Lawyers for industrial consumers are questioning Progress Energy Florida’s approach to calculating how much insurance money the utility can expect in 2013 to help pay for power to replace output from a crippled nuclear reactor.
State regulators didn’t immediately resolve that issue this week but approved rate increases for fuel, replacement power, conservation and other annually adjusted recovery charges for two smaller companies, Gulf Power Co. and Florida Public Utilities Co., and a reduction for a third, Tampa Electric Co.
A contention that Progress is underestimating potential insurance payments dominated a Public Service Commission hearing on annual rate adjustments for Florida’s five state-regulated power companies. The insurance money would help offset replacement power costs that are passed on to customers.
St. Petersburg-based Progress so far has received $162 million from Nuclear Electric Insurance Ltd., or NEIL, to replace power from the reactor at Crystal River since an October 2009 crack developed in its containment building during a maintenance and upgrade project.
The utility has projected receiving the remaining $327.6 million of a $490 million replacement power policy in 2013.
The Florida Industrial Power Users Group, PCS Phosphate-White Springs and federal agencies served by Progress argued the utility should anticipate another $490 million for a second crack that occurred in March 2011, further reducing the replacement costs passed on to consumers by that amount.
“The ratepayers we contend really are on the hook for this because the premiums are paid with ratepayers’ money,” said Jon Moyle, a lawyer for the power users group.
Moyle noted that Progress purchases an annual policy, effective April 1 of every year, and that the cracks occurred in two separate years.
Progress lawyer John Burnett said it would be speculative to consider the cracks as two events, each subject to the $490 million policy limit, rather than one because NEIL so far has acknowledged only a single event.
“If we don’t get that amount in 2013 then that’s going to drive an under recovery, which will cause bills to go up in 2014,” Burnett said.
He noted that Progress was taking a risk even including the $327.6 million still unpaid for the first crack. NEIL began making payments in June 2010, but stopped in May 2011, said Progress rates manager Marcia Olivier. She said she didn’t know why the payments stopped.
The state’s Office of Public Council, which represents all consumers, has taken no position in the dispute. Deputy Public Counsel Charles Rehwinkel said it’s premature and noted a settlement between Progress and consumer advocates says that any insurance proceeds should benefit customers.
Progress and NEIL so far have been unable to reach a settlement on the power replacement claim as well as a second $2.25 billion policy for repairing the damaged plant. They are planning nonbinding mediation and if that fails, they’ll go to binding arbitration. The payments can be denied if it is determined the cracks were not the result of an accident but due to negligence by the utility.
The plant has been down since shortly before the first crack occurred. Utility officials say they expect to decide by next summer whether to repair the reactor or permanently close it.
The five-member commission will vote on Progress’ annual rate adjustments on Nov. 27. The utility is projecting a decrease of more than $7 in the overall rate for a residential customer using 1,000 kilowatt hours a month, which is considered about average, for a total bill of $116.06. Most of the reduction is due to falling natural gas prices.
Progress, owned by North Carolina-based Duke Energy, serves more than 1.6 million homes, businesses and other customers in central and north Florida.
The commission, meanwhile, approved a rate reduction of $4.32 for a Tampa Electric customer using 1,000 kilowatt hours for a total bill of $102.58.
For Pensacola-based Gulf Power Co., a $1.78 increase will raise the monthly total to $118.39. Gulf has 431,000 customers in the western Panhandle.
Customers in the Florida Public Utilities Co. Northwest Division, based in Marianna, will see their bills go up by 70 cents to $135.34. The rate will increase $5.28 to $134.35 in the Northeast Division, based in Fernandina Beach.
The commission has not yet revised 2013 rates for the state’s largest electric utility, Florida Power & Light Co., which services 4.5 million customers in South Florida and along the Atlantic coast. Besides fuel and other annual adjustments, FPL is seeking a $690.4 million increase in base rates. A hearing on that base rate request is set to begin Nov. 15.