OUC Ponders $800 Million Deal for Nuclear Power
February 14, 2009
By Kevin Spear, Orlando Sentinel
Orlando Utilities Commission could soon commit to one of the most pivotal and potentially risky deals in the 86-year history of the city-owned electric provider.If it happens, OUC's general manager will plunk down as much as $3.7million as a deposit toward inking a deal this spring to buy up to $800 million worth of a proposed nuclear plant in Levy County. Such a sum would amount to taking on nearly $4,000 in debt for each OUC customer that would take years and potentially hefty rate hikes to pay back.
In the larger picture, Americans remain divided over whether splitting atoms to make electricity is the best way to meet an uncertain energy future, or is a dangerous technology and a black hole for money that could be better spent on other solutions.
Yet OUC so far has carried out its nuclear quest with less public involvement than what occurs in some local-government rezoning cases.
Many details of OUC's nuclear-energy deal with Progress Energy Florida are being handled out of the public eye. That's because of a confidentiality requirement enforced by Progress Energy, which wants to build the twin-reactor plant for $17billion and is trying to lure investments from smaller utilities such as OUC.
Meanwhile, the five members of OUC's board have said little during the past year in the way of publicly examining or debating fears over nuclear power's staggering costs and hazards from radioactive fuel.
And OUC's 214,000 customers have been mute. Utility officials cannot recall a single word for or against the utility's effort to buy enough nuclear power to supply 100,000 homes.
The subject became real for customers last month when OUC held a public hearing and then raised its rates by 13.7 percent, effective in March. Of that increase, 1 percent is going toward nuclear power, which was barely discussed at the meeting.
"Just because no customer has felt the need to write in, e-mail or come to our public workshop in January and complain does not mean they don't support nuclear," said Roseann Harrington, OUC vice president for marketing and public relations. "Maybe it means they do."
OUC desperately wants a new power source that doesn't fill the atmosphere with carbon dioxide, which triggers global warming. Expected environmental regulations will financially penalize carbon-dioxide emissions from the burning of coal to produce electricity. Orlando's utility burns coal at a far higher percentage than national and state averages.
The utility's nuclear interest began to solidify in July 2007. That's when OUC signed a confidentiality agreement with Progress, a stockholder-owned company of 1.7 million customers and Central Florida's largest electricity provider.
In August last year, the state Public Service Commission gave its go-ahead to Progress, urging it to spread the pain of the power-plant price tag.
In other words: "Please go and find some partners," said Charles Beck of the Florida Office of Public Counsel, the state's advocate for utility customers.
Already eager to become a partner, OUC executives in July gave their governing board an outline of future energy options. Nuclear details were mostly general and centered mainly on four slides in a presentation.
There was no vote. But Harrington said utility executives heard their cue to go out and investigate a deal with Progress. In the months that followed, board members were briefed often and behind closed doors.
"I sat down with staff numerous times," board President Katie Porta said. "I've asked questions and discussed the issues."
A critical vote came in December, when board members gave OUC's general manager authority to make a $3.7 million deposit toward the proposed nuclear plant. Despite major events it would set in motion, the vote came without remarks from the board and as part of a group approval for routine items such as dental insurance and elevator maintenance.
Some brief text in the meeting agenda said General Manager Ken Ksionek would hand over the deposit and sign a preliminary deal "on or about" Friday, Feb. 13. But Harrington said Ksionek was out of state for a family illness and missed that date.
"We don't have an idea when it's going to be signed because it's still being negotiated," she said.
Once signed, the preliminary deal is to return for final approval by OUC's board in the "March to April 2009 time frame." When that happens, board members will be under pressure to say yes to buying a piece of the Levy County plant. If the board says no, Ksionek likely will have to walk away from the deal and leave the $3.7 million in Progress' pocket.
Members of OUC's board would not comment on that prospect.
"The time to go into that is when a deal is on the table," said member Dan Kirby.
OUC also says it does not have an estimate for rate hikes that would come with nuclear power.
"At this point we have a lot of moving targets that we are trying to get our arms around," Harrington said.
OUC knows about atomic energy, owning small shares of Progress and Florida Power & Light Co. plants that were built during the nation's costly and controversial embrace of nuclear power in the 1970s and 1980s.
Gainesville Regional Utilities also has expertise. It owns about as much as OUC of the existing Progress Crystal River Nuclear Plant. But its decision-making over whether to buy more nuclear power took a different direction from that of OUC.
In 2007, GRU executives hoped to get enough electricity from the proposed Levy plant to supply 80,000 homes. Like OUC, they signed a confidentiality agreement with Progress.Then a few months later, the Gainesville-owned utility held a workshop attended by city commissioners and nearly three dozen area residents to address their "concerns and questions."
The gathering heard a detailed presentation from a University of Florida professor about the viability of nuclear power. An industry analyst from the Nuclear Energy Institute spoke. Another expert was Brice Smith, physics professor from New York and author of the book Insurmountable Risks: The Dangers of Using Nuclear Power to Combat Global Climate Change.
"They were very open-minded," Smith said.
GRU dropped talks with Progress.
"We didn't think it was in the best interest," said Kathy Viehe, a GRU assistant general manager.
Instead, the utility has pursued power generated with biomass and aggressive conservation steps such as buying customers' old, inefficient refrigerators. Last week, the utility approved a program to pay premium rates for electricity produced locally by privately owned solar panels.
Informed of GRU's direction, Harrington said: "They handled things differently."
Preparing for the future of energy has been nerve-racking for utilities.
But OUC's financial stability and the outcome of its quest for nuclear power also are key for Orlando City Hall, which gets 20 percent of its general budget - or about $70 million a year - from utility contributions.
That amounts to about what it costs to run the Fire Department.
Kevin Spear can be reached at 407-420-5062
Orlando Sentinel