Dive Brief:
- Michigan utility regulators will decide the fate of a power purchase contract for Entergy's Palisades Nuclear Plant by August, the Associated Press reports.
- Michigan regulators held public meetings this week about the future of a 15-year nuclear contract utility Consumers Energy holds with the Palisades plant. Consumers said it would terminate the contract after Entergy announced plans to shut down the nuclear facility by 2018, citing competition from cheap natural gas.
- Consumers Energy proposed to recoup its $172 million buy-out payment through increased rates, claiming the plan to end the contract early will save ratepayers between $54 million and $1.1 billion.
Dive Insight:
Like other nuclear plants in U.S. wholesale markets, the Palisades facility is being squeezed by competition from low natural gas prices.
While nuclear fleets in states like New York and Illinois have financial bailouts, that's not on the table in Michigan. Instead, the Public Service Commission plans to rule by August on a proposal from Consumers to recoup a payment the utility would have to make to Entergy to terminate its service contract.
Entergy is currently under contract to provide power to Consumers until 2022. Under the utility's proposal, ratepayers would pick up the tab for termination fees. If not approved by regulators, Consumers shareholders may have to eat the cost.
Utilities across the nation are retiring nuclear plants before operating licenses expire despite their carbon-free output. The big question following these decisions are what will replace the lost capacity?
Some utilities, like Pacific Gas and Electric, will attempt to replace the lost capacity from retired nuclear plants with renewable energy, storage and energy efficiency. Still others are striking a more traditional approach, using a mixture of natural gas in addition to renewables as alternative energy sources.
Consumers Energy and Entergy struck a deal in late December to terminate Consumers' contract early, leaving about 800 MW of capacity to fill. Consumers Energy says it will replace the lost capacity with a mixture of natural gas, renewable energy and energy efficiency.
Closing the Palisades facility will cost 600 jobs, but Consumers Energy pledged to "consider potential placement of up to 180 appropriately skilled employees from Palisades into the utility's workforce over time."
UBS Securities last year singled out the Palisades plant, in addition to Xcel Energy's Prairie Island nuclear plant in Minnesota, as prime targets for early closure. According to the report, even facilities under long-term contracts are at risk for early shutdowns.
