Governor Cuomo, Fitzpatrick, and Money

Fitzpatrick Plant

James A Fitzpatrick Nuclear Power Plant

 Early this fall, Entergy announced that both the Pilgrim plant and Fitzpatrick plant were losing money, and that Entergy would soon decide whether to continue operating those plants. Entergy said they would make the decision by the end of October.

The Pilgrim plant has been decided: Vice President Bill Mohl of Entergy announced that the Pilgrim plant in Massachusetts would close by 2019.  At the same press conference, Mohl said that Entergy has not yet made a decision about whether it would to continue to operate the James A. Fitzpatrick plant in New York State. (You can read about the press conference here, and even see the video of the whole conference.)

Entergy has not made the decision about Fitzpatrick.  However, on October 16, Entergy took a $965 million charge against earnings, writing down the value of the Fitzpatrick plant by that amount.  (Yes, that's about a billion-dollar write-down.)

The people in the Fitzpatrick area do not want the plant to close. Hundreds  of people in upstate New York rallied in favor the plant. You can see a short video of the rally here; the video includes interviews with local legislators who support the plant. The Syracuse.com article that describes the write-down also has more than thirty pictures of the rally.

Negotiating with the Governor

Andrew Cuomo

Entergy is attempting to negotiate a deal with New York State that would keep Fitzpatrick open.  As quoted in the Time-Warner article and video about the rally, State Sen. Patty Ritchie said: "I've been in a number of conversations with the governor's staff and also had an opportunity to talk to the governor, he's engaged in the issue."

However, Governor Cuomo's engagement is something that is rather hard to define.  Despite the fact that Entergy closed Pilgrim and despite the fact that Entergy took almost a billion-dollar write-down on the Fitzpatrick plant, Cuomo is treating the situation as if it is all about….well, all about him.

Cuomo's view is that Entergy is threatening the state with "job losses" and Entergy won't get away with this. Yes, Cuomo himself plans to stand up to Entergy, despite their "threats." What a guy! (sarcasm alert)

A quote from a letter Cuomo sent to Entergy, as reported by Tim Knauss in Syracuse.com:

I strongly caution Entergy not to use the threat of job losses as a means of prodding economic relief to help their bottom line. This tactic has been attempted by others i‎n the past and has been unsuccessful. In this state, an entity called the Public Service Commission has oversight over services deemed to be in the statewide public's best interests.

Entergy should keep that in mind. Any decisions will be made on the merits 

Entergy didn't write an answer to Cuomo directly. Instead, Vice President Bill Mohl wrote a note to the employees which indirectly referenced the Cuomo's accusations of "threatening job losses."  Once again,  Knauss has the story in Syracuse.com.  Here's a quote from the Mohl letter to the employees:

While we have been unsuccessful to date, our discussions [with the state] are continuing as we approach a final decision. Quite frankly, our desire has been to engage in meaningful discussions regarding continued operations of Fitzpatrick without first having to provide formal notification of a Fitzpatrick shutdown decision to the State of New York, as some have indicated is necessary. Most recently, we have heard inaccurate claims that we are "holding employees hostage" or "only seeking to improve our bottom line." That is simply not the truth. We are facing substantial financial challenges at Fitzpatrick and have been negotiating in good faith with New York State over the last several months to obtain certainty for this facility.

I am Shocked, Shocked

Governor Cuomo acts as if New York State has never made any kind of concession to attract or keep a business. He is shocked that a business would ask for such a thing, in order to continue to employ people in New York. He is shocked, shocked!

Meanwhile, here in Vermont, we can only envy the deep pockets and major financial concessions that New York gives to businesses.

