Consumer, environmental and anti-nuclear advocates said Monday they will fight proposed state legislation allowing Duke Energy to more easily pass costs of a new nuclear plant on to N.C. customers.
Duke wants N.C. lawmakers to allow it to recoup nuclear pre-construction and financing costs without filing a lengthy general rate case. The bill would instead let utilities adjust rates annually to recover those costs, something South Carolina, Georgia and Florida already allow.
Consumers Against Rate Hikes – a coalition of 12 groups – said it will fight to see that North Carolina does not repeat that “tragic mistake.”
The groups include AARP North Carolina, the N.C. Housing Coalition and the N.C. Waste Awareness & Reduction Network.
Duke has argued that the proposed simplified approach would reassure investors and allow customers to more gradually pay for new power plants, avoiding sharp rate hikes to pay for construction once they’re finished.
Critics say the practice puts customers on the hook for plants whose price tags are likely to grow, and would bill them even if a proposed plant is canceled.
“You shift all construction risks to the consumer,” Mark Cooper, a Vermont Law School economist, said on a conference call with reporters Monday. “Making an interest-free loan to a utility is not what most people would want to do with their money.”
Cooper argues that the practice called simplified cost recovery encourages utilities to invest in the most expensive power plants and erases incentives to cut costs. The coalition reported survey results of 500 likely N.C. voters by Raleigh’s Public Policy Polling that found broad opposition to rate increases to build nuclear reactors.
Duke spokeswoman Betsy Conway said it’s hard to predict how the legislation would be written.
“We want to keep nuclear as an option and rate cases are time-consuming. It’s a … nine-month process,” she said. “When we’re talking about something as significant as a nuclear plant, a pay-as-you go model … benefits customers.”
Duke won a 7.2 percent N.C. rate hike in January, its second since 2009, and plans to file for a third hike at mid-year. Duke has spent $261 million through last year on its proposed $11 billion Lee plant near Gaffney, S.C., which would serve customers in both Carolinas. Lee’s costs have not yet been added to Duke’s N.C. rates.
CEO Jim Rogers told shareholders at their annual meeting May 3 that Duke is “firmly committed” to keeping the option of expanding its nuclear capacity.
Rogers repeated that Duke needs passage of the N.C. construction-cost bill before deciding whether to go ahead with Lee. That’s not expected to happen this year, he said, as Duke pursues its merger with Raleigh-based Progress Energy.
Rogers added two more caveats for giving Lee the green light: that demand for electricity increase, after it softened during the economic slowdown, and that natural-gas prices rise. Gas prices have fallen in recent years as estimated U.S. reserves grew.
Duke customers paid $224 million when the company canceled its Cherokee nuclear plant, on the same site as Lee, in 1982. Cherokee was among 46 plants canceled nationwide after the nation’s worst nuclear accident at Pennsylvania’s Three Mile Island station in 1979.
Duke has an option to buy 5 percent to 10 percent of the Summer nuclear plant expansion now under construction north of Columbia.
Progress Energy this month pushed back the likely starting date of its proposed Levy nuclear plant in Florida to 2024, and increased its expected cost to $19 billion to $24 billion. The Tampa Bay Times has reported that the plant would add nearly $50 a month to typical bills.
Florida passed a similar cost-recovery law in 2006. Even if Levy is canceled, the Tampa Bay Times has reported, customers will repay $1.1 billion.
