Chris Schneidmiller
RW Monitor
11/6/2015
Entergy on Monday said it would close its James A. FitzPatrick Nuclear Power Plant in New York state in late 2016 or early 2017. The news came less than a month after the electricity provider announced the upcoming shutdown of its Pilgrim Nuclear Generating Station in Massachusetts.
The company in a press release cited “the continuing deteriorating economics of the facility” as forcing the shutdown of the FitzPatrick site at the end of its current fuel cycle. Specifically, the Oswego County plant is being hurt by low natural gas prices that are biting into revenue, the elevated expense of operating the plant, and “a poor market design that fails to properly compensate nuclear generators like FitzPatrick for their benefits.”
"Given the financial challenges our merchant power plants face from sustained wholesale power price declines and other unfavorable market conditions, we have been assessing each asset," Leo Denault, Entergy chairman and CEO, said in the release. "As part of this review, we previously announced the closure of the Pilgrim Nuclear Generating Station in Massachusetts and have now decided that despite good operational performance, market conditions require us to also close the FitzPatrick nuclear plant.”
The 40-year-old FitzPatrick plant employs more than 600 workers. About half will lose their jobs when the shutdown occurs, with more layoffs expected later, the Syracuse Post-Standard reported.
The decisions to close the two nuclear power plants “are difficult, knowing the effect the plant’s closure will have on our employees and the surrounding communities,” Denault said Monday during Entergy’s third-quarter earnings conference call. “We are committed to ensuring we are fair to all our employees as they go through this difficult time.”
Entergy said two months of extensive talks with New York state officials failed to deliver an agreement to keep the plant open. However, Rep. John Katko (R-N.Y.) reportedly said Wednesday that negotiations had resumed. Entergy declined to comment on the report, and New York Gov. Andrew Cuomo’s office did not respond to requests for comment this week on the situation.
The closures will leave Entergy with two operating nuclear generating facilities: Palisades in Michigan and Indian Point in New York.
Entergy spokeswoman Patricia Kakridas said the company must file a post-shutdown decommissioning activities report with the Nuclear Regulatory Commission no more than two years after a facility is permanently closed; the document will include details of the planned decommissioning operations, along with the schedule and projected cost. Entergy as of Sept. 30 had over $728 million in its decommissioning trust fund for the FitzPatrick plant. That amount meets the NRC’s funding assurance requirements, Kakridas said by email. The NRC said a preliminary estimate indicates it will cost roughly $1.1 billion to decommission the facility.
Cuomo and other New York officials lashed Entergy over the closure. “Good corporate citizenship must appreciate that there are many factors that count as the ‘bottom line,’” the governor said in a prepared statement. “The State of New York will pursue every legal and regulatory avenue in an attempt to stop Entergy’s actions and its callous disregard for their skilled and loyal workforce.”
In releasing its earnings numbers for the third quarter of 2015, Entergy cited an “as-reported” loss of $4.04 per share, which included $5.93 per share in noncash asset impairments for the Pilgrim and FitzPatrick plants. Quarterly operational earnings landed at $1.90 per share, according to a company press release. Comparatively, in third-quarter 2014 Entergy earned $1.27 per share in as-reported earnings and $1.68 per share in operational earnings.
The company’s reasoning for closing both plants has been largely similar – drastically low natural gas prices, troubling market design, and high operational costs.
The FitzPatrick’s present and projected power price has dropped by roughly $10 per megawatt hour, due to low gas prices, which would cut the plant’s yearly revenue by over $60 million, Entergy said. Power supply in the surrounding area also outstrips demand, but the facility’s cost structure is high.
“Entergy has already invested hundreds of millions of dollars to improve FitzPatrick’s reliability, safety and security,” the press release says. “While the company will always make investments needed to assure safe operations, it considers the long-term financial viability of operating plants in markets that ignore the benefits of nuclear power.”
Entergy’s Vermont Yankee Nuclear Power Plant closed at the end of 2014. The facility has been placed into SAFSTOR, meaning decommissioning would not need to be completed for 60 years after closure. The company has pledged to begin teardown when its decommissioning trust fund can cover the projected $1.24 billion project cost; that is expected in the 2030s or 2040s. On Thursday, the Vermont Attorney General’s Office, state Public Service Department, and two utilities (including the Vermont Yankee plant’s prior owner) filed a petition with the Nuclear Regulatory Commission, calling on the agency to conduct a “comprehensive review” to ensure the decommissioning fund is not used for other, unallowed purposes.
Pilgrim, which the NRC in September downgraded to its second-lowest performance category following a series of unplanned shutdowns and unplanned shutdowns with complications in recent years, is scheduled to halt operation no later than June 2019 and possibly as early as spring 2017. Pilgrim’s decommissioning trust fund stood at $870 million as of Sept. 30, which was roughly $240 million more than necessary for decommissioning operations under NRC required assurance levels, Kakridas said.
Kakridas said a determination on whether to place Pilgrim and FitzPatrick into SAFSTOR would not be made until their respective decommissioning plans are established.
Spent fuel at both facilities will remain on-site, under guard, during shutdown and decommissioning, according to Kakridas. The fuel should be extracted from the reactor as soon as the system has cooled sufficiently, which is generally days after shutdown. It would be placed in the spent fuel pool and later in dry storage casks licensed by the NRC. “The fuel will remain onsite in dry casks until it is removed by the federal government in accordance with its legal obligations,” the spokeswoman stated.
NRC spokesman Neil Sheehan said in a prepared statement the agency “will continue to provide rigorous oversight of the FitzPatrick facility. Our inspections will be focused on ensuring plant safety and security for the remainder of its operational life.”