New York basically outbid Vermont to have a new wafer fabrication plant placed in their state.  New York was able to offer $1.865 billion dollars in concessions to the plant owners, the emirate of Abu Dhabi. Poor little Vermont could offer---a $4.5 million dollar "Enterprise Incentive Fund." (An existing plant in Vermont will continue operating, however.)  It's a long story, and well told in this VTDigger article Global Foundries to Keep IBM Plant in Essex Going. Some quotes:

GlobalFoundries’ footprint in New York vastly outstrips that of Vermont. The company…is wholly owned by the emirate of Abu Dhabi…..

New York state has offered GlobalFoundries about $1.865 billion in financial incentives to establish itself in the state, according to a recent situational analysis of IBM’s plant in Essex Junction by the Greater Burlington Industrial Corp.

In May, the Vermont Legislature budgeted for a $4.5 million Enterprise Incentive Fund, which Gov. Peter Shumlin can tap at his discretion with limited legislative oversight….

Perhaps when Governor Cuomo gets over his advanced state of shock, he can think about agreeing to some small concessions to keep a steady, reliable electricity supplier, with a steady, reliable payroll, operating in his state.  He won't even have to figure out how to explain why he is sending almost $2 billion dollars of New York taxpayer money to Abu Dhabi.  Because he won't be sending any money to Abu Dhabi!

By keeping Fitzpatrick operating, Cuomo will be taking care of his own people.  I think that is what a governor is supposed to do. I urge him to do so.

IBM, Vermont Yankee and Shumlin: A Trip Down Memory Lane

Silicon Wafers

Wafer Fab facility for sale

The IBM wafer fab facility in Essex Junction employs approximately 4000 people, making it the largest private employer in the state.  It has been going through hard times, including laying off 400 people last year, and another 100 or so this year.

It is widely known that IBM wants to get out of the wafer fab business, and indeed, it has announced that its fab facilities are for sale. Earlier this month, an industry newsletter described the negotiations about selling the various IBM fab facilities: apparently Global Foundries is the front-runner.

Whatever new company buys the Essex Junction plant, it is unclear whether they will choose to keep it running or shutter it. The equipment is out of date, but not every type of chip needs to be made on the latest version of chip-making equipment.  The industry newsletter (referenced above) has a fairly long and complex essay on this subject.

In any case, the further operation of the Vermont IBM plant is certainly at risk.

Vermont to the Rescue?

In reporting on IBM's announcement of the latest round of layoffs in Vermont and elsewhere, Vermont Digger reported that Governor Cuomo of New York has struck a deal with IBM. IBM will add jobs in Buffalo and maintain jobs in the Hudson Valley.

In mid-April, Governor Shumlin announced a $4.5 million incentive fund: this fund will be used to induce a company to stay in Vermont.  When asked if IBM was the target recipient, Shumlin replied that: "I have read the same information that you have in the press about IBM."

The Vermont Digger article about this incentive plan is  IBM Candidate for Proposed $4.5 Million  Incentive. It has a vigorous comment stream.  Many comments point out that the multi-billion dollar sale of wafer fab assets will not be influenced by this relatively small sum from the state of Vermont.  I encourage you to read the comment stream.

Shumlin and IBM: Shumlin accused them of lying

A few years ago, IBM was concerned that fees assessed on Vermont Yankee would raise overall  electricity bills significantly. This would make it hard for the IBM plant to compete.  At that point, Shumlin had no compassion for the IBM plant, and no million-dollar incentives were forthcoming. Indeed, Shumlin accused the IBM lobbyist of lying.

In 2008, Shumlin was President Pro Tempore of the Vermont Senate.  The Senate was passing a bill saying that any company buying Vermont Yankee had to put up a line of credit of $300 million for decommissioning.  VPR reported:  Yankee decommissioning bill prompted political spat. 

John O'Kane, a lobbyist for IBM, objected to this plan. O'Kane said the decommissioning money was there already, and it was growing. If the state asked for more money, this would raise electricity rates for Vermonters.  Here's a quote from the VPR article:


O'Kane "Money has time value, and you're changing the time..
Shumlin: "We are not asking for the money. You're lying about that. We are not asking for the money.

