nuclear-news

Socialism in Florida – taxpayers take finacial risks, nuclear company gets profits

Nuclear reactor tax puts unfair risk on customers By
Stephen Smith http://www.sun-sentinel.com/news/opinion/fl-sscol-oped1130-20121130,0,5749854.story
11:26 a.m. EST, November 30, 2012

A misguided state law that allows big power companies to shift costs
and financial risk to customers for new nuclear power generation is
the last thing Florida’s families and businesses need as they dig out
of the worst recession in recent memory.

In 2006, the Florida legislature passed a bill to promote the
construction of new nuclear reactors, but it did this by shifting all
the costs and financial risk from utility company shareholders to its
customers. It allows companies, such as Florida Power & Light to bill
customers for specific costs before new reactors are built.

The law essentially imposes a “nuclear tax” by forcing customers to
pay preconstruction costs, including a hefty return to power company
shareholders, through their utility bills. Customers are charged
before the reactor has even produced electricity. In fact, the law
allows a big power company to recover all of its construction costs
for a reactor project even if it chooses to abandon it. This could
leave FPL customers on the hook for billions of dollars.
Last year, the Florida Public Service Commission approved $196 million
in costs that were passed on to FPL customers for nuclear-related
projects, including proposed new reactors at Turkey Point, 25 miles
south of Miami. This year, FPL sought and was recently granted another
$150 million. What’s particularly stunning about this is FPL continues
to request and be granted recovery of these costs by the PSC without
ever expressing a clear commitment to build the proposed new reactors.

This law, while saddling customers with significant costs and risk,
turns traditional utility regulation on its head. Power company
shareholders typically shoulder the risk for the construction of power
plants because prior to this new law, utilities could not charge
customers for new plants until they delivered power to customers. In
return, the state allows them to earn a rate of return on their
investment in the plant.
But this law now socializes costs and all the risk of reactor
construction by shifting it to customers. Meanwhile it privatizes all
the reward to big power company shareholders, such as FPL — even
though they shoulder no risk. FPL has recently requested an 11.25
percent return for its shareholders as part of a base rate increase.
The FPL project, if ever completed, is estimated to cost upwards of
$20 billion. Clearly an 11.25 percent return on $20 billion is a sweet
return for FPL shareholders for a risk-free investment.

Projected cost estimates for new reactors have nearly quadrupled in
the last decade. The in-service dates for the proposed Turkey Point
reactors have been delayed to at least 2022, due to lack of demand for
electricity.

Similar projects in the ’70s and ’80s were abandoned due to big cost
overruns and a drop in electricity demand. Back then, though, many of
the losses were shouldered by power company shareholders. Today, Wall
Street won’t finance these risky projects, unless, as has been done in
Florida, the company is successful in shifting the risk to customers.

Southern Alliance for Clean Energy appealed to the Florida SupremeCourt, challenging the constitutionality of the law and to overturn
the commission’s 2011 decision awarding cost recovery to FPL and
Progress Energy Florida. We believe the vague legislation — with its
lack of standards —- allows the commission to approve unlimited
expenses for companies claiming to pursue new nuclear generation. A
decision by the Court is expected soon.

Regardless of how the court rules, all Floridians should be troubled
by state legislators who are unwilling to revisit a nuclear reactor
tax that is unfair, by a governor who has remained silent on the
issue, and by a PSC that is willing to help big power companies by
heaping more costs and risk on customers. Rather, Floridians would be
better served if the state instituted a transparent utility planning
process, and ramped-up lower cost energy efficiency programs – a move
that would help customers reduce their energy use and save money on
their bills.

December 1, 2012 - Posted by Christina Macpherson | politics, USA