Entergy, utilities strike new deal over Yankee sale

Vermont Business Magazine, Aug 01, 2002 by Marcel, Joyce

As this magazine goes to press, the sale of the Vermont Yankee nuclear power plant in Vernon seems to be moving forward. But in this "high-stakes power plant poker," as the Rutland Herald calls it, the last hand has certainly not yet been dealt.

Yankee is owned by Vermont Yankee Nuclear Power Corporation, a consortium of power companies led by Central Vermont Public Service and Green Mountain Power. Together, the two Vermont companies own 55 percent; out-of-state power companies own the rest.

Once all the cards were put on the table, it was clear that for prospective buyer Entergy Nuclear of Mississippi, the purchase always hinged on the large pot of money expected to be left over after the plant is decommissioned.

The Herald characterized the sale as being similar to a man marrying a woman just for her dowry.

In an earlier deal with the Public Service Department, Entergy and the ratepayers were going to split the excess money 50-50. But when the Public Service Board reviewed the sale, it said all the leftover money should be returned to ratepayers. In a later clarification, it said the excess money should be returned to all the ratepayers, not just the Vermont ones.

Because it would not get the surplus, Entergy threatened to walk away from the sale.

"(F)rom the time of the plant's auction through the end of the (Public Service) Board's process, Entergy made clear that sharing in potentially excess decommissioning funds 'has always been a fundamental element in the transaction'," Entergy said in a posting on its Web site on July 18. "Entergy believes that it is fundamentally inequitable for it to bear all of the downside decommissioning fund risk without the potential to share in the upside if funding levels or actual decommissioning costs turn out better than expected."

The sales agreement was to expire on July 31, 2002, so a last-minute deal was cut whereby Vermont ratepayers would receive 100 percent of the Vermont utilities' share of the decommissioning fund after decommissioning. The nonVermont utilities would assign their share of excess money to Entergy.

To pick up the slack, CVPS and GMP shareholders would pay $1.5 million to the out-of-state owners. In theory, that would cover, at least in part, what they were giving, up in order to ensure that the sale went through.

Opponents of the sale claim that this last-minute deal violates the PSB order, which mandated that all the money go to all the ratepayers. What opponents or the PSB choose to do, or what they can do about it, is, at this writing, unknown.

But it does indicate that there are more hands left to play in this high stakes game.

The owners want to get rid of the plant, primarily for liability reasons, but also because the utilities want to get out of the power-generating business and concentrate instead on delivering power on the "poles and lines" aspect of their business.

The decommissioning fund, which goes with the plant when it is sold, is estimated to contain approximately $300 million. Ratepayers have been paying into the fund ever since the plant started producing power, 30 years ago. If Yankee's license is extended past its expiration date of 2012, the fund will grow even larger. After decommissioning, it is estimated that the fund might contain about $100 million.

Entergy Nuclear, a subsidiary of Entergy Corp, the country's third largest power-generation company, owns nine nuclear power plants. In the Northeast, it is currently-and, by report profitably running the James A Fitzgerald and Indian Point nuclear power plants in New York, while its subsidiary, TLG Services, Inc of Connecticut, which specializes in cost-estimating, decommissioning and decontaminating nuclear and fossil fuel power-generation plants, is decommissioning Maine Yankee. Previously, the decommissioning fund aspect of the sale was never regarded as a deal-breaker.

Entergy came to Vermont just as the sale of Yankee to AmerGen Energy Co for $10 million was falling apart. First, according to the Herald, it made an offer to Yankee's owners to decommission Yankee for $100 million less than any other estimate Yankee might obtain. (The cost of decommissioning the plant is, at this point, unknown, but TLG has a reputation for keeping such costs down.)

Then, when the plant went up for auction, Entergy offered $180 million and won.

This was at a time, however, when nuclear energy, which has always been controversial, appeared to be receiving new life. The Bush Administration was pro-nuclear power, and Vice President Dick Cheney talked enthusiastically about building new nuclear power plants throughout the country. There was even talk of building a second plant on the Vermont Yankee site, as well as an almost-certain extension of its license. Then came September 11, 2001, and the terrorist attacks on New York and Washington.

These attacks focused new attention on the safety of the country's aging nuclear power plants and made it unlikely that many more would be built.

Entergy executives said that they would not have offered so much money for the plant if the auction had been held after September 11.