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2008 CEO Forum: Conservation Compact

Utilities test new models to encourage investments in efficiency and conservation.

Fortnightly Magazine - June 2008

you can see there isn’t 700 MW of dependable capacity in that solicitation.

We’re looking hard at what’s available and what we can do on our own. Going forward, renewables must be a part of the cake. But if it’s a layer cake, renewables are toward the top. They’re still pretty expensive compared to conventional power sources. In North Carolina, we’re seeing proposals that are more than five times the cost of generating electricity using nuclear or coal.

Fortnightly: Are you talking about five times the cost of new nuclear or coal, or existing nuclear or coal?

Johnson: I’m talking about new plant production costs. Some of the proposals are about 10 times higher than our average system production cost, which is 5 cents. Some of the renewables would be closer to 50 cents. That doesn’t mean we shouldn’t do them, but at those per-unit costs, we need to make sure we’re doing it as effectively as possible and integrate into the delivery chain as best we can.

Fortnightly: How would you characterize Progress Energy’s recent order for reactor vessels for new nuclear power plants? Is this purely a “just-in-case” move to get into the manufacturing queue, or does it signal a strategic commitment to develop new nuclear capacity?

Johnson: We’re strongly committed to nuclear energy, along with energy efficiency and renewable energy. We haven’t yet made a decision to build new nuclear plants, but given the growth in both our Carolinas and Florida markets, it’s clear that new baseload generation will be needed in the future. New nuclear plants take a long time to build, so we’re taking these necessary early steps to ensure that nuclear power remains a viable alternative for meeting our customers’ needs, and to ensure certain long-lead materials are available should we elect to move forward.

Fortnightly: Your recent filings in Florida disclosed that the overall cost of the two-unit nuclear plant proposed for Levy County would be $17 billion. That’s about three times your initial estimate of $5 billion to $7 billion. How are Florida regulators reacting to that price tag?

Johnson: The commission can’t talk to us about this while the case is pending. We expect a decision in July. But when we made the filing and the number went public, the governor was very positive and said this was the right thing for Florida, and we should proceed on the nuclear path.

Florida made a public policy commitment on nuclear about a year and a half ago. It makes it a better proposition for everyone, gives us pre-construction cost recovery in advance of commercial operation, and allows us to recover our financing cost on an annual basis. It’s incumbent on us to make our case, and we’re in the process of doing that. We expect a positive decision from the Florida commission.

Fortnightly: How do investments in conservation and efficiency factor into Progress Energy’s strategy and value proposition?

Johnson: Conservation of resources and energy efficiency are essential components of our balanced solution to meeting growing energy needs. With climate change becoming a driver in