Industry pushes other states to duplicate N.Y. policy

By Jeffrey Tomich | 08/15/2016 07:00 AM EDT

CHICAGO — Operators of the nation’s nuclear power fleet are an exclusive fraternity. They care about safety. They share best practices. And when wholesale power prices erode, they tend to suffer together.

Since the closure of Kewaunee Power Station in Wisconsin in 2013, industry lobbyists have been thumbing their way through dog-eared playbooks for a political strategy that could save other struggling plants.

Frustrated with the inability of Congress to even debate a climate bill that would value nuclear’s carbon-free power generation, operators are turning to the states.


In the state of New York, the nuclear industry hopes it has found a formula for success. This month, regulators there rolled out a 50 percent renewable energy standard, coupled with a deal brokered by Gov. Andrew Cuomo (D) to extend the life of a trio of upstate reactors by providing nearly $1 billion in subsidies over the next two years.

From last month’s national meeting of utility regulators in Nashville to the National Conference of State Legislatures’ 2016 Legislative Summit last week, the nuclear industry is stepping up its lobbing efforts as a dozen or more of the nation’s 99 operating reactors are deemed at risk of being shut down.

"Now is the time, I would contend, for state legislatures to step up and address the issue," Alex Flint, senior vice president of government affairs at the Nuclear Energy Institute, told lawmakers and staffers at the legislative conference in Chicago.

The campaign was buoyed by the Aug. 1 win in New York, where the Public Service Commission approved a plan to help the R.E. Ginna, Nine Mile Point and Fitzpatrick plants (EnergyWire, Aug. 10). Two of the plants are owned by Exelon Corp. and the company has an agreement to purchase the third.

Flint said the zero emission credit (ZEC) program in New York, where payments are based on the Obama administration’s controversial calculations for the social cost of carbon emissions, isn’t the only option.

"There are a number of models for addressing the issues," he said. But regardless of the court challenge to U.S. EPA’s Clean Power Plan, he said some form of carbon regulation is here to stay, and preserving existing nuclear generation — 63 percent of the nation’s carbon-free power — is key to any strategy.

Legislation proposed in Illinois would help two money-losing Exelon plants, Clinton and Quad Cities. Ohio regulators are considering a different kind of proposal to aid FirstEnergy Corp.’s Davis-Besse plant. And in Connecticut, a measure to aid Dominion’s Millstone nuclear station was filed in the final days of the legislative session.

The Connecticut Senate unanimously passed the bill. But the House didn’t take it up.

State Rep. Mary Mushinsky, a Democrat, said the bill left her conflicted. An environmentalist, she feels urgency to act on climate change. But she’s concerned about the effect on electric rates and subsidizing a profitable company.

"My environmental side is wrestling with my consumer side right now," she said.

Even where there are not yet concrete proposals, talk has begun in other states where nuclear reactors are seen as at-risk. The threat is most acute in states such as New Jersey and Pennsylvania that have competitive power markets.

In Pennsylvania, Exelon’s 837-megawatt Three Mile Island plant is frequently cited among those in danger of shutting its doors, in no small part because of the shifting economics of energy and the surge of cheap shale gas from nearby Marcellus and Utica formations.

The plant failed to clear grid operator PJM Interconnection’s last two capacity auctions for 2018-19 and 2019-20. Meant to ensure there is adequate generation for high-demand periods, the auction is a key source of revenue for power plant owners. And not clearing the auction means the plant failed to qualify for millions of dollars in annual payments.

In an email statement, Exelon spokesman Ralph DeSantis said the company will "explore" whether lawmakers in the state will consider proposals similar to those in New York and Illinois.

"What we do know is that parity among zero-carbon resources needs to be addressed in order to ensure that the state is able to meet its carbon reduction goals at the best price to consumers," the statement said.

The company has already announced plans to shut down its 625-megawatt Oyster Creek Nuclear Generating Station in New Jersey by 2019.

The other two nuclear plants in the state, the Salem and Hope Creek stations, are operated by Newark-based Public Service Enterprise Group Inc.

In a conference call with analysts and investors just days ahead of the New York PSC decision, PSEG’s chief executive, Ralph Izzo, said he thinks the plants should be rewarded for producing carbon-free energy and their reliability and that the company is engaged in "early conversations" with policymakers.

But, he acknowledged that unlike the Exelon plants in Illinois and New York, the company’s reactors aren’t bleeding red ink.

"We don’t have that situation," Izzo said. "I’m glad we don’t have that situation."

Without a brewing crisis, however, it will be tougher to convince lawmakers to act given all of the other problems they face.

"Our challenge is that our plants are quite healthy, economically. It does sort of impair our ability to have the same level of interest and participation in the discussions," Izzo said.

Like the nuclear sector with the New York victory, consumer groups and environmental advocates that have criticized subsidies for reactors have a blueprint borrowed from the West Coast for how to address nuclear plants.

In California, Pacific Gas and Electric Co. announced in June that it would not seek relicensing for the 2,200-MW Diablo Canyon plant when its operating licenses expire in 2024 and 2025 (EnergyWire, Aug. 12). PG&E would replace the generation with a mix of efficiency and renewables. The proposal, submitted jointly by PG&E, environmental groups and labor unions, requires approval by California regulators.

The proposal has already prompted questions about whether output from nuclear plants can be replaced with some mix of wind, solar and efficiency.

Kathleen Barrón, senior vice president of federal regulatory affairs and wholesale market policy for Exelon, urged legislators to look at the impact on consumers.

"You’ll notice in that proposal there isn’t a lot of detail on what that’s actually going to cost consumers to replace all those megawatt-hours of carbon-free generation," she said.