Jim Rogers

Crystal River Crack: The Moral Hazard of Private Utility Companies

About fourteen months ago, I wrote about the Florida Containment Dome Crackers who had the bright idea that they could save $15 million while refurbishing the steam generators at the Crystal River nuclear power plant in 2009. They wound up cracking the containment dome because they had no clue on managing this complex project: it was the managing engineering contract they decided to bypass to save money. Yesterday, Duke Energy, the successor to Progress Energy (more on that change in a bit), finally announced that they will no longer pursue the repairs and that the plant will be closed. The math has only gotten worse since my earlier report. Now the overall cost estimate for the repairs, replacement energy while the plant is down and construction of a new gas power plant is up to $3 billion from the earlier $2.5 billion estimate. Of those costs, insurance will pay $835 million and Duke’s customers will pay the rest. Most depressing of all is that the Tampa Bay Times’ Ivan Penn, who has been the go-to source on this story since its start, reports that Duke will pocket $100 million of the $1.3 billion expended to date on the “upgrade” to the plant. Clearly, the regulatory environment in Florida enables private companies posing as public utilities to feed their addiction to public funds without consequence for bad decisions. In fact, Duke has now been rewarded with $100 million when their predecessor only sought to pocket $15 million. Rate-payers will be stuck with a bill for over $2 billion, some of which it appears to me Duke will be allowed to pocket while building the replacement plant.

Meanwhile, Citrus County, where the plant is located, is looking at 600 lost jobs and a huge blow to its tax base (the replacement gas plant will be on the Atlantic coast instead of the Gulf coast where Citrus County is located):

Shutting the plant would drop Duke Energy’s tax bill, which was $35 million, to at most $13 million, an executive of Duke subsidiary Progress Energy Florida told the county last month.

That shortfall, equal to a fourth of the county’s general fund, could have dire consequences for schools, safety and public services in this expanse of forests and strip malls less than 80 miles north of Tampa.

The locals see tough times ahead:

In the midst of the Crystal River fiasco, Progress Energy entered into a merger agreement with Duke Energy. Despite Duke being the larger entity, the original merger agreement called for Progress CEO Bill Johnson to be head of the new combined company. The deal closed in July of last year, but Johnson’s tenure as CEO lasted only a few hours. From behind the Wall Street Journal paywall: Continue reading

Emptywheel Twitterverse
emptywheel TIL: Sony is a more critical part of our critical infrastructure than all of PGE's infrastructure, apparently.
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emptywheel @jaazee1 How is this cyberwar? Sony is a company, and not even an American one. @OKnox
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emptywheel @onekade Just so long as @JameelJaffer can't prove they said it they can do that forever. @oknox
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emptywheel @onekade You obviously didn't read that part of the Torture Report, where they can too and still Glomar it damnit. @oknox
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emptywheel RT @OKnox: White House says Sony hack is a "serious national security matter" but does not blame North Korea (investigation "progressing")
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emptywheel @Krhawkins5 I've LONG thought that. Perfect tragic "hero" @johnkerry
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emptywheel @matthewstoller I asked earlier: how much do they actually pay in taxes?
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emptywheel RT @matthewstoller: Hey media, yes American interests are involved, but can you please stop saying that Sony is an American company?
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emptywheel @theurbansherpa Whatev. Having been at both I find the guinea pigs to be far worse. @JenDeOne
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emptywheel @theurbansherpa I think @JenDeOne is inflating that even more than you the guinea pigs. She was too small to remember.
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emptywheel RT @joe_palazzolo: Court: Probition on gun possession by man who was committed to a mental institution violates the 2nd Amendment http://t.…
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emptywheel @JenDeOne The bean up your nose was horrific. The fishhook? I don't remember it as being so bad. @theurbansherpa
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