Foes gear up to fight utilities

Feb 10 - The News & Observer, Raleigh, N.C.

A coalition of environmental and consumer advocates will fight a proposal by the state's largest electric utilities that would make it easier to raise rates to pay for new nuclear plants.

The opponents are getting a head start. They have begun waging their anti-nuclear campaign before the utilities have recruited a friendly legislator to introduce a bill on their behalf.

Duke Energy and Progress Energy executives concede this may not be the best year to lobby for a pro-nuclear bill as the state contends with a budget shortfall. But they have little choice, Progress CEO Bill Johnson said last month in a meeting with N&O editors and writers.

"We can't raise the money on Wall Street unless we get that kind of regulatory structure" in North Carolina, Johnson said. "This may not be the year to do it, but we're going to try it."

The two North Carolina power companies, which last month announced they're merging to form the nation's largest utility, had previously announced plans to build six reactors in Florida and the Carolinas, including the Shearon Harris site in Wake County. Jointly financing new nuclear reactors, which can cost more than $10 billion apiece, is one of the main drivers of the merger.

Johnson and Duke CEO Jim Rogers said they can't build nuclear plants unless state law is changed to allow paying for new reactors without having to go through lengthy rate hearings.

A coalition of more than a dozen groups that includes environmentalists, nuclear critics, N.C. Justice Center and AARP want to keep this state from adopting a nuclear policy that's already in place in South Carolina, Florida and other states.

The groups have placed full-page newspaper ads to warn that this state's power companies are gambling on nuclear projects that could experience cost overruns and end up abandoned, as happened more than 60 times in the 1980s. The AARP also sent a mailer to more than 100,000 members in the state last week, characterizing the proposal as a blank check that will lead to certain annual rate increases.

The groups have been encouraged by Florida's Republican state Sen. Mike Fasano, who is seeking to repeal a similar law in the Sunshine State. That state's law results in an extra $5 a month on a typical residential bill for Progress Energy's Florida customers.

In North Carolina, "GOP legislators will be nervous about voting for something that will fairly quickly start to raise people's energy bills," said Peter Walz, organizing director at the N.C. Conservation Network. "You're also likely to see opposition emerge eventually from business and industry groups who don't want to see their energy bill going up."

It's not clear when the new Republican-controlled General Assembly in Raleigh might come forward with the legislation Charlotte-based Duke and Raleigh-based Progress are seeking. Republican leaders in both chambers said through spokesmen they don't know the status of a draft bill.

Rep. Daniel Clodfelter, a Democrat from Mecklenburg County, said the utility proposal is a no-brainer.

The tradeoff is that "you end up paying more on the front end, but you have more stable rates and you have lower rates over the long term," Clodfelter said. "That's for the rate payer -- not just for Duke or Progress -- but for me and for you."

Savings on plant costs

The change Progress and Duke are seeking would let utilities raise rates to pay off the interest on their debt. The principal would not be paid until the nuclear plant is built and in operation.

Still, by paying the interest each year rather than after the plant is completed, the cost of a plant would be reduced by about 25 percent, said Robert Gruber, director of the Public Staff, this state's consumer advocacy agency.

That's why Gruber has thrown his support behind the power companies' proposal, after years of opposing the idea as bad public policy.

"I've reluctantly come to this conclusion because nuclear plants are so expensive," said Gruber, whose agency intervenes on behalf of ratepayers in utility rate cases.

South Carolina changed its law in 2007 to allow streamlined cost recovery.

Nuclear critics contend that passing a similar law in North Carolina would let power companies shift the nuclear risk from shareholders to customers. They fear a repetition of the nuclear fiasco of the 1980s that led to the cancellation of more than 60 projects across the country. One local example: Progress's Shearon Harris plant, planned to have four reactors for $1.1 billion, ended up with one reactor that cost $3.9 billion.

Progress later sought a 13.9 percent rate increase to pay for the project, but the N.C. Utilities Commission in 1988 slashed the request to 9.1 percent, saying the rest wasn't justified.

Nuclear critics say that making it easier for electric utilities to raise rates to pay for nuclear plants will embolden the companies to take similar risks again.

"Why aren't the shareholders bearing the responsibility?" said Rep. Pricey Harrison, a Democrat from Guilford County who backs environmental causes and energy efficiency. "If Wall Street won't finance it, I don't know why ratepayers should."

john.murawski@newsobserver.com or 919-829-8932

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