Governor Peter Shumlin

The bill says..."
O'Kane: "Peter, that is.. You just called me a liar.."
Shumlin: "I said you're not telling the truth about that, John."
O'Kane: "You called me a liar. That is unacceptable. You're the president of the Senate, and you're calling me, a representative of the largest employer..."

Eventually, Governor Jim Douglas smoothed most of this over. You can read more in the VPR article.

IBM Should Build a Power Plant

The question remained, however--IBM cannot pay higher prices for electricity, so what should be done?  In 2011, about three years after Shumlin called the IBM lobbyist a liar, the economic development committee of the Vermont Senate visited IBM.  The WCAX story IBM Warns Lawmakers about the loss of Vt. Yankee describes this meeting.  Some quotes from that article:

IBM pays about $35 million a year to power its Vermont facility. And the company estimates those costs will go up by 25 percent if Vermont Yankee goes off line....

(Senator) Illuzzi wants to explore the idea of a combined heating and power plant created on IBM's campus as a way for the company to address its power needs.....

"I don't want to own and IBM doesn't want to own a power plant," Bombardier said. "We don't want to run a power plant; we want to invest in semiconductors-- we don't want to invest in power generation source."

In other words, Vermont suggested that IBM just build its own power plant.  IBM replied that it wasn't in the power plant business.  It was in the semi-conductor business.


It Probably Didn't Matter

Considering the economy, it probably didn't matter much that Shumlin insulted an IBM spokesman and that Vermont legislators suggested that the company build its own power plant.  So I don't want to refine too much on the reason IBM is selling its facilities.

But still.  How will the new owners look at this history?  Will $4.5 million make them eager to stay in Vermont?

End note: A blog post of mine on this subject from 2011. The post includes more references and is also a bit snarky.  Some notes on IBM and Yankee: How I found Vermont's Energy Plan.

Reliability and Business: Two Reasons Why Vermont Needs Vermont Yankee

Last week was a big week for writing letters about Vermont Yankee. I received (in various ways) two very informative letters about Vermont Yankee, and I want to share them in my blog. The first letter, about Vermont Yankee reliability, was sent by an Entergy Vice President. The second letter was an open letter to Peter Shumlin about the importance of Vermont Yankee to Vermont's economy. The letter about Vermont Yankee economics was signed by two business organizations and a union.

Vermont Yankee and Reliability

The letter about Vermont Yankee reliability was sent by Entergy to an email list, and I don't know who was on the list. (Media? Friends of Vermont Yankee?) At any rate, I was glad to get the letter, because it showed Entergy is reaching out to bloggers. For most companies, including Entergy, us bloggers don't get no respect. For most companies, we're not "real media." ( Areva, on the other hand, has conference calls and even tours for bloggers.)

So I was happy to see the letter come my way, and I sincerely hope that communication with bloggers is a new approach by Entergy. (Rod Adams has already blogged about the letter.)

Vermont Yankee and Reliability

In this letter, Entergy Vice President T. Michael Twomey, based in White Plains, New York, did a fabulous job of refuting the trash-talk about Vermont Yankee and reliability. The person to whom the letter was addressed, James Marc Leas, apparently has described Vermont Yankee as a "piece of machinery that is falling apart" and claimed that it has "extraordinary" reliability issues.

Twomey completely refutes Leas. In the letter, Twomey goes through the plant, practically section by section:

• Performance Indicators, as assessed by the NRC, show that Vermont Yankee is at the highest levels of performance and lowest levels of required oversight, year after year.
• Vermont Yankee's capacity factor (time on-line) is fourth highest of its group of sixteen "sister plants" (boiling water reactors that came on-line between 1969 and 1979).
• Major equipment upgrades ($400 million dollars worth of equipment) have been added by Entergy in the eight years it has operated the plant. Twomey lists the equipment that was added.

