Jeremy L. Dillon
RW Monitor
2/14/2014
Exelon warned that it may shut down some of its nuclear plants if the economic environment does not improve, Exelon President and CEO Christopher Crane said during an investor’s call late last week. Exelon, which operates 10 nuclear plants in Illinois, Pennsylvania, and New Jersey, said the competition from natural gas along with a harsh energy policy towards nuclear has hurt the profitability of operating a nuclear plant. “Despite our best every year in generation, some of our nuclear units are unprofitable at this point in the current environment due to low prices and bad energy policy that we’re living with,” Crane said. “Assessing the market operations and commercial policy solutions has been the focus right now. A better tax policy and energy policy would be the clear answer, but if we do not see a path to sustainable profits, we will be obligated to shut units down to avoid the long-term losses,” he said. Crane indicated that Exelon would know for sure if any plants would close by the end of this year.
Exelon spokesman Paul Adams said this week that the company did not have any plans for immediate shutdowns, but it would continue to monitor the economic environment. “The combined effect of low wholesale power prices and the unintended consequences of current energy policies is challenging the economics of several of Exelon’s nuclear units,” Adams said. “We continually review the economic viability of all our generating units. We believe power markets will recover, but if we do not see a long-term path to sustainable profitability for a particular unit, then we will consider all options, including unit shutdowns.”
If the company does decide to shut down some of its plants, it would add to a growing list of plants, including Entergy’s Vermont Yankee and Dominion’s Kewaunee Power Station, that entered premature shutdown citing economic reasons. Exelon itself announced the shutdown of the Oyster Creek station in New Jersey, scheduled for 2018, last year, citing economics as reason.
NEI Warns Wall Street of Potential Shutdowns
Meanwhile, Nuclear Energy Institute’s President and CEO Marvin Fertel spoke before a group of Wall Street analysts this week of the growing potential for more nuclear station shutdowns due to a harsh energy environment for nuclear. Weak market conditions are leading to price signals that are threatening efficient, quality nuclear stations with premature retirement, Fertel said. “The decisions to close Kewaunee and Vermont Yankee were perfectly rational business decisions for the companies operating the plants in those markets. But from society’s point of view, these were not rational decisions,” Fertel said. “There was nothing wrong with these plants. There is something wrong with the design and operation of the markets in which they are operating. They do not value baseload capacity that can be dispatched when needed; do not provide value for fuel and technology diversity, and do not recognize the other attributes of a nuclear power plant,” he said.
Entergy Gives Nuclear Fleet A Vote Of Confidence
While both Exelon and NEI warned of potential shutdowns, Entergy gave its nuclear fleet a ‘vote of confidence’ this week during its 2013 fourth quarter earnings call, saying it would continue to own and operate the plants for the “foreseeable future.” “We continue to believe the rational that separating merchant risk from a utility holding company remains valid,” Entergy Chief Financial Officer Drew Marsh said. “To that end, we have looked at a number of alternatives to accomplished this over the last several years. Our conclusion based on what we know today is that we intend to own and operate this fleet for the foreseeable future. We know there is a lot of uncertainty on this point so we felt it was important to let you know that based on our current point of view we have made no decisions to close any other plants and are not actively considering selling any at this time,” he said. Marsh went on to say that this is the company’s stance right now, but if the environment changes in the future, Entergy could change its stance.
Entergy previously announced the premature shutdown of Vermont Yankee at the end of 2014 due to economic reasons. At the time of the announcement, the company cited economic reasons for the shutdown. In December, Entergy and the state of Vermont agreed to the terms of decommissioning of the station, which included the ‘as soon as possible’ decommissioning approach to the station, rather than years of SAFESTOR before active work begins.
