Palisades to close in 2018

09 December 2016

Entergy Corporation yesterday announced plans to close the Palisades nuclear power plant by 1 October 2018. The company has also agreed to the early termination of an agreement under which Consumers Energy was to buy almost all of the Michigan plant's output until 2022.

Palisades (Image: NRC)

The company purchased Palisades from Consumers Energy in 2007 for a total of $380 million - $242 million for the plant itself, $83 million for nuclear fuel stocks and $55 million for other assets such as spare parts. At the same time, it entered into a power purchase agreement (PPA) committing it to selling back the plant's output to Consumers Energy until April 2022, a period of 15 years.

Since that time, market conditions have changed "substantially" and "more economic alternatives are now available" to provide power to the region, Energy said yesterday. Closure of Palisades will result in expected savings of $344 million over the early termination period from 2018 to 2022. "We determined that a shutdown in 2018 is prudent when comparing the transaction to the business risks of continued operation," Entergy chairman and CEO Leo Danault said.

Both the early termination of the PPA and the closure of the plant are subject to regulatory approvals. Consumers Energy is to seek approval from the Michigan Public Service Commission to terminate the PPA from 31 May 2018. A new PPA will be signed under which the plant will continue to operate until 1 October 2018. Entergy is to notify power grid operator, Midcontinent Independent System Operator, and the Nuclear Regulatory Commission of its intent to permanently shut down and decommission the plant.

Assuming those regulatory approvals are granted, Palisades will be refuelled as scheduled in the spring of 2017 and will then operate through to the end of its fuel cycle on 1 October 2018.

Entergy will recognise a non-cash pre-tax impairment charge of about $390 million in the fourth quarter of this year as a result of the agreement to terminate the PPA and close Palisades. It expects to record additional charges of about $55 million related to severance and employee retention costs over the period to the end of 2018.

Consumers Energy, Michigan's largest utility and the principal subsidiary of CMS Energy, said regulatory approval of the PPA's early termination would lower customer costs by up to $172 million. Investment in clean energy, reliability and demand reduction technologies driven by the decision would lead to further customer savings, the company said.

Consumers Energy president and CEO Patti Poppe said company had a "comprehensive plan" to ensure ongoing reliability and affordability for its customers which included "adding more renewable energy and clean natural gas-fired generation" to its portfolio.

Not valued

The Nuclear Energy Institute (NEI) described the announcement of the latest US nuclear power plant to be closed for economic reasons as "yet another instance of otherwise exemplary power plants having to shut because their many benefits are not properly valued by the market".

The short-term nature of deregulated electricity markets, coupled with competition from low-cost gas and federally subsidized wind power, have left some otherwise well-performing US nuclear plants at risk of premature closure for economic reasons.

NEI president and CEO Marvin Fertel said: "We note with regret the coming loss of Palisades nuclear power plant, which its owner said was not earning enough from electricity sales to be profitable." As well as "churning out emissions-free electricity" since 1971, he said, Palisades was the largest tax-payer in its county while helping to stabilise the electricity grid and provide a "vital hedge" against severe weather. "But the market does not value the plant for providing any of those benefits. Nuclear plants are operated by corporations, with an eye on the bottom line. What is not paid for does not endure," he said.

Entergy's announcement came only two days after the governor of Illinois signed legislation recognising the benefits of nuclear power and ensuring the continued operation of at-risk reactors, following the lead of New York. Earlier this year, New York became the first state to approve legislation explicitly recognising the zero-carbon contribution of nuclear power plants.

Governor of Michigan Rick Snyder said Palisades was a major employer and economic engine for the region. "I'm certain the Michigan Public Service Commission will look at this very closely and examine the implications for the reliability and affordability of electricity in Michigan, as well as protection of the environment," he said.

Palisades, a single unit 798 MWe pressurised water reactor, began commercial operation on 31 December 1971 and is currently licensed to operate until 2031. It is the smallest of Michigan's three nuclear power plants - the others are the two-unit DC Cook plant and the single-unit Fermi 2. The state generated 25.7% of its energy from nuclear in 2015, according to the US Energy Information Administration.

Researched and written
by World Nuclear News