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(Reuters) - Duke Energy Corp, the biggest power company in the United States, said Tuesday its Progress Energy Florida utility will retire the Crystal River nuclear plant in Florida.
The plant has already been safely shut down and offline since late 2009 due to damage done to the reactor's containment structure during a power upgrade and the replacement of the unit's steam generators.
There are currently 104 reactors licensed to operate in the United States. The reactors have a total capacity of about 101,000 megawatts (MW) and generate about 20 percent of the nation's power.
In addition to Crystal River Unit 3, Dominion Resource Inc plans to retire the Kewaunee reactor in Wisconsin over the next few months due primarily to weak natural gas prices from record shale production that has reduced power prices to decades low levels, making the continued operation of Kewaunee uneconomic.
Duke said in a release it is reviewing alternatives to replace the power produced by Crystal River, including the potential construction of a new natural gas-fired plant.
Duke said the four coal plants at Crystal River with a capacity of 2,291-MW will remain in service. The reactor had a capacity of 860 MW.
"We believe the decision to retire the nuclear plant is in the best overall interests of our customers, investors, the state of Florida and our company," Jim Rogers, CEO of Duke Energy said in a release.
"This has been an arduous process of modeling, engineering, analysis and evaluation over many months. The decision was very difficult, but it is the right choice," Rogers said.
Crystal River 3 began operating in 1977 and was shut in the autumn of 2009 for refueling and replacement of its steam generators when a delamination, or crack, occurred in the outer layer of the containment building's concrete wall.
The process of repairing the damage and restoring the unit to service resulted in additional delaminations in other sections of the containment structure in 2011, the company said.
During the ensuing months, Progress Energy, which owned the reactor, and Duke Energy merged in July 2012, evaluated the ability to successfully repair the unit, the risks associated with any repair and the repair scope as well as the likely costs and schedule, Duke said.
In late 2012, a report confirmed that repairing the plant was a viable option but that the nature and potential scope of repairs brought increased risks that could raise the cost dramatically and extend the schedule. That report found the repair bill could exceed $3 billion and take eight years.
In addition, the company and its insurance carrier, Nuclear Electric Insurance Limited (NEIL), have reached a resolution of the company's coverage claims through a mediation process. Under the terms of the mediator's proposal, NEIL will pay an additional $530 million.
Along with the $305 million NEIL has already paid, customers will receive $835 million in insurance proceeds. This will be the largest claim payout in the history of NEIL, Duke said.
"We believe accepting the mediator's proposal is in the overall best interests of our customers and shareholders, and the monies we receive will go directly to customers to reduce their electric bills," Rogers said.
For the future, Duke expects to put the reactor into "a safe storage configuration, requiring limited staffing to monitor plant conditions, until the eventual dismantling and decontamination activities occur, usually in 40 to 60 years."
To meet customer needs, Duke said Progress Energy Florida will continue to serve customers reliably as it has through the extended outage, in the coming years through a combination of power generation, energy efficiency and purchasing electricity in the market.
The company said it was evaluating the potential to build a new gas plant that could come online as early as 2018, noting there was no definite plan for new generating capacity at this time.
The company did not mention in its release Tuesday the proposed construction of a new nuclear plant in Levy County, Florida, near the Crystal River plant.
In 2012 before the merger with Duke, Progress said it delayed the proposed in service date for the Levy county nuclear power plant to 2024 with a second unit following 18 months later. The company also boosted the cost estimate for the 2,200-MW project to between $19 billion and $24 billion.
About 600 full-time employees work at the reactor. Many will remain onsite to work through the closing and decommissioning of the unit, Duke said, noting it will work with employees to help as many as possible make the transition to positions in other Duke organizations.
Reporting by Scott DiSavino; Editing by Gerald E. McCormick, Nick Zieminski and Sofina Mirza-Reid