Duke Energy’s decision to retire the troubled Crystal River nuclear plant will bring Florida customers temporarily lower bills – but the prospect of being billed more than $1 billion for the plant later.

A key to Duke’s decision was the $530 million that the plant’s insurer agreed during mediation to pay. That money will repay the costs of buying replacement power for the plant, which shut down in 2009, and trickle down to customers of subsidiary Progress Energy Florida.

“One of the important things from the Florida customer’s perspective is that by accepting the mediator’s proposals, we think we’ll start refunding to customers … one or two years earlier,” said Duke spokesman Mike Hughes.

The money will lower typical bills by $5 or $10 a month for one year. Progress will also repay $388 million to customers by 2016 under terms of an agreement reached last year, and will record a $195 million impairment to its fourth-quarter earnings.

Progress Energy Florida has 1.6 million customers, Duke Energy’s second-largest customer base.

Progress agreed to freeze its rates through 2016. After that, the utility will try to recover from customers the costs of its remaining investment in Crystal River, $1.6 billion, over 20 years.

The botched installation of a new steam generator at the plant triggered the concrete problems that doomed it.

Duke concluded the risks of trying to repair the plant, at an estimated cost of up to $3.4 billion, weren’t worth saving the 36-year-old plant.

The Florida Public Service Commission is expected to hold hearings in April on the prudence of Duke’s decision.

“It is kind of a disaster in the sense of the enormous costs that will have to be paid,” said Charles Rehwinkel, deputy public counselor in the Florida Office of Public Counsel, which represents consumers. “But another way of looking at it is that Progress tried to extend the life of the plant. Otherwise, it would have gone off line in 2016 anyway.”

Crystal River’s license expires in 2016.

Progress thought it could save $10 million, Rehwinkel said, by self-managing a project to replace the huge steam generator. Instead the utility and its customers will lose hundreds of millions of dollars.

Other utilities have successfully undertaken the same procedure, punching a hole through the thick concrete wall of the reactor containment to install the new steam generator. This time, cracks appeared in the concrete after the repair in 2009 and twice more in 2011.

The Office of Public Counsel hired an expert from the Massachusetts Institute of Technology to assess what went wrong.

“I believe Crystal River was doomed in the beginning, in its concrete quality going back to its construction,” Rehwinkel said. “If (Progress) had known their building the way they should have, they wouldn’t have proceeded.”

The decision to retire the plant is devastating to Citrus County, where it’s located. Progress Energy Florida’s property accounts for 26 percent of the county’s tax base.

Duke has mounted a legal challenge to the $36 million tax value the county places on that property. With the nuclear plant crippled, Duke says the value should be $19 million.

“This is obviously not a happy subject, but we put a premium on being as transparent as we could be with county officials,” Hughes said.

County commission Chairman Joe Meek said this week’s announcement “removes uncertainty about the future” of the plant.

“The decision also highlights the drastic budget issues we are facing as a community,” Meek said in a statement. “The county commission has been preparing for this decision, and has made balancing the budget and diversifying our local economy the top priority.”

About 200 to 300 of the nuclear plant’s 600-member workforce will stay on for a couple of years as the plant is closed and stabilized.

Citrus County has hopes of being the site of a new power plant to replace the nuclear reactor. Duke says it hasn’t picked a site or made a final decision on what kind of plant to build, but is leaning toward one fueled by natural gas.

Because gas prices are so low, and gas-fired plants far cheaper to build than nuclear plants, “it’s very difficult in today’s economy to look at anything but a natural gas plant,” Hughes said.

Progress has picked a site in Levy County, Fla., for a new nuclear plant to start up no sooner than the mid-2020s, but hasn’t decided whether to build it.

A new gas-fueled plant would only intensify Florida’s reliance on natural gas, from which Progress Energy Florida already gets 65 percent of its electricity. While prices are low now, they could rise again.

“The fuel diversity policy of this state is a good one and it’s going in the wrong direction,” Rehwinkel said. “It could come back to bite us down the road.”