Yet, in my opinion, Twomey doesn't go far enough. He doesn't mention that in 2010, VY was awarded an industry-wide prize for their advanced steam-dryer inspection methodology. Well, okay. If Twomey was going to list everything, it would be a long letter.

The letter is pretty impressive as it is.

I have to say, however, that I wish I had had access to this information months ago. For example, when I speak about VY, I have said things like: "It is one of the most reliable plants in the fleet." Saying "fourth out of sixteen in capacity factor" would have been much better. I have said: "They have kept up the plant effectively, as proved by its reliability." Saying "400 million in capital improvements" would have been more convincing.

To quote Rod Adams, Like many of my pronuclear blogging friends, I have been a little disappointed in the lack of quotable responses from the plant owner.

I am pleased that this letter has been written, but I wish it had been written months ago.

Vermont Yankee and Vermont's Economy

The letter about the economic consequences if Vermont Yankee does not get relicensed did not contain any information which will be new to readers of this blog. A quote from the letter:

Vermont will face 1) increased electric rates from more expensive replacement power than Yankee would offer, 2) increased rates from the cost of projects required to shore up the electric grid's reliability, 3)possible periods of reduced reliability if such projects are not completed in time, and 4) the loss of well over 1,000 jobs from Yankee itself, companies doing business with the plant, and other businesses facing higher electric rates.

The new information in this letter is the list of the groups signing it, which includes Associated Industries of Vermont. The other two organizations who signed the letter are IBEW, a union which has long supported Vermont Yankee, and VTEP, another long-time supporter. However, I see the signature of Associated Industries of Vermont, along with IBM's recent press conference, as evidence of a new mobilization of Vermont industries to support Vermont Yankee.

Two letters: one with new information, and one with new supporters. I am happy to share them.

Some Notes on IBM and Yankee. How I Found Vermont's Energy Plan.

The Puzzle

On Wednesday, IBM said they might close their large plant in Vermont if Vermont Yankee closes and their electric bills rise. A day later, the governor said he thought there was a plan for electric supply for Vermont: a plan that did not include Vermont Yankee. But, according to VPR, the governor says he can't find such a plan. The plan never existed, or it has gotten lost.

Seek and ye shall find. I am proud to say that I found the plan. Yes I did. Keep reading.

IBM Makes An Announcement about Energy Use and Continued Operations

The background about IBM:

• IBM has a huge wafer fabrication plant in Essex Junction, Vermont. It employs thousands of people.
• IBM spends $35 million a year for electricity.
• On Wednesday of last week, IBM said that they were very concerned about Vermont Yankee closing.
• IBM further said that they would not be able to operate in Vermont if their electricity prices rise and they expect the prices will rise without Vermont Yankee.

At that point, high-up people in the Vermont government responded.

• Legislators suggested to IBM that they could build their own power plant on the IBM wafer fab plant site.
• IBM answered that they were in the wafer fab business, and had no intention of building and operating power plants.
• Governor Shumlin tried to deal with the IBM announcement by saying "the statement I read was ‘We’re out of here,’ meaning we’re out of business, not that they’re moving somewhere else.” (Yes. You read that right. I often scratch my head about Shumlin's statements.)
• Shumlin further stated that he had been shocked, shocked to find out that the state had no energy plan for the future that did not include Vermont Yankee

C'est Moi, the Energy Sleuth

Well, gosh, I was shocked too. So I did a little digging on my own blog, and I found the missing plan.

As a matter of fact, the plan for going forward without Vermont Yankee was explained during a recent debate which I posted on my blog: Howard Shaffer and I debated James Moore of VPIRG and Vermont Senator Dick McCormack.

Senator McCormack sits on both the Senate Natural Resources Committee and the Finance Committee. The Natural Resources Committee deals with energy issues, and the Finance Committee deals with utility regulation (among other things). Therefore, McCormack's authority and his explanation of the Vermont energy plan are very credible. You can hear him explain it in his own words on the video below:






The Energy Plan on Video

To hear the energy plan, you have to move the slider to about 22 minutes in to the tape.

