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The Palm Beach Post: Commentary: Pay-as-you-go financing for nuclear energy benefits Florida Power & Light customers
Friday, May 24, 2013
In his column “Utilities go nuclear to protect their interests,” Randy Schultz quotes state Rep. Mike Fasano, R-New Port Richey, as saying, “We were lied to” when he supported 2006 legislation that allows cost reimbursements for nuclear plants to be sought on a period basis rather than waiting many years for such plants to start operating. I was there in 2006. There is nothing about the policy consideration then or the application of the policy that supports this inflammatory claim.
In late July 2005, Congress adopted the Energy Policy Act. It attempted to stimulate development of low-emission energy projects by including incentives totaling about $5.8 billion for wind and solar, alternative motor vehicles and biofuels and efficiency and conservation, and incentives totaling about $4.3 billion for nuclear energy. In late 2005 and early 2006, U.S. Department of Energy officials met with state government officials, environmental organizations and energy experts to consider state-level policies to promote additional low-carbon-emitting energy sources such as solar and nuclear.
As the principal deputy administrator of the U.S. National Nuclear Security Administration, I was invited to attend meetings in Tallahassee during which these diverse groups considered such measures, including nuclear cost recovery in the form of pay-as-you-go financing. In 2006, the Legislature passed Senate Bill 888 by nearly unanimous vote. It promoted solar energy, biomass, ethanol and nuclear energy. Two years later, the Legislature adopted another bill that provided cost recovery for 110 megawatts of new solar energy, which has been successfully built in Florida.
The pay-as-you-go financing for new nuclear generation has worked, too. Expansions of Florida Power & Light Co.’s dual-reactor plants in St. Lucie and Miami-Dade counties are providing more than 500 megawatts of zero-emission electricity. Those projects alone will save ratepayers what a public service commission docket estimates to be almost $4 billion in fossil fuel purchases. Those projects cost less than $4 billion. Only about $450 million was reimbursed prior to plant startup. The rest was financed by FPL.
Similarly, a new dual-unit nuclear plant in Miami-Dade would save ratepayers, according to the company, almost $80 billion in fuel costs, although the plant cost would be between $12 billion and $19 billion, depending on inflation and costs of materials. Only about 10 percent would be reimbursed on a pay-as-you-go basis prior to plant completion, but that would save ratepayers about $2 billion in interest charges.
This is smart economic policy. Moreover, that new plant would avoid emissions of about 250 million tons of carbon dioxide into the air during the life of the plant. This is smart environmental policy.
Some opponents have suggested that the law should not allow cost recovery if circumstances prevented completion of a proposed plant. Although the Florida Public Service Commission determines whether expenses were prudently made at the time, it would not be wise to exact a financial penalty for a decision to discontinue nor a financial reward for continuing a project in the unlikely scenario in which one is terminated.
That is not how our society makes sound decision when developing complex, expensive infrastructure. As taxpayers, for example, we do not receive a return if government decides that it should not proceed with planned construction of a school, a sewer plant or an aircraft carrier.
It is trendy and politically opportunist to rewrite history. But facts are stubborn things. The factual history of Florida’s nuclear cost recovery shows that it was good policy when it was adopted and is good policy today.
Jerry Paul, a nuclear engineer, was Distinguished Fellow for Energy Policy at the University of Tennessee Howard Baker Center for Public Policy. He lives in Venice, Fla.