When a nuclear power utility says one of its reactors is economically troubled and it may close early, should you believe it? For that matter, when a nuclear power utility says anything at all, should you believe it?
Since the answer to the second question is almost always no, the answer to the first is self-evident.
The reality is that when a nuclear utility–especially one like Exelon, Entergy or FirstEnergy, all of which have an ideological pro-nuclear fixation–says that it may close one or more of its reactors early, what it really means is that it wants a taxpayer and/or ratepayer bailout to make up for its losses. Only when that approach fails will it actually think about cutting its losses by closing a reactor.
Digressing only slightly for just a moment, when a nuclear utility like Exelon says it will bring benefits to a city or region if only that city or region will allow it to operate there, what it really means is that it will bring rate hikes and stymie clean energy if that city or region is foolish enough to allow it to come in.
The photo above from this morning’s rally outside Washington DC’s District Building shows DC residents that have caught on to Exelon, and don’t believe it for a second. The rally was held in support of the recent DC Public Service Commission decision denying the proposed takeover of local utility Pepco by Exelon, and to put pressure on the PSC and Mayor Bowser to reject a settlement offer Exelon reportedly has brought to the mayor. News of a $170+ million rate hike proposed this week by Exelon subsidiary Philadelphia Electric (perhaps to help bail out Exelon’s struggling Three Mile Island reactor?) for that region don’t provide much confidence in the company’s assurances that it wouldn’t raise rates in D.C.
If approved–which doesn’t seem likely, the Pepco takeover would go a long way toward salvaging Exelon’s nuclear fleet. The steady money coming in from Pepco ratepayers, who aren’t burdened with failing reactors, would have eased tension around Exelon’s Chicago-area headquarters as the company desperately seeks more money from every venue imaginable. Though maybe Exelon, instead of seeing itself as primarily an electricity generating company, now sees itself as sort of an industrial-scale pickpocket. Rather than focusing on providing a product (electricity) or service (electricity distribution) in return for payment, Exelon seems to spend its efforts trying to raise money directly: from state legislatures, from regulators, from federal officials, from anyone who might listen. They do so not with the promise of providing something of value in return, but with the threat of taking away something (jobs, taxes, power) those entities might want. Yes, a lot like the kid from school who threatens to take away the only bat and ball, so that no one can play, if he doesn’t get to be the pitcher.
That understanding goes a long way in explaining the past 18 months, which have been filled with pronouncements from Exelon that, depending on the day, some combination of its Byron, Quad Cities, Clinton, Three Mile Island, Oyster Creek and Ginna reactors are uneconomic and will be closed in the near future–unless someone will come along and give Exelon more money. Not to be outdone, Entergy has now followed Exelon’s lead with its Fitzpatrick reactor, and to some extent Pilgrim as well. As has FirstEnergy, which is now desperately seeking an absolutely outrageous bailout for its Davis-Besse reactor.
That’s 11 reactors, 12% of the entire U.S. nuclear armada, that their owners have publicly said at some point or other in the past 18 months are uneconomic or nearly so, and thus merit or need additional financial support beyond what they can earn selling their product.
In a normal free-market economy, if those reactors actually were uneconomic, they would all have closed by now. Successful companies may be willing to lose money on start-up ventures and products–for a while–but successful companies do not continue selling their products at a loss, especially if those companies are losing money not because people no longer want the product, but because their ancient technology makes the product too expensive to make while competitors have come along and provide the same product at a lower cost.
Utility deregulation, adopted by many states over the past couple of decades, was supposed to have brought the electric utility industry into a free-market economy. But for decades utilities simply went to their captive Public Service Commissions demanding, and normally receiving, rate increases when things went sour. That attitude has carried over into the deregulation era, only the target has changed: instead of the PSC, the utilities are now going to legislatures and other types of regulators. The idea that they should actually have to compete in a free-market economy is alien and frightening to them.
So, with that lengthy introduction, which reactors are really shutdown candidates–toast–by the end of this decade, and which are simply pawns in the utility’s financial games?
Byron: pawn. Does anyone believe Exelon would actually close an otherwise relatively noncontroversial standard Westinghouse PWR with a high capacity factor? Please….
Quad Cities: pawn this year, but wait til next year. Quad Cities is an ancient two-unit GE Mark I Fukushima-clone reactor. Even worse, both reactors are in the same building. From a safety standpoint, it should have been closed years ago, but certainly on March 12, 2011. Not that safety has ever been a concern for Exelon. Despite Exelon’s proclamations that Quad Cities needs a legislatively-ordered bailout, the reactors somehow managed to clear this year’s PJM transitional auction (although it didn’t clear the more forward-looking PJM auction a couple months ago). That means Quad Cities will operate through mid-2018. It also means Exelon isn’t very likely to get the bailout it wants from the legislature–why raise consumers’ rates during an election year if the reactors are going to run anyway? But if it doesn’t get that bailout, it actually does make it more likely that Quad Cities will close in 2018.
