Duke Energy to retire idle Crystal River plant

Duke Energy subsidiary will shut down Crystal River plant in Florida

jmurawski@newsobserver.comFebruary 5, 2013 

Crystal River Reactor

The reactor building at the Crystal River Nuclear Plant seen during a tour held for broadcast and print media, in Crystal River, Fla., Tuesday, June 14, 2011. The reactor is currently shut down as Progress Energy considers their options for repairing the delamination of the concrete wall containing the reactor building. (AP Photo/Will Vragovic, Pool)


Duke Energy announced Tuesday that it will close Progress Energy’s idled Crystal River nuclear reactor in Florida, which experienced one of the most unusual and costly malfunctions in U.S. nuclear history.

The Charlotte power company is reviewing alternatives to replace the power generated by the 860-megawatt reactor, including possibly constructing a natural gas-fueled plant to meet the energy needs of its Florida customers. Duke, which acquired Progress Energy last year, is evaluating several potential sites for the project.

The Crystal River plant in Citrus County, which supplied 8.5 percent of the electricity for the company’s Florida service area, has been shut down since a botched component-replacement project in 2009 cracked the concrete in the reactor containment structure. Duke had been mulling over whether to repair the plant, at a cost estimated between $1.5 billion and $3.4 billion, or retire it.

“We believe this decision to retire the nuclear plant is in the best overall interests of our customers, investors, the state of Florida and our company,” Duke CEO Jim Rogers said in a statement. “This has been an arduous process of modeling, engineering, analysis and evaluation over many months. The decision was very difficult, but the right choice.”

Duke also announced Tuesday that it has reached a solution with the insurer, Nuclear Electric Insurance Ltd., about claims Progress can collect for the damages that occurred at Crystal River. Under the terms of a mediator’s proposal, NEIL will pay $530 million in addition to the $305 million it has already paid. Duke said the $835 million payout is the largest in the history of NEIL, an insurance pool funded by other nuclear operators.

Progress plans to charge its Florida customers more than $1.7 billion for uninsured repairs, replacement power and costs associated with winding down the Crystal River nuclear plant. The company expects to begin seeking those costs after its negotiated rate freeze expires in 2016.

“Our expectation is that those costs would be recovered over 20 years, so the impact (on customers) should be minimized,” said Progress spokesman Mike Hughes.

The Florida utility operates independently of Duke utilities in other states and North Carolina customers will not pay for the Crystal River fiasco in their rates.

The facility employs about 600 people. The company expects many to transfer to other Duke nuclear plants and a contingent to remain on site during the plant’s decommissioning, Hughes said.

Johnson blamed for Crystal River

The troubles at Progress’ Crystal River reactor were cited by Rogers and other Duke board members as one of the reasons that Duke moved to fire Progress CEO Bill Johnson just hours after Duke and Progress completed their merger last summer. Johnson had been slated to lead the combined Duke after the merger, but Duke’s board said Progress’ poor nuclear performance in recent years reflected badly on his leadership.

Duke’s board became particularly concerned about missed deadlines and rising costs at Crystal River after the merger between Duke and Progress was proposed in January 2011, Duke’s lead director Ann Maynard Gray said last summer during testimony before the N.C. Utilities Commission.

Duke reported in November that subsidiary Progress Energy Florida would record a $100 million charge against third-quarter income from its Crystal River nuclear plant.

An agreement the Florida Public Service Commission approved in February triggered the expected $100 million charge. Progress agreed to refund to customers $40 million in 2015 and $60 million in 2016 if repairs don’t begin by the end of this year – the money paid for replacement power while Crystal River was not operating.

Little downside in decision

Anti-nuclear activists praised the decision to mothball the plant and said it demonstrates that nuclear plants are too expensive and too risky.

“Crystal River clearly demonstrates the vulnerabilities of being overly dependent on a high-risk energy source like nuclear power, which exposes ratepayers to high financial risks and residents to unnecessary health and environmental risks,” Southern Alliance for Clean Energy said in a statement.

Duke plans to place the crippled reactor in a “safe storage configuration,” requiring limited staffing to monitor plant conditions until it is dismantled and the site decontaminated. That could be in 40 to 60 years.

Utility analyst Hugh Wynne at Sanford C. Bernstein & Co. in New York said Duke’s decision was expected and makes sense given the costly experience of other electric utilities that have dealt with damaged nuclear plants.

Wynne said the risk of trying to repair the Crystal River plant was simply too great and could have resulted in unforeseeable delays and cost overruns.

Wynne also noted that the downside of walking way from the Crystal River plant is small. Progress Energy’s settlement with Florida regulators last year will allow the utility to charge customers for its uninsured costs in the idled nuclear plant.

“Utility investors have been burned so badly with these nuclear projects in the past that they don’t want to see Duke get caught up in this tar baby,” he said. “It could be a real earnings sink.”

Duke shares closed Tuesday at $68.88, up 53 cents.

Charlotte Observer staff writer Bruce Henderson contributed.

Murawski: 919-829-8932

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