Monday, December 10, 2012

Investment in nuclear energy is good for FPL customers - a regulator's template for Ontario

Recently S&P downgraded Ontario Power Generation, partly because of it's negative percption of OPG's "capital expenditure in a regulatory context, which provides limited cash flow relief during construction for multiyear projects..."
The article cited here provides insight into an alternate 'regulatory context' - in Florida.

Michael Waldron: Investment in nuclear energy is good for FPL customers - South Florida
Over the past several years, Florida's nuclear cost recovery statute has allowed FPL to upgrade our existing nuclear plants and add over 500 new megawatts of clean, cost-effective power-generation to our fleet. To put this in perspective, this is about the same amount of electricity generated by a medium-sized nuclear power plant without having to build one.
...the reality is continued investment in nuclear power is good for FPL customers, for the environment and for our state. To this end, FPL isn't just talking about protecting consumers from higher energy costs and preserving our environment for future generations, we are continuing to take action to do so today and for generations to come.
The entire letter, from the Director of Nuclear Communication of FPL, is at the South Florida

Ontario residents would be aware of FPL only through it's Nextera affiliate taking advantage of a very rich FIT program on industrial wind, at prices far above what it would consider in it's Florida home.  This article shows that FPL has a much more coherent (ie. real) vision of customer value in it's home state.

OPG's production receives approximately half of the price, per MWh, of non-nuclear private-sector generation in Ontario.


  1. Scott, Interesting that you advocate allowing CWIP in rate base. What is wrong with the traditional method of allowing recovery of costs only for assets providing useful service? Do you support CWIP in rate base for non-nuclear assets too?

  2. Is that what you feel this post advocates for?
    Interesting you ask what's wrong with the traditional method that has, of course, led to long-term power-purchase agreements, and no merchant power generation.
    The S&P downgrade was instructive in it's mistake re: the Lower Mattagai project. That project has a PPA (HESA) and won't be OPG owned (although OPG will own much of the company), and is only getting built due to a ministerial that specified 3 objectives - none of which were the provision of affordable electricity.
    So the current system is long-term power purchase agreements for wind and solar and hydro; long-term revenue guarantees for gas, and the other system for nuclear.
    What is wrong with this picture that guaranteed expensive generation but prohibits more affordable generation?
    I hadn't thought of it that way.
    Guess I'll have to give it some thought.

  3. I understood your subtitle "A Regulator's Template for Ontario" has recommending the rate regulation approach of the Florida Public Service Commission for allowing FPL to start charging consumers today for the cost of new nuclear, long before the power plant is producing electricity. I am not aware of any major consumer organization that has supported allowing CWIP in rate base. I think that allowing CWIP in rate base is likely to promote mischief.

    I don't understand your comment that "the traditional method (of utility regulation) that has, of course, led to long-term power-purchase agreements". Can you explain the basis for this statement?

  4. Yeah ... I was being a little duplicitous there.
    But I'm not the one with the plan to refurbish and the credit rating downgrade citing plans to refurbish.

    Assuming that presents a problem... Florida's regulator presents a template for a solution.

    There is only new build generation with long-term PPA's. I won't build a case that puts that on the regulator, aside from referencing the case I previously built that OPG was used to keep rate increases, due to the private generation built with long-term PPA's, minimized.
    If OPG does not have the financial strength to refurbish generation that receive half the rate paid to other generators, I think that is a regulatory issue.