JOHN C. ZINK, Ph.d., p.gif., managing editor
Nuclear plant managementbecomes strategic business
Competition in power generation is leading many in the utility industry to rethink their business strategies. Owners of nuclear stations are particularly fearful of being stuck with huge stranded investments in these plants and are seeking innovative ways to prevent that from happening. Other nuclear operators are finding opportunities among the threats to the status quo. Here is a recent example.
In the June 1996 issue of The Electricity Journal, Robert Schoenberger, New York Power Authority (NYPA) president and CEO, and Robert Cudlin of PRISM Consulting discuss what they term stranded value associated with nuclear power plants. They define stranded value as the antithesis of stranded cost.
That is, it is the “potential additional value-increased power generation and reduced costs, while maintaining high levels of safe operation-that could be obtained from an average nuclear plant if it could be operated at the performance levels attained by the best nuclear plant operators in the country.” Schoenberger and Cudlin believe the new era of competition in generation requires NYPA to rethink “… the paradigm that it is best able to provide value through direct management of its nuclear plants.” Consistent with the NYPA view, Don Hintz, Entergy Operations Inc. president and CEO, said in the August issue of Electric Light & Power, “The handful of companies that will emerge as the nuclear operators will be the ones that demonstrate consistently high performance, safety performance, operating performance and cost performance.”
Entergy Operations has successfully operated a fleet of five nuclear units and all have shown significant improvement since coming under Entergy Operations` management. Entergy Operations intends to exploit the opportunities to utilize its nuclear plant management expertise. In May, Entergy filed an application with the Securities and Exchange Commission (required under the Public Utility Holding Company Act of 1935) to pursue new business opportunities in the nuclear field. Specifically, Entergy plans to establish an unregulated subsidiary to provide nuclear plant management to non-affiliated companies. “It may be surprising to see the words `nuclear` and `growth` together in a headline unless it`s in an article about the Pacific Rim,” said Hintz. “There is, however, a potential for growth for some nuclear operators.”
On July 31 the two strategies merged as NYPA and Entergy announced a memorandum of understanding as the first step toward a contract for Entergy to provide management services to NYPA`s two nuclear plants. The new era of competition in power generation is supposed to bring about efficiencies by forcing companies to focus on what they do best. This appears to be an early example of such a change.