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Court denies Westinghouse claim in nuclear contract dispute with Duke

A federal judge has ruled Duke Energy Florida LLC does not have to pay Westinghouse Electric Co. LLC approximately a half-billion dollars in a dispute over the utility's termination of a contract related to its planned Levy nuclear facility.

Westinghouse is entitled to recoup from Duke Florida $34 million as a contract termination fee, according to a Dec. 22 decision in the U.S. District Court in the Western District of North Carolina, and Duke's request for $51 million has been denied. But a $512 million fee Westinghouse sought from Duke Florida, later reduced to $352 million, was stricken by U.S. District Judge Max Cogburn Jr.

At issue was Duke Florida's obligations as part of a consortium, which it later exited, created to support Westinghouse's effort to win approval of the AP1000 nuclear plant design, and the Duke Energy Corp. subsidiary's decision in 2013 to shelve development of the Levy reactors based on delays in obtaining a key license from the U.S. Nuclear Regulatory Commission. (Duke Florida has said it will keep its options open with regard to moving forward with plans to develop the Levy plant, depending on federal greenhouse gas emissions regulations, natural gas prices and the potential for changes to Florida's nuclear cost recovery laws.) Duke Florida sued in March 2014, saying Westinghouse had breached a contract by not completing work on Levy, and Westinghouse immediately countersued, claiming the utility refused to pay hundreds of millions it was owed related to the Levy engineering, procurement and construction, or EPC, contract.

But Cogburn found that $352 million was related to Duke exiting the consortium, which Duke was within its rights to do, and thus the utility was not obligated to pay that amount as part of the terminated Levy contract.

"In sum, Duke lawfully exited from a consortium of domestic power companies that backed Westinghouse in seeking approval of its AP1000 Standard Plant design," Cogburn wrote. "When Duke thereinafter terminated a separate agreement to build an AP1000 Standard Plant in Florida, Westinghouse attempted to recoup those development costs under the design-build contract at issue here by inclusion of Duke's share of development costs in its termination invoice. [T]he court concludes that Westinghouse's inclusion of those development costs in the invoice at issue here — no matter how equitable that inclusion may seem — was beyond the terms of the contract."

Cogburn added, "While the court finds that [Westinghouse]'s billing for such costs was made in a good faith reading of the EPC Agreement, that reading was too broad and ultimately not sustainable. Thus, the court concludes that Duke owes nothing of the remaining $352 million."

In October, the NRC announced it will issue combined licenses for two new reactors at Levy. In August 2015, Florida regulators approved a settlement in which Duke Florida agreed to defer until 2017 any issues related to cost recovery for Levy, after the utility expected its litigation with Westinghouse on the matter to be resolved.

The case is Duke Energy Florida Inc. v. Westinghouse Electric Company LLC, Civil Action No. 3:14-cv-00141-MOC-DSC.