Florida state Rep. Mike Fasano (R-New Port Richey), who voted in favor of Florida’s 2006 Construction Work in Progress (CWIP) advanced cost recovery law, has become the prime sponsor of a new law to overturn that rule.
According to a January 11, 2012 op-ed published by the Tampa Bay Times titled No more blank checks for Florida utilities, Rep. Fasano has two primary concerns:
- He believes that the utility and the Public Utility Commission are not doing a good job of controlling the project cost.
- He is worried that the utility’s lack of commitment to the project might end up with customers paying hundreds of millions for a project that gets cancelled and does not ever produce electricity.
Those concerns are valid and must be addressed.
Compared to the cost estimates provided in the 2005-2006 time frame when the CWIP law was passed, estimates for project completion costs rose dramatically. Initially, that was attributed to high materials inflation and competition for construction workers; however the estimates were not revised downward after the financial system collapse of 2008 reversed those trends and brought interest rates for large borrowers to record low levels.
Secondly, if the utility wants to hedge its bets and not commit to a project, why should they start charging customers, committing them to spending money for which there may never be any return? It would be different if the utilities offered customers some kind of ownership in the project where they would see a real return on their investment if the project successfully goes online. Instead, all that the utilities are currently offering is some kind of vague assertion that the project will keep rates under control.
It is fair to make project commitment a qualifying criteria before seeking to charge customers for advanced cost recovery.
Perhaps part of Rep Fasano’s questions could be addressed by better communication from the project sponsors. They need to clearly and repeatedly explain why they believe the nuclear plant investment is the right choice.
They could talk about how nuclear energy investment are a hedge against the possibility of future natural gas price hikes. They could explain how that hedge would never work if they were not making credible progress towards actual operation. After all, why would natural gas vendors be worried about nuclear competition if the 10 year long projects were not even underway?
They could also talk about the need for reliable electricity that does not produce any pollution. In this case we are talking about the “Sunshine State”, a place where people have been willingly paying a little bit more for cleaner sources of electricity for as long as I can remember. In Florida, a hazy day is not a good day to take pictures to fill the tourist brochures or to have people posting those photos on their Facebook pages describing their winter vacations.
Bottom line – nuclear industry leaders need to be sensitive to the questions and criticisms of their supporters as well as their detractors. When the supporters ask valid questions and express real concerns, the vendors and the utilities need to address them head on. If the source of the uncertainty from the vendors and the utility is a concern about unpredictable government regulatory action, they need to make that clear as well.
They should enlist the support of their fans to try to keep the pressure on the government to perform its job of efficiently and accurately reviewing license applications, approving the good ones, rejecting the risky ones, and sending the marginal ones back for additional work.