Vermont Yankee On the Market?

Back in the days when I worked for EPRI or had my own consulting business, I read the Energy Daily. It's a well-reputed and very expensive ($2400 a year) daily update on the energy business. Needless to say, I don't subscribe any more.

But I have friends in low places, and they shared an article from today's Energy Daily with me. The Energy Daily claims that Vermont Yankee is on the market, with NRG Energy and Exelon showing some interest. Of course, nobody at any of the companies will comment about this possibility. If Energy Daily can't get a comment, I'm not even going to try.

What do I think about this? I think it could be a good thing for the plant and the state. Selling the plant won't change the opinions of the so-called "citizen's groups" that met with Jaczko, or the Eugenics Grannies. But it would give the Senate the ability to revote. After all, the plant would REALLY have new management with a sale. "They lied" would be off the table ("they" aren't there anymore) and the economics and reliability of Vermont Yankee would be far more visible. As a matter of fact, I suggested the positive aspects of a sale in a post in May called Entergy Communications.

The psychological effect could be huge. Without some kind of drastic change, it is hard for a group like the Senate to reverse itself. There's a shame factor: "Were we wrong before, maybe? Are we admitting we made a mistake?" Love may mean never having to say you're sorry, but politics seems to insist on never admitting you need to be sorry. The political motto is: "I have never made an error, and I never will. Trust me."

The German Model

Relicensing Vermont Yankee at the 11th hour, with new management in place, would be completely precedented. Germany and Sweden came within inches of shutting down their nuclear power plants, by law. But as the day came closer, these countries became aware of all the natural gas they would be buying from Russia. It was Reality Check time, and their nuclear plants are still running.

It is amusing to shout about the imagined dangers of nuclear power, but when it actually comes time to buy fossil energy off the grid from outside suppliers, people begin to object. Ordinary people who are not anti-nuclear activists prefer the plants that they know, the plants that have been running for ages, the plants that supply jobs and taxes to THEIR own jurisdiction.

Negotiating with the Weak, Negotiating with the Strong

I read, somewhere, sometime, that Entergy put a pretty good rate on the table for selling electricity to Vermont utilities after 2012. I believe the rate was 6.1c kWh, which was the same as the "strike price" in the existing Revenue Sharing Agreement (item 4) of the Memorandum of Understanding. I don't think this rate was firm, though, so I am not going to try to look up the newspaper article in which it appeared.

Entergy has also been battered by poor choices and poor publicity. As everyone who reads this blog knows, the problems were blown out of proportion. The tritium leak was small and fixed in jig time. Every investigation shows Entergy did not lie about the pipes. However, these accusations DID weaken Entergy's negotiating position a great deal. They put Entergy in the position of a beggar, really. "Please please let us keep the plant open, and we will give you whatever you want."

Nuclear plants in general are changing their tune. They don't tend to be beggars anymore. When Germany decided to tax nuclear fuel rods as a simple way to bring revenue to the state, the utilities weren't standing still for it and threatened to shut the plants down. They aren't trying to stay open at any cost, with any taxation structure. This on-going fight in Germany is still, well, on-going.

My point is that negotiating from a strong position ("You wanta buy from the Russians, huh? You wanta buy from the New England Grid at spot prices, huh?") is likely to lead to more money for the group in the strong position. If Vermont Yankee is sold, the new owner will be in a stronger position, and the negotiations may be quite different.

If Vermont Yankee is sold, a major motivation might be to let the Senate off the hook about reversing itself. In which case, Vermont would have only itself to blame for encouraging the change in ownership, and therefore putting itself into a worse negotiating position. Ah well. It won't be the first time politicos mess up.

"I have never made an error, and I never will. Trust me." This statement is not a good way to get through life, or through politics. It is sure to cost someone some money, somewhere down the line. Vermont may have arrived at that place. New ownership at VY, higher priced power for everyone, but the Vermont Senate gets an "out" to reverse itself. Sigh.

Correction: In an earlier version of this post, I wrote: "if Entergy is sold." I meant: "if Vermont Yankee" is sold. Thank you to Rod Adams for the correction.

