Wednesday, February 19, 2014

The Proposed Entergy Settlement is Good for Vermont

The Proposed Settlement

The state of Vermont and Entergy Corporation have been battling each other for years, but the two parties reached an agreement in December about the future of Vermont Yankee. Entergy has owned and operated the 42-year-old nuclear plant in Vernon since 2002. When Entergy announced plans to close the plant by December 2014, the state, which has passed laws aimed at preventing the plant from operating, seemed surprised. It also lost some negotiating leverage. Even so, the settlement, which the Vermont Public Service Board must still approve, is a good deal for Vermont — better than I thought possible. Let’s take a look its four main points: the Certificate of Public Good; pending lawsuits; payments; and decommissioning.

The Certificate of Public Good: In 2012, the Nuclear Regulatory Commission renewed Vermont Yankee’s federal license for 20-year-period, through 2032. However, to keep operating for that period, the plant also needed state approval, specifically a Certificate of Public Good from the Public Service Board. The Shumlin administration vigorously opposed granting such a certificate, and used the state approval process to try to force the plant to shut down when its original license expired. Now that Entergy has amended its petition to operate only through the end of this year, not through 2032, the state will be on Entergy’s side before the Public Service Board.

Lawsuits: The main federal lawsuit hinged on whether Vermont interfered in the federal regulation of nuclear safety. In both district court and in appeals court, Entergy won its case, arguing that the Legislature attempted to regulate nuclear safety when the state Senate voted in 2010 to deny the plant a certificate of public good. Nuclear safety, like airline safety and drug safety, is regulated at the federal level. Though Entergy won its case, both Vermont and Entergy conceivably had grounds to appeal to the U.S. Supreme Court. Now, according to the agreement, neither side will appeal. I suspect both sides breathed a sigh of relief.

The agreement also settled another lawsuit about a new “generation tax.” The state had raised the generation tax on Vermont Yankee to $12 million a year. This is a tax paid by Entergy for every kilowatt-hour that the plant generates. However, the higher tax rate applied only to power plants that were built after 1965 and were larger than 200 megawatts! Of course, there’s only one such plant in the state, and Entergy quite reasonably felt targeted. In the agreement, Entergy agreed to drop this suit and to pay the $12 million for 2014.

Payments: Entergy agreed to pay more than the new generation tax. In 2015, the plant won’t be generating any power, so Entergy won’t be required to pay the generation tax. However, Entergy agreed to pay the state $5 million in 2015, to help the state as it deals with the loss tax revenue Vermont Yankee generated. Entergy also agreed to other relatively short-term payments: a payment of $5 million to the Clean Energy Development Fund, and a further payment of $2 million a year for five years to help Windham County adapt to the plant closing.

In his address on the state budget, Gov. Peter Shumlin mentioned “one-time payments” from Entergy as part of his plan to close the state’s budget gap.

The state appears to have won the financial negotiations. However, the plant closing means that $60 million a year in payroll will disappear from the local economy. These payments hardly begin to close that gap for Vermont and neighboring states. As I have said before, it would have been far better if the plant remained open. Some people say that decommissioning will be a similar boost to the local economy, but it won’t be. Not in the next few years at least.

Decommissioning: This has been, and remains, the most difficult and contentious part of the agreement. When Entergy bought the plant in 2002, the agreement it signed with the state allows Entergy to use a delayed decommissioning plan called SAFSTOR, approved by the NRC. With
SAFSTOR, decommissioning can take up to 60 years but it could also be completed sooner. The state wanted to decommission the plant sooner, much sooner  —  immediately, as a matter of fact.

However, in the course of the negotiations, I suspect the state learned some facts about decommissioning. Decommissioning cannot start for six or more years after the plant is closed. After the plant is shut down, the last fuel from the reactor is placed in a spent-fuel pool. This fuel must cool in the pool for five years before it can be removed and put into dry-cask storage. In plants such as Vermont Yankee, the fuel pool is in the same building as the reactor.

You can’t begin tearing down the building while the fuel pool is still in use. So there has to be at least a five-year delay between plant closing and the beginning of major decommissioning work. Therefore, there will be a gap of several years in the economic activity around the plant. In the agreement, Entergy agreed to move the fuel from the pool in a timely fashion. In the press conference about the recent agreement, Shumlin said that all fuel bundles should probably be moved into dry cask storage within about seven years.