Clinton: Toast. The Clinton reactor has been an economic albatross from the beginning. Built by the tiny Illinois Power and a bunch of even tinier rural electric co-ops, it nearly bankrupted all of them, and Exelon bought it for pennies on the dollar. But it’s not in the PJM service area and regulators in its grid–MISO–don’t seem as inclined as their counterparts at PJM to change rules to benefit uneconomic (or profit-making, for that matter) nuclear reactors. Further, since it’s in less-populated downstate Illinois, the constituency to keep it open is smaller and less powerful. Expect a shutdown announcement within a year.
Ginna. Toast. Ginna will close, probably by mid-2017–although that’s several years beyond its original design life. That it will even operate that long is a travesty, brought about more by grid problems in upstate New York than by any particular love for it among regulators. Upstate New Yorkers will have to pay far more than others for their electricity because of grid shortsightedness for a couple years, but that will only last as long as absolutely necessary. And a strong coalition of clean energy advocates, including NIRS, will make sure of that.
Three Mile Island. Pawn. Pennsylvania newspapers have been full of stories about whether TMI’s failure to clear the big PJM auction means it will close soon. What it really means is that Pennsylvania is about to get the full Exelon bailout press, and Exelon probably will succeed, at least for a while. Even if it doesn’t, failure to clear one auction–as we learned from Byron–doesn’t necessarily mean it won’t be back in the running next year.
Oyster Creek. Toast. It’s already set to close in 2019 and that won’t be changed. What could change are expenses–if Exelon has to put any money into Oyster Creek at all–for repairs, for post-Fukushima safety changes, then it will close even before 2019.
Fitzpatrick. Toast. Entergy says it will make a decision on Fitzpatrick’s future by the end of this year. That’s utility-speak for saying that Entergy’s own full-court bailout press is being put in motion. But New York is not as utility-friendly as Illinois or Pennsylvania, and Entergy hasn’t won any friends in Governor Cuomo’s administration, who want it to close their Indian Point reactors. Though if Entergy agreed to close Indian Point, Cuomo probably would find a way to bail out Fitzpatrick. But that wouldn’t make economic sense for Entergy anyway. Whether the December announcement will be a shutdown statement isn’t clear, but the odds that Fitzpatrick operates until the end of the decade are vanishingly low.
Pilgrim. Pawn. Pilgrim has more reported safety problems than just about any reactor in the country; it has a completely unrealistic and unworkable evacuation plan; and its inept staff are keeping the reactor on the NRC’s radar screen. In addition, there is a strong and growing anti-Pilgrim movement. But, unlike Vermont Yankee, Pilgrim isn’t losing money–yet; at least not much money. Whether Massachusetts would allow a bailout isn’t clear; it could depend on who is in the statehouse. Entergy probably wouldn’t survive as a company if it had to close Pilgrim, Fitzpatrick and Indian Point, so it will fight mightily to keep at least two of those sites open. Of course, who cares if Entergy survives?
Davis-Besse. Pawn. Davis-Besse is perhaps even worse from a safety perspective than Pilgrim. A Three Mile Island clone, the reactor was poorly-built and has never run well–it has one of the lowest capacity factors of any 35 year old reactor anywhere in the world. FirstEnergy’s bailout proposal is so outrageous that even the conservative Ohio Public Utilities Commission is likely to reject it. But FirstEnergy is probably just seeing how much it can get away with. If that first proposal is in fact rejected, expect FirstEnergy to come back with something more modest; perhaps an offer to close one or more of its ancient coal plants instead of Davis-Besse in return for a more modest rate increase. Still, any financial reprieve for Davis-Besse is only likely to last until its next major safety-related breakdown–let’s hope that next breakdown doesn’t take Northeast Ohio along with it.
Like all lists of this type–and genie-like glimpses into the future of specific reactors generally–take all this with several grains of salt. All of these reactors are going to close someday, even though nuclear utilities don’t like to admit that fact and don’t seem to be planning very well for that day. None of these reactors are likely to last until the end of their re-licensed periods. And some, probably most, of these reactors will close before the decade turns. Even nuclear utilities will someday have to face the fact that their beloved reactors can’t continue to operate if their electricity is more expensive than their cleaner and safer competitors. They may get some temporary bailouts in some locations, but in the longer run, a better deal is a better deal and renewables are already a better deal. No one, not even a bought and paid for legislature, is going to allow permanent bailouts–not a legislature whose members want to stay in office, or run for higher office, anyway.
Perhaps more interesting is which reactors will come right behind these; which ones will the utilities suddenly realize, like Kewaunee in 2013, can no longer compete with cheaper gas and increasingly reliable solar and wind power? This time next year, there could well be several additions to this list.
In the meantime, the most effective thing any of us can do is make sure that the elected officials in your state, as well as utility regulators, hear from you loudly and often that taxpayer/ratepayer bailouts for aging, dangerous and uneconomic nuclear reactors will have consequences–for the legislators. That’s the best way to take reactors off the bailout list and put them into the shutdown list to make room for the next ones seeking a bailout on their way to permanent oblivion.
September 17, 2015
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