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Good move, Duke Energy: It seeks to use bonds to offset nuclear power plant costs

With much ink spilled over Duke Energy charging customers for future nuclear power plants, it is encouraging to see the utility, supported by state Sen. Jack Latvala, on the right side of the issue.

In a new proposal, the Clearwater Republican and Duke are working together to lift some of the financial burden from consumers when shutting down nuclear power plants.

The measure, now in front of the Senate Utility Committee, seeks to give the state Public Service Commission authority to allow Florida utilities to issue bonds.

Bonds would help pay for costs associated with retiring nuclear plants, without passing it all on to consumers.

Called a “securitization plan,” utilities can issue bonds in financial markets, with proceeds going to pay for unexpected repairs and subsequent retirement expenditures.

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The amendment is similar to Florida law passed in 2005 that allows such a “re-financing” option for hurricane rebuilding. If passed, any utility can petition the PSC to take advantage of the alternative financing.

Before granting approval, utilities would have to follow several steps. First, they must estimate cost savings, based on current market conditions, or demonstrate how Nuclear Asset Recovery Bonds and the imposition of Nuclear Asset Recovery Charges would either avoid or mitigate rate impacts to customers, compared with traditional method of financing.

Bonds would be available after the PSC decides — with a financing order — that a bond-based recovery would reasonably result in lower overall costs or lessen rate increases to customers.

Under the amendment, issuing bonds could save consumers hundreds of millions of dollars.

One of the first projects eligible for the bond issued cost recovery is Duke Energy Florida’s Crystal River Unit 3. Applying them to shutting down CR3, bonds could reduce the customer burden by nearly $600 million, equal to a $2 to $3 reduction in the average monthly consumer electric bill.

During the 2012-13 session, consumer advocates and state officials agreed the ideal way to repay nearly $1.4 billion in expenses for decommissioning CR3 was to spread the costs over many years. The move minimized the change to current rates. That led to the current approved regulatory plan, a $5.33 monthly surcharge to the average residential customer for the next 20 years.

Bonds could bring that number down as low as $2.91, a $2.42 savings.

If approved, the bond issuance program would take effect sometime around 2016-2017.

The proposal has another immediate benefit: It would go a long way toward repairing Duke’s much-battered image with customers and local legislators.

Securitization chart

Written By

Peter Schorsch is the President of Extensive Enterprises and is the publisher of some of Florida’s most influential new media websites, including Florida Politics and Sunburn, the morning read of what’s hot in Florida politics. Schorsch is also the publisher of INFLUENCE Magazine. For several years, Peter's blog was ranked by the Washington Post as the best state-based blog in Florida. In addition to his publishing efforts, Peter is a political consultant to several of the state’s largest governmental affairs and public relations firms. Peter lives in St. Petersburg with his wife, Michelle, and their daughter, Ella.

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Florida Politics is a statewide, new media platform covering campaigns, elections, government, policy, and lobbying in Florida. This platform and all of its content are owned by Extensive Enterprises Media.

Publisher: Peter Schorsch

Contributors & reporters: Phil Ammann, Jim Rosica, A.G. Gancarski, Joe Henderson, Janelle Irwin, Dan McAuliffe, Jacob Ogles, Scott Powers, Bob Sparks, Andrew Wilson.
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St. Petersburg, Florida 33704

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