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.

Mostly about Vermont Yankee: The Boston Meeting on the future New England Energy Mix

Looking forward to Nuclear Going Forward

On June 24, in Boston, Bloomberg BNA and Nuclear Matters co-sponsored an event about the future of nuclear,  Nuclear Going Forward.  The two organizations are holding a series of these joint events.  The June meeting was A Chain Reaction: The Role of Nuclear Energy in New England's Energy Mix.

The June meeting had an absolutely stellar line-up of speakers, including nuclear plant owners and nuclear start-up companies.  In this meeting, nuclear energy (current and future) was not compartmentalized, but rather presented as a whole. And the conference focused on New England!  I was delighted to go to it.

I wrote about my plan to attend the meeting in this blogpost, and you can see the videos of the meeting at the Nuclear Going Forward website.

Vermont Yankee and Nuclear Going Forward.

There were three main sections to the meeting.  I will discuss only the second section: a panel focused on existing power plants.

The panel started with extensive discussion about Vermont Yankee (video below). Topics included the reasons for Vermont Yankee shutting down, the consequences of Vermont Yankee shutting down, and the risk factors for other plants in the Northeast. Many of the statements made on this panel will be familiar to readers of this blog.  However, there were some factors that were new to me.

What is a "single plant? I knew that single, stand-alone plants are more vulnerable to being shut down. However,  I didn't remember that Millstone 2 and 3 have different vendors. They do not have the economies of "sharing" (operators, training, etc.) that most dual-unit plants can  boast.   They are more vulnerable than other dual-unit plants because their labor costs are higher.  It would be a disaster for the New England grid if these plants closed.

Do capacity payments help? I had been heartened to see that the forward capacity auction has been yielding higher prices.  That fact, coupled with grid-level "pay for performance," seemed to favor nuclear plants.  However, Mohl of Entergy pointed out that nuclear plants run with a very high capacity factors.  Most of their revenue comes from kWh produced, and only a  small part of their revenues are capacity-type payments (capacity and pay-for-performance).  Nuclear plants receive 15-20% of their revenue through the capacity auctions.  Plants that run a small percentage of the time get much higher percentages of their revenue from the capacity auctions.  In other words, increased prices at the capacity auctions don't help nuclear plants all that much.

Laughing all the way to the bank? During the Polar Vortex, prices on the grid soared and merchant plants gathered a lot of revenue.  All businessmen like extra revenue. Still,  Mohl of Entergy pointed out that this kind of volatility of energy prices is not good for anyone.  Businesses that can't predict their costs will begin to leave the area.  Consumers will have less to spend in the area as their utility bills take up more of their income.  The result can be a downturn. General economic downturns aren't good for consumers or for energy producers.  In other words, during the polar vortex, merchant plants weren't really laughing all the way to the bank.

Forward with Nuclear Going Forward

Nuclear energy is good for

• reliability (of course), 
• economic sustainability (prices are low and not volatile), and 
• environmental sustainability (no carbon, no acid gases, small quantity of mined material compared to fossil fuels of all kinds).  

The general consensus of the meeting, however, is that unless the grid begins to value these benefits, nuclear may have a rocky future.

Endnotes: 

About the meeting as a whole

You can see videos of the entire meeting at this link: http://nuclear-going-forward.bna.com

The first section of the meeting was an interview with John Kotek of DOE about DOE's funding for nuclear-based research.

The second section was a panel discussion about current plants.  The panelists were:
Judd Gregg, former Senator from New Hampshire, now with Nuclear Matters
William Mohl, President, Entergy Wholesale Commodities;
Daniel Weekley, VP, Corporate Affairs, Dominion Resources
(This blog post covered this section of the conference.)

The third section was a panel which included executives from forward-looking nuclear companies, such as LightBridge and NuScale.

Chris Gadomski (Lead Analyst, Nuclear) from Bloomberg New Energy Finance was the moderator for all sections.  As you can see in the videos, Gadomski asked excellent questions. He kept the meeting interesting and (miracle!) on schedule.

Attending Nuclear Going Forward

It was difficult to get to the meeting.  Appearing at 8:30 a.m. for a meeting in an expensive hotel in Boston's Back Bay is do-able if:

• you live in Boston and know the T
• you have the money to stay overnight in Boston, preferably at an expensive hotel in Boston's Back Bay.  

Neither was true for me.  I left my driveway in Vermont at 5:17 a.m. for what Google describes as a two-hour-and-ten-minute drive if there was only light traffic. I arrived at the meeting room at 9:05.  (Breakfast was over and the first session was starting.) Yeah, traffic was bad.  I wasn't the only one who was late.

Once I got there, it was worth it.  However, the choice of time and place did make me wonder. What audience were the meeting planners hoping to attract?  Why was the meeting set up in this difficult manner?

Rod Adams and Nuclear Going Forward

Rod Adams was also at the meeting, and his blog post about the meeting is here.  He has some interesting observations, including illuminating conversations with panelists.  There are over twenty comments on his post, and I encourage you to read both his post and the comments.