The Sixteenth Blog Carnival Of Nuclear Energy

The Sixteenth Blog Carnival of Nuclear Energy is up at Idaho Samizdat. Once again, Dan Yurman has done a terrific job of choosing the best of the blogs, and putting things in perspective. There's Advanced Reactor Research at Brave New Climate, a terrific post from economist David Bradish of NEI Nuclear Notes on Nuclear and Job Creation, and CoolHandNuke on TVA refurbishing the Bellefonte reactor. Great stuff! Read and enjoy. Nothing like a Carnival on a late summer evening.

Dollar image from Wikimedia.

Map of nuclear plants in Germany also from Wikimedia.

Ferris Wheel also from Wikimedia.

Hydro Quebec De-Mystified

A Win-Win Deal?

The recent Hydro Quebec deal was announced in a air of hoopla and celebration. On Friday, March 12, the Burlington Free Press quoted James Moore of VPIRG and various members of the legislature, congratulating Vermont for the deal. In this article, President Pro Tem Shumlin, House Speaker Shap Smith, and House Natural Resources Committee chair Tony Klein all described the purchase as a positive development. For once, Governor Douglas was in agreement with his legislature. “Reaching a new long-term agreement with Hydro-Quebec is a good deal for ratepayers and strengthens the state’s economic future,” Douglas said.

There was happiness on the Canadian side, also. The Montreal Gazette was pleased that HydroQuebec had landed a $1.5 billion dollar deal with the Vermont utilties. While the U.S. stories avoided talking about money, the Canadian article was more direct. The Montreal Gazette article was published on Thursday, March 11, and it was delighted with the revenue that would be coming to Canada.

Worth $1.5 billion over 26 years, and starting in 2012, the contracts call for the purchase of 225 megawatts of power from Hydro-Québec at “market prices,” Premier Jean Charest said. The contract renewals, with Central Vermont Public Service and Green Mountain Power, account for a third of the electricity consumed in the state. And Charest said Hydro-Québec could win an equally large new contract with Vermont if plans to close Vermont Yankee, the state’s only nuclear reactor, go ahead.

(emphasis added by blogger)

Vermont utilies also gave HQ something they dearly wanted: declaring Quebec Hydro power as Green Energy. As the Montreal Gazette noted:

But in addition, Charest said, the Vermont legislature is considering a bill to recognize electricity produced by large hydro dams as green. At present, several U.S. states consider electricity produced by large dams as non-renewable energy.......If Vermont becomes the first state to recognize Hydro-Québec as a green energy producer, others could follow, increasing the provincial utility’s potential export sales to the U.S., Charest said. “It opens the door to agreements that could multiply across the United States,” the premier said.

Meanwhile, also on Thursday, March 11, Governor Jim Douglas of Vermont was given the highest honor that the Quebec government can award, the National Order of Quebec. He was the first American politician to receive this award. It was a great, busy day for Quebec-Vermont relationships.

A Puzzle?

Premier Charest and Governor Douglas described the situation as win-win. I described it to myself as puzzling. How much power were we buying? What were we paying for it? It seemed to have something to do with Vermont Yankee, but what? I began my investigations.

My hard work was interrupted when I discovered that Peter Shumlin thinks 30% of German electricity comes from solar. (Solar provides 1% of German electricity.) So I had a little comic relief. But a blogger's life cannot be all fun and games. I had to figure out this HQ deal. I called David Lamont of the Department of Public Service, and ask him a few questions. He was very helpful.

For a while, Mr. Lamont was TOO helpful. Vermont utilities have five separate contracts with HydroQuebec, with different rates and end dates. The new contracts extend this power purchase past 2016. The existing contracts buy capacity and electricity separately somehow. Dollars do not follow the electrons. For example, Vermont could buy electricity that gets delivered to Boston, and some other electricity would get delivered to Vermont from near Boston. And to top it off, the dollar amounts in new HQ contracts are not finalized.

Well, at least I know why I was confused.

Hydro Quebec Deal Demystified

I think I finally got it, though. The basics of the Hydro Quebec deal.

Our current situation:

Vermont buys 300 MW (installed) at 75% of hours (capacity) from HQ each year. Vermont pays approximately 6.6 cents per kWh for this power. The five contracts begin to run out in 2012, and all finish by 2016. The AC line into Vermont near Highgate is adequate to carry most of this amount of power. Some is currently carried by a DC line into Boston.

