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* Repair has cost Progress about $214 million
* Utility has spent $375 million on replacement power (Adds detail, company comment)
HOUSTON, June 27 (Reuters) - Progress Energy Corp PGN.N said on Monday that it will cost as much as $1.3 billion to repair damage to the containment building wall at its troubled Crystal River nuclear plant in Florida.
The nuclear plant, which has been shut since 2009, is expected to remain closed until 2014, the company told the Florida Public Service Commission and the U.S. nuclear agency.
Progress Energy's Florida unit, the state's second largest, has been struggling to return the 838-megawatt reactor to service after a gap was found in a section of the containment building's 42-inch (107 cm) thick wall.
The wall was opened in 2009 to allow contractors to remove and replace the unit's steam generators, tasks originally expected to take about three months.
After that area was repaired, a second gap was discovered in March in a different area of the containment building wall.
"This would be a major repair, requiring significant cooperation and coordination with state and federal regulators and others," Vincent Dolan, Progress Energy Florida president, said in a release.
Progress said it considered shutting Crystal River, but decided that fixing the wall would be the better option to save customers money over the long-run.
Dolan said the Crystal River nuclear plant is the utility's least-cost resource to operate, saving customers $300 million a year in fuel costs.
So far, Progress Energy Florida said it has spent about $214 million on the repair and $375 million to buy replacement power to serve its 1.6 million customers, the utility said.
The nuclear industry insurance fund has paid claims of $265 million during that period, including $103 million for repair costs and $162 million for replacement power.
Progress Energy said it is insured for up to $2.25 billion per event and up to $490 million for replacement power, the company said in a release.
Progress, which is the target of a $13.7 billion acquisition by Duke Energy Corp (DUK.N), said it will take a pretax charge of $45 million in the second quarter to cover its obligations for replacement power costs for the reactor's minority owners, a group of public power agencies.
Progress said outside engineering experts came up with 22 potential repair options. Its preferred repair calls for systematically removing and replacing concrete in the containment structure at a cost of between $900 million and $1.3 billion.
Progress officials will meet with state regulators next month to discuss its plan in more detail.
Progress determined that the initial gap was caused by the process to release pressure on about 200 tendons. Such a gap, or "delamination," has not been seen before at any other U.S. nuclear plant, according to the U.S. Nuclear Regulatory Commission.
Depending on the repair Progress pursues, the utility may have to amend its current NRC license. Nuclear fuel was removed from the reactor in May and moved into the spent fuel pool.
The 3,151-MW Crystal River station, located in Red Level, Florida, about 85 miles (140 km) north of Tampa, includes four coal units and the nuclear reactor.
(Reporting by Anna Driver and Eileen O'Grady; Editing by Robert MacMillan, Sofina Mirza-Reid and Bernard Orr)