Dive Brief:
- Entergy will keep the Palisades nuclear plant in southwest Michigan open until 2022 instead of closing it in October of next year, the company announced Thursday.
- The decision comes after Michigan regulators cut $36 million out of Consumer Energy's proposal to buy out the remainder of its nuclear power purchase agreement with Entergy. The companies requested more than $172 million, but were approved for $136 million last week.
- Entergy said it expects the decision to have a positive impact on free cash flow of between $100 million and $150 million. The company stressed it remains committed to exiting the competitive power business in 2022.
Dive Insight:
At the core of the Palisades issue is a disagreement over how much customers would save if the plant shut down. When Entergy proposed to close the plant early, it and Consumers estimated ending the PPA could save customers $172 million over four years.
Last week, the Michigan Public Service Commission took issue with that figure.
"The commission determined that there would be savings to customers if that contract were terminated and replaced with other sources of power, but not the full amount that was requested by Consumers Energy," said PSC Chairman Sally Talberg, according to MLive.
The decision was enough to make the companies reconsider. Entergy now says it will operate the plant until termination of its existing PPA in 2022.
“In light of the Michigan Public Service Commission’s order issued Sept. 22, which granted Consumers Energy recovery of only $136.6 million of the $172 million it requested for the buyout of the PPA, the parties have agreed to terminate the buyout transaction,” said Charlie Arnone, Entergy’s top official at Palisades.
Entergy said that seeing the PPA out will be positive for cash flow compared to the buyout proposal with Consumers. The company also no longer expects "fuel, refueling outage costs and capital expenditures to be expensed as incurred."
"Instead, these expenditures will be amortized or depreciated over their useful lives and the expense will be
included in operational results," according to a company statement.
The Palisades nuclear plant has been operating since the 1970s and has a capacity of 811 MW. Entergy and Consumers announced last December that they would shut the plant, replacing the generation with a mix of gas, renewables and energy efficiency.
Palisades is feeling similar pressures to other nuclear plants in organized markets, with cheap gas, renewables and stagnant power demand cutting into revenues. The closure of Nebraska's Fort Calhoun plant last October marked the fifth shuttering in five years, following the retirements of Crystal River, Kewaunee and San Onofre in 2013 and Vermont Yankee in 2014.
Illinois and New York approved subsidies to nuclear generators last year aiming to preserve their carbon-free generation and jobs. Operators are currently pushing for similar supports in Pennsylvania and Connecticut, threatening to shut down plants in those states if supports are not approved.
