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Entergy: ‘Difficult Decision’ to Close Pilgrim Nuclear Plant

Pilgrim nuclear power plant to shut down by 2019 Entergy Massachusetts

The 680-MW Pilgrim Nuclear Power Station in Massachusetts will shut down in 2019 due to poor market conditions, a decline in revenues and an increase in operational costs.

The exact date of the shutdown depends on several factors, including further discussion with the ISO New England grid, and will be decided in the first half of 2016. Plant operator Entergy (NYSE: ETR) said it would not operate the plant past June 1, 2019, per ISO-New England’s suggestion. Pilgrim’s license was renewed in 2012 to operate for another 20 years.

The decision to close was based on several factors, including:

  • Low current and forecasted wholesale energy prices, thanks to low natural gas prices. Current and forecast power prices have dropped about $10 per megawatt-hour, a yearly loss of more than $40 million in revenues for Pilgrim.
  • Wholesale energy market design flaws that do not provide adequate compensation to merchant nuclear power plants. Unfavorable state energy proposals that subsidize renewable energy sources also undermine Pilgrim’s economic performance, Entergy said.

In addition to a market that does not benefit merchant nuclear plants, local governments have developed policies that work against merchant plants such as Pilgrim.

“Regional and state policies have failed to recognize the benefits that nuclear provides,” said Bill Mohl, president of Entergy Wholesale Commodities. He pointed out that Massachusetts Senate Bill 1965 gives preference to hydropower imported from Canada and that the Massachusetts Clean Energy Standard excluded nuclear power.

“As if it weren’t challenging enough to run a single-unit plant in these difficult situations, the plant also faced increased generating costs,” Mohl said.

The NRC recently increased oversight at the plant following an unexpected shutdown during a winter storm in 2015. The enhanced inspections are expected to cost Entergy between $45 million and $60 million pre-tax in operation and maintenance expenses, not including potential capital investment or other costs to address issues that may arise from the inspections.

Mohl said the company plans to invest money to keep the plant safe and said Entergy had already spent hundreds of millions of dollars to strengthen safety.

The Nuclear Energy Institute said Pilgrim’s early closure is a sign that the markets still have improving to do.

“When Wisconsin’s Kewaunee nuclear plant was retired prematurely in 2013, we warned that market reforms are needed to ensure that the nation maintains a diversified portfolio of electricity options,” said Marvin Fertel, president and CEO of NEI. “We continued to sound those warnings when Entergy prematurely retired the Vermont Yankee nuclear plant a year ago. Today’s announcement is more proof that the reforms urgently needed in competitive electric markets are too slow in coming.”

Mohl said the FitzPatrick nuclear plant in New York faced a similar situation and a decision on that plant will be made at the end of October.

Pilgrim’s decommissioning trust has a balance of $870 million as of Sept. 30, 2015. License termination is expected to cost $240 million above NRC-required assurance levels.

“Electricity consumers in New England will not immediately feel or see the impact of today’s announcement concerning Pilgrim, but they and policymakers at the state and federal levels should not take false comfort in that,” Fertel said. “There will be impacts to offset the loss of this around-the-clock source of carbon-free electricity.”

Mohl said the 633 employees of the plant will stay on until the plant is shut down.

“This has been an extremely difficult day for us and the more than 600 employees at the nuclear power plant,” Mohl said. “We have reluctantly concluded it is the appropriate action for us.”

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