Maine Yankee dry cask storage
Other major decommissioning work can begin after the fuel is moved to dry casks. The decommissioning fund is around $580 million now, and decommissioning is estimated to cost between $600 million and $1 billion. Entergy agreed to start full decommissioning when the fund is large enough to to pay for the job. (Federal rules for SAFSTOR stipulate that owners can wait up to 60 years to complete decommissioning, no matter how big the fund.) Entergy also agreed to put $25 million into a separate fund for “greenfielding” the site. Greenfielding generally involves excavating, grading and seeding.

The Next Steps

Of course, not everyone is happy with the agreement. Opponents loudly insist that decommissioning must start immediately (it can’t), and others worry that it will take years for Entergy to have enough funds to start decommissioning. The definition of “greenfielding” is also contentious.

Even so, the agreement is a major step forward in what has been a hard battle between Vermont Yankee and the state. Both are arguing in favor of this agreement before the Public Service Board. That’s quite an unexpected development. Either side could withdraw from this agreement if the Public Service Board does not approve it by March 31, however. The board is now considering this plan, and the public comment period is still open. At the PSB website, you can read docket 7862 and write your comments. I encourage you to do so.


Here is a direct link to the comment form on this docket.

When reading docket 7862, you will note that there are two major document filings: the Memorandum of Understanding and the Settlement Agreement.  The Settlement Agreement is the agreement between Entergy and the state agencies, while the Memorandum of Understanding is the part of the Settlement Agreement that lies within the jurisdiction of the Public Service Board. The Board will rule on the Memorandum, but the Settlement Agreement was filed for informational purposes.

The article above is an op-ed that I wrote (plus a short end section on links).

The op-ed has been published in the Valley NewsTrue North Reports, and Vermont Digger.  It may also be published other places in Vermont. 


Joffan said...

I thought this blog entry sounded familiar... :-)

Anyhow - a "what-if" thought. Suppose that the PSB does not approve the certificate by the end of March. The most likely reason being that the PSB has failed to reach a decision.

Then is there much advantage to Entergy in keeping the agreement? if Entergy declares that the agreement is cancelled, presumably the government has to go back the the PSB and change everything it said, the hearings drag on another month or two, the PSB decides - eventually - on the CPG.

Suppose, again, that the CPG is denied. This is surely appealable, and Entergy can effectively run the clock out in court, for significantly less than $25 million. In fact they probably could do that already.

The only benefit to Entergy of playing the "friendly" (or what I call "servile") game is that other states they operate in might be less hostile as a result. I see zero indication that this hope is well-founded.

Meredith Angwin said...


Yes, it is familiar! But when I put in a link ( as "please read my post at the Valley News!)" I am never sure how many people actually click that link and read the material.

In my opinion, Energy is trying to protect two things here: their employees, and their investment in fuel. They have given their VY employees end-dates...if the PSB forces an earlier closure, that is bad for the employees. Similarly, about the investment in fuel. I think one run of fuel is about $65 million for 18 least, that's what I remember. With seven months left after March 31 (months of April-October), that's more than $20 million that Entergy paid for fuel and which they hope to recoup.

BUT, recouping that fuel money may be the "sunk costs" fallacy. Entergy already paid for the fuel: it's a sunk cost. Continuing to operate the plant at a loss just sinks more costs.

In the book "Getting to Yes," there's a section on how the group that can walk away from the negotiations most easily because it has another alternative...that group will win the negotiations. The walk-away-easily group has a better BATNA (Best Alternative To Negotiated Agreement.)

With Entergy losing money on the plant operations, and Governor Shumlin hoping to close the budget gap with one-time payments from Entergy...which side can walk away from the negotiated settlement more easily right now? Which side has more to lose? I think it's Shumlin.

I won't be doing more notes like this, spending time this week with grandkids. Thank you for the comments. You are right...

Robert said...

How hard will the decommisioning be on the enviroment? I was thinking of noise. We had a bank build a new building and the old one with its vault was demolished. It took a week and a half to jackhammer the 2 foot thick vault and we could hear the noise all day through the neighborhood. Vermont Yankee is much thicker and the noise will be terrible - possibly worse than when they built the place. Perhaps the outbuildings will go first and the turbine and reactor buildings last. I would think all the people who want VY gone might be happy with the outbuildings gona and only the 2 primary buildings there.

Joffan said...

Good choice - enjoy your time with the young uns.

Engineer-Poet said...

Isn't the TVA Federally chartered, and thus outside the reach of state law?  Maybe TVA should buy VY and keep everyone on, simultaneously eliminating Shumlin's extortion mechanism and the local property taxes (but not the payrolls).

Anonymous said...

Seems kike a lot of Danegeld was extorted in there. Paying extortion is not a good deal, IMO. But, then again, I have perhaps an exaggerated sense of fairness and justice compared to the way things are done today.