, saying the company should be required to justify charging customers for a project that may be halted.

"If a project is no longer feasible or practical, then the costs incurred are not prudent," wrote City of Miami attorney Victoria Mendez in a motion filed with the PSC on Tuesday. Since FPL plans to recover the cost of the project, she said, "while doing no additional work towards the completion of the project, it is imperative that FPL demonstrate the project is still economically feasible and practical."

J.R. Kelly, who heads of the Office of Public Counsel, said the decision is baffling.

"What is a pause?'' he asked. "Does this mean they're not going to build the system now? Are they second guessing and at the same time they want to keep collecting money from the ratepayers?"

At the time FPL applied for the two new reactors in 2008 and 2009, natural gas costs were more than six times higher and pursuing additional nuclear generation with updated and upgraded reactor designs from Westinghouse seemed a wise option, said Steve Scroggs, senior director of project development for FPL. Because the technology was so new, the utility had planned on watching the progress -- and monitoring the final construction costs -- of similar reactors being built in Georgia and South Carolina.

"We wanted to game our experience from somebody else's efforts," he said.

But because those reactors have also fallen behind schedule and aren't expected to be complete until 2020, FPL has been left with the information needed to calculate real-world costs and time lines for the Turkey Point project, he said. Several other utilities across the country already have backed away from nuclear expansion plans -- many saying the staggering initial cost of the plants didn't make economic sense when natural gas was plentiful and cheap.

South Miami Mayor Phillip Stoddard, an outspoken critic of the Turkey Point nuclear expansion, said FPL under-estimated the costs of building the Westinghouse reactors, which had never before been built in the U.S, leaving the company to scramble to justify continuing work.

"The cost has more than tripled, somewhere between tripled and quadrupled, and meanwhile the cost of solar has fallen like a rock," he said. "It will take 60 years before Turkey Point 6 and 7 break even from the ratepayer perspective. So the determination of need the PSC approved [in 2008] was wrong when it was approved and it's a lot more wrong now."

FPL's plans at Turkey Point also have been complicated by the clean-up of an underground saltwater plume that threatens South Florida's drinking water supply.

The plume has been spreading for decades, pushed westward by the heavier salty canal water leaking into the aquifer, likely exacerbated by FPL's decision to uprate, or increase power output, at the Turkey Point plant in 2013. Following the surge in power generation, temperatures in the canals spiked, prompting the utility to began adding massive amounts of water to cool them, a fix that drew increased scrutiny and fears over worsening the plume.

FPL nuclear plant canals leaking into Biscayne Bay, study confirms

The company submitted its proposed 10-year clean-up plan to state and local regulators on Monday.

FPL's Turkey Point canal cleanup plan faces county review

Scroggs said the decision to hold-off on the new reactors was not connected to problems with the cooling canals because the new reactors would use a different method to cool reactors. He also said sea rise projections of up to a foot by 2030 did not factor into the decision.

"We've accommodated for it in our design and calculation on maximum hurricane surge and things that might be affected by increased sea level," he said.

But Kelly, the PSC public counsel, noted in his motion filed Monday with the PSC that other setbacks FPL has faced in the last month put "the feasibility of the project in serious doubt."

On April 20, an appeals court reversed the governor and Cabinet's certification of the new units at Turkey Point, he noted. A day later the U.S. Nuclear Regulatory Commission Atomic Safety Licensing Board denied FPL's proposal for injection wells for the project and the Florida Department of Environmental Protection ordered FPL to abate the saltwater plume "which is contaminating both Biscayne Bay and the County's groundwater."

Kelly argues that FPL should do what Duke Energy agreed to do in a settlement agreement with his office, after its customers spent more than $1.5 billion financing a failed nuclear project. Duke Energy put its proposed Levy plant on hold and continued to pursue a federal license for a new reactor but, rather than charging customers for those costs, charged its shareholders.

Rob Gould, an FPL spokesman, acknowledged that the NRC review has contributed to the delay. "We feel the uncertainty in the NRC review process and the need to integrate the best information possible from leading construction projects mandates that we maintain tight control over the start of preconstruction,'' he said in an email.

FPL told senators at a hearing in Miami last month that it expects the cost of the clean-up to be close to $50 million this year alone and it will ask state utility regulators to let customers pay for the effort.

Customers to foot $50 million bill for FPL cooling canal clean-up

The PSC will decide at a hearing Aug. 10-12 whether FPL will be allowed to continue to charge customers for the nuclear plant expansion. Another hearing is scheduled Aug. 22 to hear FPL's request for a $1.3 billion increase in customer rates, a 23.7 percent increase.

Meanwhile, how and who will pay for the clean-up costs of the polluted cooling canals remains a question. FPL has said it will ask the PSC for approval to have customers pay for the clean-up but the company has not yet filed any petition to recover costs, said Cynthia Muir, PSC spokeswoman.

State Rep. Jose Javier Rodriguez, D-Miami, has urged regulators to reject all rate or fee increases sought by FPL until the issues related to the salinity of the cooling canal system is resolved.

He also called on FPL to withdraw the rate case and have its shareholders bear the cost of the contamination, not customers.

"Putting it simply, it is inappropriate to seek higher profits from your customer base at a time when my constituents and all South Florida residents continue to be impacted by these failures at Turkey Point," Rodriguez wrote in a letter to FPL president Eric Silagy on May 4.

Mary Ellen Klas: [email protected], follow on Twitter @MaryEllenKlas

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Source: Equities.com News (May 18, 2016 - 6:30 PM EDT)

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