Friday, August 27, 2010

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.


Unknown said...

This is probably nieve, but I don't understand why an entity like Exelon or NRG would be willing to saddle themselves with a plant that has so much baggage (political, societal), at the end of its 40 year license, and not a large generator. Somebody that has a better understanding of this please explain the logic....

Meredith Angwin said...


A good question. And maybe it is all rumors. After all, the Energy Daily couldn't get anyone to confirm, and I didn't even try.

However, the more general question might be: Why would someone buy an older nuclear plant? If an older plant is allowed to sell at the market rates just like other generators, that is, if an older nuclear plant is a merchant plant, it can be very profitable. That's why Germany thought the older plants were sitting ducks for massive new taxes, because they are profitable.

The Brattleboro Reformer has a reasonably good article this morning on the possibility of VY being sold. The article tells some of the history of plant ownership and does a good job of putting it in perspective.

The last part of the article, unfortunately, is the usual set of opinions by opponents (it won't matter if they sell it, the problem isn't that Entergy is untrustworthy, who would have said that was the problem? oh we said that? well, it's not what we meant, we meant the problem is that the plant itself is a mess....etc etc.)