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As tides turn on nuclear fee, House leaders allow a hearing, hint at more to come

The Florida House broke its silence on the controversial nuclear cost recovery law Wednesday and, for the first time in years, allowed a workshop hearing into the controversial 2006 measure that allows electric utilities to charge customers for nuclear plants before they are built.

For years, legislators in both the House and Senate have filed bills to repeal the measure, alleging that it's a bad deal for customers, but the proposals never got a hearing. This year, three Republican senators have filed legislation to modify the law, the Senate conducted a hearing on the measure last week and the House followed on Wednesday.

The law has allowed Progress Energy to charge customers $1.5 billion for nuclear development costs before the plants go online.  Florida Power & Light customers paid $300 million for nuclear development costs that the company says will help pay for a 500 megawatt nuclear power expansion at its existing plant in St. Lucie County. The project will be completed this year and FPL plans to use the nuclear fee to pay for additional nuclear projects at its Turkey Point plants.

Opponents say the law allows utilities to raise rates on customers so they can shift the risk of financing nuclear development projects from utility shareholders. Progress Energy has also been able to keep $150 million in profits from the fee but has not decided whether it will build its projected Levy County nuclear plant or not.

The utilities say the cost shift from shareholders to customers saves customers more money in the long-run because it allows the company to invest in the expensive nuclear projects, expand Florida's fuel diversity and be prepared for the increasing costs of natural gas.

But legislators in both the House and Senate now say they are open to modifying the law and a nuclear expert gave the House several suggestions.

"I do think the appetite is there for a bill,'' said Rep. Jose Felix Diaz, R-Miami, chairman of the House Energy and Utilities Subcommittee after the workshop on Wednesday. "There's a lot of folks that want to see something, whether it's a revision or repeal."

He said that it's "too early to tell" whether the House action will come in the form of a committee bill or whether it will wait for the Senate bill.

The proposed Senate bill would give utilities until 2016 to start building new nuclear plants or forfeit collecting any more money from the so-called advanced nuclear cost recovery fee.

Peter Bradfrod, an adjunct professor at Vermont Law School and a former member of the Nuclear Regulatory Commission, told the House committee that Florida's law lacks many of the traditional safeguards that have been put in place by other states.

He suggested Florida legislators revise the law to at least protect customers from cost overruns and plant cancellations, cap the amount customers must pay, require that plants be at least 50 percent constructed to collect the fees, and require regulators to conduct a rigorous review every few years to determine if the plan is in the best interest of customers.

Bradford also suggested that the Public Service Commission tap into the growing market for alternative energy production by using competitive bidding to run periodic auctions "to see what the independent producer power community would be able to offer for 1500 megawats of demand."

"In other parts of the country, these auctions tend to produce pleasant surprises whereas nuclear construction tends to produce unpleasant surprises,'' he said.

But executives for both FPL and Progress Energy urged the committee to leave the law in place, saying it has worked well.

Steve Scroggs, senior director nuclear development for FPL, said his company spent $2.9 billion on expanding its St. Lucie County nuclear plant to include 500 megawatts of new energy, but customers only paid $320 million for it, saving customers $100 million in fuel costs.

Without the cost recovery law, he said, "the cost would be passed along to customers."

Progress Energy Florida president Alex Glenn said that his company continues to move forward on plans to build a two-reactor nuclear plant in Levy County. He said that conducting an auction is not feasible for Florida and nuclear power is essential to maintaining a diverse mix of affordable fuels.

"The one point to take away from today is, there are no magic bullets here,'' he said. "We're taking steps to maintain nuclear for the future of our state. Right now, we need an 'all of the above' approach."