Progress Energy

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
bmaz .@MonaHol No, it is not a sex crime, and that is an asinine headline for @Forbes to run. http://t.co/ecj9xtScVy
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JimWhiteGNV @cocktailhag Heh. And now that #Rays won, I'm putting another clear coat on door number two.
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JimWhiteGNV RT @cocktailhag: @JimWhiteGNV Not as satisfying as refinishing, I expect.
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JimWhiteGNV Heading outside to shovel horse shit in 93F heat. Much more pleasant than watching Balfour pitch 10th for #Rays.
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JimWhiteGNV RT @AntonioFrench: Organizers say today's planned protest involving halting highway traffic has been postponed at the request of the Brown …
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bmaz @kellyoxford @LegallyErin It is a crime, yes, absolutely. Sex crime...uh, no, it is not.
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bmaz RT @DanCBarr: @bmaz They will probably rule quickly. Reinhardt wrote Perry and Smith-Kline. Berzon joined in Smith-Kline. Gould wrote Witt.…
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JimWhiteGNV “@TBTimes_Rays: Good play by #Rays Longoria on bad throw by Hanigan to catch Bogaerts stealing 3B” Cartwheel tag.
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bmaz @etb714 @wellsbennett Okay, that is an awesomely cute picture.
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JimWhiteGNV RT @JohnHorneUK: This award winning pic was taken in #Bahrain in Feb 2011. In July 2014 the photographer was arrestd & tortured for it http…
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bmaz @DanCBarr Agree. I'm just still disappointed in Reinhardt's Romer based watered down Perry decision. Hope they get this decision out quickly
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September 2014
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