The new situation:

Vermont will have new contracts to buy power from HQ for 26 years, starting in 2012. The contracts cover 225 MW (installed) and 66.7% hours (16 out of 24 hours).

Looking at the odd unit of MWyears (one megawatt times one year's worth of time)

• We used to buy 300 MW times 0.75 or 225 MW years
• Now we will buy 225 MW times 0.67 or 150 MWyears.

Therefore, this deal is for 2/3 of the power we used to buy from HQ.

The price is not known, but it will be some variation of market price. Negotiations are not yet finished. I think the price is unlikely to be less than the 6.6 cents per kWh we are currently paying HQ. If it were less, Douglas and the Legislature would be trumpeting this from the housetops. Right now, the Canadians are the only ones shouting with glee about money.

Future Purchases

Both the newspaper articles and Mr. Lamont stressed that more power can be bought from HQ at a moment's notice. Mr. Lamont wanted me to realize that Vermont could buy more power (if it wanted to) than the Highgate AC line can carry. The DC line to the Boston area could carry power that Vermont buys: it already carries some Vermont power. This power is delivered to Boston, but some Boston-area power is delivered to us at the price we had arranged with HQ. Electrons and dollars do not have to move in tandem. Since the line can carry more power, we could buy more power from HQ if Vermont Yankee closes.

Some Thoughts

I don't mean to be a spoilsport. But why is everybody in Montpelier so happy about this? Locking in out-of state power at "market price" when VY was willing to sell at 6.1 cents? And VY pays taxes here. Apparently some price fluctuations will be smoothed in the new contracts, just like a mortgage that will only raise your rate half a percent per six months. (Not the best kind of mortgage.) But the deal is still about market rates.

I am not the only one to notice that this is not the deal-of-the-century. Vermont Digger shows Douglas being asked some difficult questions at his March 15 press conference. Three particularly good questions:

1. How can you evaluate a deal without a price?
2. Is it right for public utilities to agree to a contract without a specified price structure?
3. There is language in the agreement that ties a contract to legislative action. Isn't that unusual?

Unfortunately, the Governor's answers weren't quite as good as the questions. His answers were along the line of "It's all going to be all right. We have a feeling about it." I urge you to read the transcript of the conference referenced above, or perhaps watch the video.

Another point is a little more subtle. There's language in the contract that ties this contract to legislative action...that is, I believe the Vermont legislature has to declare HQ power "renewable" for the contract to take effect. Haven't we been here before? Haven't we had the legislature in the middle of a power purchase agreement before? Can't the legislature decide later that HQ power isn't renewable after all?

Indeed. Why does anybody in Quebec think it's going to work out well to have our legislature in the middle of their power agreement?

Follow the Money

The Conservation Law Foundation (CLF) is the group that is always trying to get the PSB to find Vermont Yankee in violation of SOMETHING. My previous post described two of their attempts to get the Public Service Board to find against Vermont Yankee. One attempt was successful (investigate tritium) and one attempt was a dud (declare the docket tainted). The CLF keeps trying.

I just realized that they are not just doing this for their health. There's money on the table, too. CLF Ventures is "the non-profit affiliate of Conservation Law Foundation."

CLF Ventures gives CLF the chance to say "YES" to ground-breaking, market-based efforts to protect the environment.

And what, perchance, are they saying "YES" to? Their prime featured project is a 700 megawatt combined cycle gas-fired generating plant in New Hampshire. This plant came on-line in 2002, and I suspect it would make much more money if it didn't have to compete with cheap power from Vermont Yankee. Also, having done one successful project, CLF would probably like some more natural gas clients. Their description of this project seems to imply it is as green as grass, a "Super Clean Power Plant in New Hampshire." They don't describe it like something that involves a fossil fuel.

When a group goes to a lot of trouble to bring legal action, it's worth figuring out what they gain if they win. In this case, it's clear. By helping close Vermont Yankee, CLF would knock out a competitor and provide itself with future clients.

Update: October 7, 2010. CLF Ventures has moved its website, and I redid the link. My quotes on this blog post are from their former website.

The graphic of a natural gas processing plant is in the public domain (Wikimedia). Information about natural gas and radiation is posted today at Atomic Insights blog.