Aug. 13--TALLAHASSEE, Fla Duke Energy CEO Jim Rogers told Florida regulators Monday his company is committed to what is now its second-largest territory. But he predicted a tough road ahead for talks with an insurer about repairing a troubled nuclear plant there.
The merger last month with Progress Energy brought Duke both opportunity -- 1.6 million customers -- and what Rogers called its highest-priority decision: whether to repair or retire the Crystal River plant, shut down since 2009.
Questions by the Florida Public Service Commission were gentle compared with those last month from the N.C. utilities commission following the sudden ouster of former Progress chief executive Bill Johnson to lead the combined company.
Rogers and Duke directors had cited the problems at Crystal River as contributing to Johnson's forced exit, leading to his appearance in Florida.
Those problems now focus on exhaustive engineering studies of whether the plant can be repaired safely. Consumer advocates hope that will be the case -- the 35-year-old plant was Progress Florida's cheapest electricity generator, saving customers $300 million a year in fuel costs.
Crystal River has been shut down since a Progress-led repair job went awry. Progress has estimated repair costs at up to $1.3 billion, but company officials now say estimates are trending higher. They didn't cite new estimates.
Duke will enter into nonbinding mediation later this year with the plant's insurer, Nuclear Electric Insurance Limited, which has balked at paying to repair the failing concrete in the plant's thick reactor containment structure.
If mediation with the insurer fails, Rogers said Monday, the issue is likely to go to arbitration. Because it is NEIL's largest claim, Rogers predicted that mediation "is going to be tough and difficult."
If NEIL refuses to pay any more and repair costs rise, he added, the prospect of retiring the plant goes up.
"It's a complex decision, but at the end of the day what's best for the customers is what we'll do," Rogers told reporters.
Under an agreement with consumer representatives, approved in March, Progress Energy Florida -- now part of Duke -- agreed to refund up to $100 million to customers if repair work doesn't start by the end of the year. The agreement, which Rogers said Duke will comply with, also addressed costs of a $24 billion nuclear plant being considered for Levy County.
Engineering for the Crystal River repair is nearly complete, Progress Florida says. The utility is working on an engineering contract for the repair, which would involve removing and replacing sections of concrete in the 42-inch-thick containment structure.
Before the merger, Progress favored repairing the plant, a position supported by Florida'sOffice of Public Counsel, which represents consumers. Through March, Progress had spent $425 million on repairs and replacement power not covered by insurance.
"We liked the fact that (Rogers) spoke to Duke's commitment to continue to evaluate the repair option if technically and economically feasible," said Public Counsel J.R. Kelly. "It means a lot to ratepayers that that unit get repaired because if you don't it's going to be a hornet's nest."
Any other option -- such as building a new power plant to replace Crystal River -- is likely to cost consumers more than fixing the plant, Kelly said. Every dollar that insurers agree to pay toward a repair, he added, will also save customers money.
Apart from Crystal River, commissioners sought reassurance that Duke won't ignore its distant service territory in Florida. Duke's commitment to Progress' former headquarters city, Raleigh, also came up as part of the N.C. Utilities Commission's probe of Johnson's ouster.
Last week, Duke announced that Progress Florida president Vincent Dolan would retire at the end of the year. He will be replaced by current general counsel Alex Glenn.
"You have made this promise, but I'd like to hear you say it. ... Can you assure us that Florida is not an afterthought?" asked commissioner Lisa Polak Edgar.
Rogers replied that "our Florida customers will be in the forefront of what we do."
He touted the merger's benefits to Florida, where Duke employs 4,000 people. He noted the efficiency of its nuclear fleet, role in economic development and ability to send crews from five other states, if needed, to help repair storm damage. About 20 percent of the new Duke's revenue will come from Florida.
Edgar, referring to calls by two resigned directors that Duke look for a new CEO, asked Rogers whether he'd made a commitment to his board on his tenure.
As he has previously, Rogers replied that he serves at the pleasure of the board and will "serve as long as I add value and they want me."
Asked whether he expected more fallout in North Carolina, Rogers said, "My hope is the N.C. commission puts this behind them and allows us to focus on delivering the benefits that the merger offers for the consumers, not just in North Carolina but all the consumers of Duke Energy."
Henderson: 704-358-5051 Twitter: @bhender
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