FPL Fraud & Early Cost Recovery

The Early Cost Recovery (ECR) scam, is not new and has been used for years by utilities across the nation to gouge their customers (over whom they hold a monopoly) in order to pay for improvements to their own infrastructure and capital base.

In 2007, after a year in which FPL handed out nearly $1.3 million in campaign contributions, the legislature passed Florida statute 366.93, which allows for “Cost recovery for the siting, design, licensing, and construction of nuclear and integrated gasification combined cycle power plants.” An electric utility can take our money, up front, for any and all of the following:

  • ALL capital investments, including rate of return.
  • ANY applicable taxes.
  • ALL expenses, including operation and maintenance, related to the siting, licensing, design, construction or operation of the nascent nuclear facility.
  • ANY new, expanded or relocated transmission lines “of ANY size that are necessary.”

FPL is currently charging ratepayers around $30 million a year in ECR, but keep in mind that this what they are able to charge BEFORE receiving a license from the state to “build” these two proposed nuclear plants. Once they receive a license, ECR charges will climb into the hundreds of million per year, resulting in monthly bills that could increase by close to 50% at their peak.

The ECR funds FPL charges us every month are also being used to lobby and litigate against us. Essentially, FPL is currently taking $30 million a year from us to plead their case to the state and federal government that they should be able to take hundreds of millions of dollars from us in order to build two nuclear power plants that they ultimately have little intention of constructing. Pretty amazing, huh?

What do the experts say?

Mark Cooper, senior fellow for economic analysis at the Institute for Energy and the Environment at Vermont Law School, said: "In 2009, we told the Florida PSC that it should deny the FPL … requests for recovery of hundreds of millions of dollars of costs for the proposed nuclear reactors at Turkey Point … because they were no longer necessary and would result in billions of dollars of excess costs being needlessly imposed on consumers.  A year later, that reality is finally starting to impose itself on the utilities.  The proposed Florida reactor delivery dates have been pushed back by half a decade and FPL now goes so far as to say it has not yet decided whether to actually build the reactors.  Unfortunately, both utilities have asked to continue charging ratepayers for costs for these reactors that may never be built, insisting that they have to continue to pursue their license applications to keep their place in line at the Nuclear Regulatory Commission.  This just puts Florida utility consumers in the position of paying for FPL and Progress to hold their place in a line that is most likely going to end up going nowhere."

Arnold Gundersen, a nuclear engineer and energy adviser at Fairewinds Associates, Inc., said:  "FPL [is] … relying on the AP1000 reactor design, which is not currently approved and has at least two major unresolved design and safety issues that U.S. regulators are insisting be addressed.  That is going to mean even more delay and higher costs. When the selected design for a proposed Florida reactor is not certified as hurricane proof, it is very difficult to see how things are going to get anywhere any time soon.  Small wonder then that top executives at three leading U.S. utilities -- including the president of FPL itself -- have acknowledged the uncertainties surrounding attempts at licensing and constructing new nuclear generation.  Given the design problems with the reactors alone, the least-cost option would be the immediate cancellation of these reactors, rather than bleeding consumers for what may end up being nothing more than the nuclear equivalent of white elephants."

Stephen Smith, executive director, Southern Alliance for Clean Energy:  "It is unprecedented that a state PSC is giving this level of early cost recovery for projects that are now over 10 years out before any reasonable chance of completion. These plans can be evaluated in a couple years when and if these proposals are relevant and when the utilities have a better understanding of what their legitimate needs are. [T]his … will protect Florida's families and businesses while forcing the utilities to rethink their shaky plans. We have consistently argued that there are low-risk and low-cost resource alternatives available to the proposed new reactors in Florida. The energy efficiency savings levels by Florida's largest utilities are appallingly low relative to other states – it's time for more to be done there versus wasting billions on new reactors. "

FPL’s plans to build Turkey Points 6 & 7 are far from certain. In fact, all signs point towards FPL NOT, in fact, constructing the new plants. Even FPL President Armando Olivera wrote, in a letter to the editor published on the TCPalm.com website, “The licensing process for new plants takes many years and ultimately, our decision regarding new plants will be based on what will deliver the greatest positive return for our customers' investment.”

What he means is that it simply makes no sense for FPL to spend the money now, or in the foreseeable future, to build TP 6 & 7. The reasons are varied:

  • Natural gas costs are declining.
  • Estimates of carbon prices are declining.
  • Demand has declined as a result of the economic recession
  • Increased energy efficiency has resulted in reduced demand.
  • Cost projections for building new nuclear facilities continue to grow.
  • Public concern over the safety of nuclear power is near all time highs.

In addition to these numerous factors working against the construction of new nuclear facilities, FPL’s own actions have shown an extremely tentative approach. The timeline below details just some of the examples of how FPL itself has gradually been backing away from their commitment to build these plants.

They continue to pursue licensing and approval however, because it allows them to continue receiving ECR funding from ratepayers – and the further along in the process FPL gets, the more money they will be able to take from us, even if they never build a plant.

  • January 2010:  FPL announces that they'll suspend plans for Turkey Point reactors based on decision of Florida PSC to reduce proposed rate hike from $1.26 billion to $75.5 million.
  • January 2010: Fitch puts FPL (Turkey Point reactors) on ratings watch 'Negative' after decision by Florida PSC to not provide FPL's full rate increase request.
  • February 2010:  Toshiba/Westinghouse indicate that regulatory problems could cause up to 3 years in delay for Florida reactors (Turkey Point and Levy County).
  • March 2010: FPL announces delay of Turkey Point reactors past 2018, signals interest in federal loan guarantee bailout.
  • April 2010:  Moody's downgrades FPL from low to moderate risk over pursuit of Turkey Point reactors.
  • June 2010:  FPL President Olivera meets with the Sun Sentinel editorial board and admits that FPL may never build these new nuclear reactors due to licensing and economic concerns, cheap natural gas prices, and unresolved design issues as to whether or not the proposed reactors can withstand hurricanes.

Public Counsel: Progress Energy should stop charging customers for Levy County nuclear plant

By Ivan Penn, Times Staff Writer In Print: Wednesday, August 17, 2011

TALLAHASSEE — Progress Energy customers should no longer have to pay for any additional develo ...