At this point, I have just finished explaining the possible grid-level consequences of closing Vermont Yankee, as described by ISO-NE, the grid operator.

Senator McCormack does not dispute my description of post-Yankee grid problems, and adds that he is on the Senate Finance Committee which reviews ISO-NE reports. He says that people ask him about "where will the electricity come from without Yankee" as if nobody in the legislature ever thought of it before. People who want Yankee's license to be extended will ask that question, and his tone of voice implies that they are a bit silly.

McCormack says the transition will be difficult, but the utilities have assured the legislature that the grid has plenty of excess power and can make up the loss from Yankee. He also says energy efficiency is important.

At this point, I thought I had a pretty clear idea of the energy plan. I thought it was that Vermont would buy from the grid and also improve energy efficiency. McCormack understands there will be grid problems and other problems, but that is the plan. Buy from the grid at market prices. Okay. I don't like this plan particularly, but it seemed realistic at least.

Now we are around 24 or 25 minutes into the tape, and McCormack begins to to describe the long term plan, not the transition energy plan. In all honesty, this may not be the official plan, but only McCormack's own plan. But since McCormack describes the earlier plan as "the transition," I think this is the official longterm plan. Also, he is on all the relevant committees in the Senate, and he is describing the longterm plan, so I think this is it. I think I found it.

We DO Have A Plan

As McCormack explains, the long-term plan is about cutting back on our electric use. (I got the impression these will be big cut-backs, not some little wimpy measures.) Vermonters will cut back voluntarily, or at least McCormack hopes we cut back voluntarily. If not voluntarily, we will still cut back. (McCormack does not outline the mechanism for non-voluntary cutbacks.) He further says that that the idea that everyone can have all the electricity they want is outmoded. If you listen for about five minutes, between 21 and 26 minutes on the video, you can hear the entire conversation.

So there it is. The Vermont energy plan, on video, in the words of a ranking Senator from both significant Senate committees. The long-term plan for replacing VY is simple: Vermont just can't keep using all that electricity.

Look, I know IBM won't like this. I don't like this. However, I only stated that I found the plan and I am happy to share it with Governor Shumlin. I never said I liked the plan, I just said that Vermont has a plan. The Governor can start with that knowledge, and go on from there.

Vermont will just stop using so much electricity. This will be easier, of course, if IBM shuts down and stops drawing all that power.

The Backstory on this post: Standing on the Shoulders of Giants

In building this post and finding the plan, I acknowledge and thank many writers and reporters, as well as other reporters linked within the text above.

My first and foremost tip of the hat is to Rod Adams, for his two posts:

IBM Tells Vermont Politicians That a 25% Increase in Their Power Bill Would Force Them to Shut Down

40-year -old nuclear plants can produce electricity that is "too cheap to meter"--that capability angers the competition

The second tip of the hat is to Jack Harding of Vermont Tiger for his post

Do You Hear Footsteps?

And finally, for the WCAX reporting (with video) that first covered the story.

IBM warns lawmakers about the loss of Vermont Yankee

And finally, I appreciate VPR for Bob Kinzel's interview with Shumlin, and especially for these quotes:

"The extraordinary thing to me is that I stand here as your governor - 16 months before the shutdown date that was scheduled when we approved it 40 years ago - and state government has one plan. That's to continue to operate it beyond its design date. There was never a second plan, which might have been: What if it is actually shut down when it was scheduled to be shut down?"

"I sit here with my team frankly scrambling to put together a shutdown plan that should have been designed over the years."

Will IBM Stay In Vermont if Yankee Leaves?

Liar Liar Two Years Ago?

IBM's wafer fab plant employs thousands of people in Essex Junction. It is the biggest private employer in the state. If Vermont Yankee is voted off the island, will IBM sail away?

