Decision driven by sustained low power prices, high cost structure and wholesale electricity market design flaws for Vermont Yankee plant.
Entergy Corporation today said it plans to close and decommission its Vermont Yankee Nuclear Power Station in Vernon, Vt. The station is expected to cease power production after its current fuel cycle and move to safe shutdown in the fourth quarter of 2014. The station will remain under the oversight of the Nuclear Regulatory Commission throughout the decommissioning process.
"This was an agonizing decision and an extremely tough call for us," said Leo Denault, Entergy's chairman and chief executive officer. "Vermont Yankee has an immensely talented, dedicated and loyal workforce, and a solid base of support among many in the community. We recognize that closing the plant on this schedule was not the outcome they had hoped for, but we have reluctantly concluded that it is the appropriate action for us to take under the circumstances."
The decision to close Vermont Yankee in 2014 was based on a number of financial factors, including:
- A natural gas market that has undergone a transformational shift in supply due to the impacts of shale gas, resulting in sustained low natural gas prices and wholesale energy prices.
- A high cost structure for this single unit plant. Since 2002, the company has invested more than $400 million in the safe and reliable operation of the facility. In addition, the financial impact of cumulative regulation is especially challenging to a small plant in these market conditions.
- Wholesale market design flaws that continue to result in artificially low energy and capacity prices in the region, and do not provide adequate compensation to merchant nuclear plants for the fuel diversity benefits they provide.
Making the decision now and operating through the fourth quarter of 2014 allows time to duly and properly plan for a safe and orderly shutdown and prepare filings with the NRC regarding shutdown and decommissioning. Entergy will establish a decommissioning planning organization responsible for planning and executing the safe and efficient decommissioning of the facility. Once the plant is shut down, workers will de-fuel the reactor and place the plant into SAFSTOR, a process whereby a nuclear facility is placed and maintained in a condition that allows it to be safely secured, monitored and stored.
"We are committed to the safe and reliable operation of Vermont Yankee until shutdown, followed by a safe, orderly and environmentally responsible decommissioning process," Denault said.
Commenting on the future of nuclear power, Denault said: "Entergy remains committed to nuclear as an important long-term component of its generating portfolio. Nuclear energy is safe, reliable, carbon-free and contributes to supply diversity and energy security as part of a balanced energy portfolio."
Financial Implications
Entergy plans to recognize an after-tax impairment charge of approximately $181 million in the third quarter of 2013 related to the decision to shut down the plant at the end of this current operating cycle. In addition to this initial charge, Entergy expects to recognize charges totaling approximately $55 to $60 million associated with future severance and employee retention costs through the end of next year. These charges will be classified as special items, and therefore, excluded from operational results.
The company noted that the estimated operational earnings contribution from Vermont Yankee was expected to be around breakeven in 2013, and generally declining over the next few years. As a result of this decision and based on continuing operations into fourth quarter 2014, the estimated operational earnings change, excluding these special items, is expected to be modestly accretive within two years after shutdown, and cash flow is expected to increase approximately $150 to $200 million in total through 2017, compared to Vermont Yankee's continued operation.
Regarding decommissioning, assuming end of operations in fourth quarter 2014, the amount required to meet the NRC minimum for decommissioning financial assurance for license termination is $566 million. The Vermont Yankee decommissioning trust had a balance of approximately $582 million as of July 31, 2013, excluding the $40 million guarantee by Entergy Corporation to satisfy NRC requirements following the 2009 review of financial assurance levels. Filings with the NRC for planned shutdown activities will determine whether any other financial assurance may be required and will specifically address funding for spent fuel management, which will be required until the federal government takes possession of the fuel and removes it from the site, per its current obligations.
Vermont Yankee, a single unit boiling water reactor, began commercial operation in 1972. Entergy acquired the plant from Vermont Yankee Nuclear Power Corporation in 2002. In March 2011, the NRC renewed the station's operating license for an additional 20 years, until 2032.
Frequently Asked Questions (This information is provided from the Entergy website concerning this press release)
When will Vermont Yankee close?
The company anticipates shutting down the Vermont Yankee Nuclear Power Station in fourth quarter 2014, with the exact date still to be determined.
Why was this decision made?
Vermont Yankee has an immensely talented, dedicated, and loyal workforce (about 630 employees) and a solid base of support in the community. We recognize that closing the plant on this schedule was certainly not the outcome they had hoped for, but we have reluctantly concluded that it is the appropriate action for us to take under the circumstances.
Couldn't Vermont Yankee be sold to another company?
We are constantly evaluating our portfolio of assets and businesses to determine if it makes sense to hold and optimize, to sell, or to shut down. As a matter of policy, we cannot comment on any specific efforts, however, we did consider all options before making this decision. Closing the plant on this schedule was certainly not the option we hoped for, but we have reluctantly concluded that it is the appropriate action for us to take under the circumstances.
