* Florida law allows early recovery of nuclear costs
* FPL says Turkey Point expansion still cost-effective
* Crystal River concessions offset Duke's recovery charges
HOUSTON, Nov 29 (Reuters) - Florida regulators this week approved requests from the state's two largest utilities to charge customers $540 million to boost nuclear generation in the state - $417 million to increase output at existing reactors and $123 million tied to new reactors that won't come online for a decade or more.
The Florida Public Service Commission (PSC) approved separate requests by NextEra Energy's Florida Power & Light, the state's largest utility, for $397 million in extra revenue to pay for increased output, called "uprates," at three reactors and to develop two new reactors.
The PSC also voted to allow Duke Energy's Progress Energy Florida, the state's second-largest utility, to charge an additional $143 million t o recover its nuclear costs, including $102.7 million for Progress' two new proposed reactors.
The commission's action may mean higher bills next year for FPL customers, while bills for Progress' customers are likely to fall due to concessions related to Duke's damaged Crystal River nuclear reactor, according to the commission.
Florida is one of a handful of U.S. states with laws that encourage new nuclear plants by allowing utilities to recover certain costs ahead of plants coming online since nuclear licensing and construction can take many years.
Florida's 2006 law also lets utilities recover early costs to expand output at existing reactors.
Costly nuclear plants, however, now face stiff competition from natural gas-fired plants which have become more economical as record gas production has cut the fuel's price outlook and historic volatility. Lower growth in U.S. power demand and safety concerns after the Fukushima nuclear disaster in Japan have also reduced industry expectations for new U.S. reactors.
An environmental group challenging Florida's law allowing early nuclear cost recovery criticized the commission's actions and labeled the costs a "nuclear tax" for p o wer supply that may never be built.
Stephen Smith, executive director of the Southern Alliance for Clean Energy, said the commission's acceptance of P SC s taff recommendations is "an unfortunate trend of rubber-stamping that we have seen year after year in spite of major obstacles and pitfalls that have made new reactor proposals in Florida less and less feasible."
Most of the amount the PSC approved for Florida Power & Light's (FPL) 4.6 million customers will pay for work to boost the output at the utility's existing nuclear plants by an estimated 526 to 536 megawatts.
The PSC approved an additional $246 million revenue to pay for uprates completed at three reactors: two at the St. Lucie plant on Hutchinson Island, 110 miles (177 km) north of Miami; and one unit at the Turkey Point nuclear station in Florida City, 25 miles south of Miami. Work is ongoing to add capacity at Turkey Point 4.
The increase translates into an extra $2.59 in base rates per 1,000 kilowatt-hours of electric use on FPL monthly bills next year, regulators said in a release.
Overall, FPL pegged the cost of adding the 500-plus MW at between $2.95 billion and $3.15 billion, or more than $5,500 per kilowatt.
The high capital costs for the nuclear uprate will be offset over the years by lower fuel costs. FPL customers will save $114 million in fuel costs in the first year and $3.8 billion over the life of the plants due to the increased output, said commissioner Eduardo Balbis.
"Customers can start realizing these benefits," said Balbis. "This is something we need to applaud."
In addition, the commission approved FPL's request to recover $151.5 million under the 2006 nuclear cost recovery statute. That includes $131 million for the uprate work and $20.3 million for development of two new reactors at Turkey Point.
That translates into $1.65 per month for each 1,000 kwh used by FPL customers, a utility spokesman said, 55 cents below the current charge. While the two nuclear related charges total $4.28 per 1,000 kwh, other pending PSC rate action may mean FPL bills rise by less than that amount in mid-2013.
In filings, FPL said its plan to build Turkey Point Units 6 and 7, totaling 2,200 megawatts, will cost between $12.8 billion and $18.7 billion. Completion of the units could occur in 2022 and 2023, the company said.
FPL told regulators the new Turkey Point reactors remain cost-effective compared to gas-fired generation despite falling gas prices. However, PSC staff noted that the nuclear project might not be economical if capital costs "approach" FPL's high estimate of $5,200 per kw and gas prices remain low.
At Duke's Progress Florida unit which has 1.6 million customers, the PSC approved a nuclear recovery increase of $143 million. That includes $102.7 million for Progress' two proposed reactors in Levy County and $40 million to expand output at the Crystal River 3 reactor in Citrus County, even though it has been shut since 2009 due to a series of cracks found in the containment building walls.
Duke executives have not decided whether to repair or retire the Crystal River plant due to the extensive damage.
The nuclear costs translate into a $4.79 per 1,000 kwh per month increase for Progress Florida customers, but the amount was more than offset by other regulatory action to include potential insurance proceeds covering lost output from Crystal River, deferral of some uprate costs and overall cheaper gas.
The latest estimate to build the 2,200-MW Levy station is $24.1 billion, with startup dates in 2024 and 2025, according to Progress filings.