Today, Vermont Public Radio (VPR) described this issue in a short article: Shumlin Works to Change Image. VPR has these quotes from about two years ago. John Dillon of VPR reports:

(Dillon) The moment was classic Shumlin. And although it happened two years ago, similar issues have come up in this campaign.

A lobbyist for IBM - the state's largest private employer - blasted Shumlin's proposal to force Vermont Yankee to cover the full cost of its decommissioning. John O'Kane, the IBM lobbyist, complained the bill would raise electric rates. Shumlin confronted him.

(O'Kane) "Money has time value, and you're changing the time."

(Shumlin) "We are not asking for the money. You're lying about that. We are not asking for the money. The bill says..."

(O'Kane) "Peter, that is.. You just called me a liar.."

(Shumlin) "I said you're not telling the truth about that, John."

(Dillon) Shumlin later apologized.

False Claims Today?

Shumlin apologized, but he hasn't learned his lesson.

Late last month, his group put out a press release saying that Dubie made false claims that IBM would leave if Vermont Yankee closed. "False Claims" is toned down a little from "You're lying about that."

Shumlin claiming someone is a liar is not really news. (Predictable statements are not news.) However, some of the fallout from his "false claims" press release is news.

IBM Might Leave?

In a highly-unusual move, the Commissioner of the Department of Public Service, David O'Brien, commented on the Shumlin press release. O'Brien wrote:

Further I have heard from IBM officials throughout my seven year tenure that their power costs are too high in Vermont and it has a profound affect on their ability to compete for work and retain or add jobs in Essex Jct. Specifically they have referenced the possible loss of VY as a major threat to their ability to attract capital investment from corporate and add jobs here in VT.

In response to all this, IBM made it clear that they hadn't given Vermont an ultimatum:

“I don’t think we’ve said anything about moving jobs specifically around the electricity goals,” Couture said. “There was nothing specific, or an ultimatum.”....Couture did say that increases in power costs could affect jobs.

As a former corporate employee, I recognize that this statement is as close to an ultimatum as corporations give. If a corporation is saying "no ultimatum" that means there is an ultimatum. (My opinion, at least.) Otherwise, the corporation would say something like: "IBM is committed to its facility in Essex Junction Vermont, and we expect to work with whatever electricity choices are made by the people of this great state." IBM didn't say that.

Corporations have to be very careful what they say, because everything they say can be taken as a promise. That's why corporate employees listen to the rumor mills, and business reporters have "sources" within the companies they cover. If you do listen to the PR people, you have to read between the lines. You have to think about what they don't say, as well as what they say.

Looks to me as if IBM might leave, O'Brien is right, and Dubie was not making "false statements."

More Analysis

Jack Harding, chairman of Vermont Tiger blog, did a thought-experiment about a rise in electricity rates would affect IBM. How much money is IBM likely to lose, and how many layoffs is it likely to have?. His post, IBM Unplugged, was posted both on Vermont Tiger and Vermont Digger blogs. Harding pointed out that a rise in electricity costs was likely to:

• Lead to the layoff of about 400 employees at IBM Essex Junction
• Wipe out IBM's world-wide energy cost savings advances
• Perhaps cause IBM headquarters to pull the plug on the Essex Junction facility.

Harding concluded that Dubie was correct to be concerned. By the way, you might enjoy some of the comments on the Vermont Digger post. Especially the comments by Howard Shaffer and Willem Post, who have both been guest bloggers on this blog.

Fun with Layoffs

Well, not really. But I must recommend Art Woolf's tongue-in-cheek post End Supply, Stop Demand. Woolf suggests that we close down IBM for emitting ammonia. After all, if 1000 picocuries of tritium is the Worst Environmental Disaster in Vermont's History, according to Shumlin, what must all that ammonia represent? Vote both IBM and Vermont Yankee off the island! Stop demand and end supply!

Art Woolf is a very funny economist. (He's a professor at University of Vermont.) After I read his post, I laughed till I cried.