Vermont Yankee may be next nuke to close

UBS predicts Entergy will close its Vermont Yankee nuclear power plant soon: that's the same Entergythat couldn't keep the power on during the SuperBowl and that can't keep Pilgrim 1 nuclear reactor up in Massachusetts during a winter storm (down 3 days now, for the third downtime in a month). A few days later, UBS set Entergy up on a quarterly earnings call to mention that Vermont Yankee had already been taken off the New England energy capacity auction, which would make it easy to replace. San Onofre still down in California, Dominion Power closing Kewaunee in Wisconsin, NRC terminated Calvert Cliffs in Maryland, Duke closing Crystal River in Florida, and maybe Vermont Yankee next? How about we pass HB 267 to stop Georgia Power charging for cost overruns for Vogtle 3 and 4 and see how long before Southern Company stops that project?

Andrew Stein wrote for vtdigger 6 February 2013 (updated 7 Feb), In report, financial firm forecasts that Entergy may close Vermont Yankee,

In an investment research letter, the Swiss financial services company UBS Securities anticipates Entergy Corp. will retire one of its nuclear power plants in 2013, and it cites “Vermont Yankee as the most tenuously positioned plant.”

UBS representatives met with Entergy's new leadership team on Feb. 1, the same day Leo Denault became CEO and chair of the board for the Louisiana-based company that operates the Vermont Yankee nuclear power plant.

And that's how a clean-broom new CEO often signals his intentions: by bringing in outside experts to provide him cover for what he already intends to do anyway. And this new-broom CEO is Entergy's former Chief Financial Officer who as CFO has repeated fiddled with Vermont Yankee to try to make it less unprofitable. What did those experts say?

On Monday, UBS released a report (see below) that details fiscal portents “suggesting real retirement risk for units such as Vermont Yankee and (New York's) Fitzpatrick in '13; we see (increased) focus on the (decommissioning) process.”

This analysis comes a month after UBS released a report, which project that Entergy “is unlikely to generate any meaningful cash” from wholesale commodities in 2013 and 2014. UBS also expects the corporation to experience deficits in 2015 and 2016 if the company does not retire older, lower capacity units, like Vermont Yankee.

The February UBS report shows that Vermont Yankee is the lowest capacity plant Entergy operates, at 605 megawatts.

All of this information comes as Entergy and the state of Vermont are embroiled in legal disputes over whether Vermont Yankee should continue to operate. One case is pending before the U.S. Court of Appeals and Entergy has appealed Vermont Public Service Board decisions to the Vermont Supreme Court.

The story continues with a rote recital of rosy prospects for nukes by an Entergy spokesman. That's also part of the corporate ritual. And so is this, a quarterly earnings call teleconference, Entergy Corp ETR Q4 2012 Earnings Call Transcript, 8 February 2013:

Julien Dumoulin-Smith - UBS: Then just turning to the EWC segment for a quick second, obviously the New England results came out the other day. Can you indicate whether you committed Vermont Yankee into that auction and whether it cleared by chance?

What auction? The annual energy capacity auction for the six New England states. Scott DiSavino wrote for Reuters 10 December 2012, New England grid can function without Vermont Yankee reactor,

ISO New England told Reuters the grid operator decided to let Vermont Yankee out of auction 4 in May 2012 and auction 5 in November 2012.

Now that the ISO has accepted Entergy's request to keep the reactor out of the auctions, Entergy could lose millions in guaranteed future revenue. But the company would not be on the hook for providing capacity in the event that the state was successful in its efforts to shut the reactor.

So Entergy can close Vermont Yankee without suffering some financial consequences.

Back to the earnings call:

Leo P. Denault - Chairman and CEO: Bill?

Julien Dumoulin-Smith - UBS: I tried.

Bill Mohl - President, Entergy Wholesale Commodities: Julien, this is Bill. We did actually commit VY and it did clear and you may ask a question why did we do that as we haven't in the past, but now that unit has been delisted it's not considered a reliability must run unit that takes away a lot of our relicensing risk, because it relates to the CPG issues, so that in the event that we would encounter any problems, we could replace it with a fungible product.

UBS, the same company that just released that report, lobbed the first questions in the quarterly earnings call, leading up to an answer that Entergy is ready to ditch Vermont Yankee and replace it with "a fungible product": some other energy source whose output is more easily tradeable on markets.

A CPG is a Certificate of Public Good, as in the petition filed by Entergy with the Vermont Public Service Board the same day as the earnings call, for "operation of the Vermont Yankee Nuclear Power Station, including the storage of spent nuclear fuel."

Sure, Entergy is still going through the motions of fighting the various court cases, which include the state of Vermont wanting to close it, as related earlier in that same earnings call:

Regarding Vermont Yankee, oral argument at the Second Circuit Court of Appeals was held on January 14th, before a three judge panel. As a reminder this case involves the state of Vermont's appeal that the January 2012 Federal District Court ruling invalidating certain state laws regarding continued operation and borrowing the state from requiring a below market PPA as a condition for continued operation. A decision could come by mid-year. Two days later we participated in hearing at the Vermont Supreme Court. The state court hearing concerned a claim by an intervener group that Vermont Yankee was operating in violation of past Vermont Public Service Board orders. Next steps will be established by the state court. However, given the Federal District Court rulings and the absence of any state ruling prohibiting operation, we will continue to operate until final decisions are reached in the federal case and in the certificate of public good proceeding before the VPSB. Our right to continue operating is supported by representations to the Federal District Court by the Vermont Attorney General. Also at the state level, hearings on direct testimony in the CPG proceeding will be held next week. Additional testimony hearings and briefings are scheduled through August of this year. A Board decision is expected by year-end.

Sure, those court cases could go for Entergy. But if they don't, Entergy is already prepared to close Vermont Yankee and is busily sending out signals of that closing.

-jsq