What will happen to employees?
We expect to continue operations with current staffing levels through to shut down, at which time we will transition into decommissioning. Staffing levels will change and be reduced as the plant moves through the various stages of decommissioning. The company will treat employees at the station fairly and assist them through this transition.
Beyond the financial aspect, what's the reasoning behind closing the plant?
We looked at the impact of this decision through the lenses of all our stakeholders, and while extremely tough for many, we believe the decision was ultimately the right one:
What has to be done to decommission a nuclear plant?
The decommissioning process is clearly defined by the Nuclear Regulatory Commission in Title 10 of the Code of Federal Regulations, Section 50.2 (10 CFR 50.2). The initial activities involve extensive planning to safely and efficiently decommission the station and terminate the station license. Activities include removing the plant from service, transferring used fuel to safe storage, removing any residual radioactivity and restoring the site which includes the removal of structures and, if appropriate, re-grading and reseeding the land.
How can we be assured that decommissioning will be handled properly?
The safety of our operations will continue to be a top priority. In addition, the NRC will provide oversight during the decommissioning process.
How long will the entire decommissioning process take?
The complete decommissioning process is likely to take decades. We plan to follow the NRC-approved SAFSTOR methodology of decommissioning, where the facility is maintained and monitored in a safe condition and the decontamination and dismantling of the station occurs later. There are a number of advantages to SAFSTOR methodology, including lower potential radiation exposure for workers doing the decommissioning work and the need for fewer shipments of radioactive material to the low-level waste site.
Entergy expects to decommission using the SAFSTOR method. What is SAFSTOR?
SAFSTOR places and maintains a nuclear facility in a condition that allows it to be safely stored until the removal of radioactive materials and components, eventually permitting unrestricted use of the area. During SAFSTOR, the facility is left intact, with structures maintained in a sound condition. Systems that are not required to support the spent fuel pool or site surveillance and security are drained, de-energized and secured.
What will happen to the Vermont Yankee site after decommissioning?
Once Vermont Yankee's license has been terminated and the NRC has released the site for unrestricted use, the area can be used in any way permissible by federal, state and local laws. Entergy retains ownership of the property on which Vermont Yankee operates. Entergy has committed eventually to restoring the site by removing structures and, if appropriate, re-grading and reseeding the land.
What happens to the used fuel?
The used fuel will remain secured on site, under guard, monitored during shutdown and decommissioning activities, and subject to the NRC's oversight. Removal of the fuel from the reactor vessel to the spent fuel pool is expected to begin as soon as the reactor has cooled sufficiently, in a matter of days after shutdown. This is similar to what happens in a refueling outage. From the spent fuel pool, fuel will be moved to NRC-licensed casks. The fuel will remain onsite in dry casks until it is removed by the federal government in accordance with its legal obligations.
How many U.S. nuclear power stations/units have been decommissioned?
Since 1960, more than 70 test, demonstration and power reactors have been retired throughout the United States.
Vermont Yankee contributes about $435,000 annually to the community through open grants, site sponsorships, annual events and other charitable giving. What will happen to that support?
We will continue to be a good corporate citizen. We recognize that this is a significant event for the local economy and for surrounding communities. We will have future discussions to talk about transition plans, as it is too soon to know the specifics.
How can the public be assured of radiological safety during the decommissioning process?
The environmental monitoring program in place now will continue after the plant is shut down. The program will be modified to monitor the types of releases that may occur during decommissioning. Again, the NRC will provide oversight during the decommissioning process.
Will the closing cause electric reliability supply issues in the state or elsewhere in the region?
ISO New England will conduct a grid reliability review before Vermont Yankee's closure.
What about other Entergy plants in the region?
Each of our merchant plants has unique characteristics, some operating in different market environments, some of which are more favorable than others.
For example, Vermont Yankee and Indian Point are on two opposite ends of the spectrum. Vermont Yankee is a small, single-unit plant in a very challenging economic market. Indian Point is a large, two-unit station in a more favorable market. Indian Point continues to be a vital component of the region's power supply and we are committed to its continued and safe operation.
Regarding FitzPatrick, while in a difficult market environment, we currently expect to refuel in the fall of 2014.
While Palisades' market environment is certainly difficult, it has a power purchase agreement.
Although Pilgrim's market environment is the same as Vermont Yankee's, Pilgrim's higher power output provides greater economies of scale.
Does Entergy have the required decommissioning funds in place?
How does Vermont Yankee's closing change Entergy's viewpoint on nuclear energy?
Entergy remains committed to nuclear as an important long-term component of its generating portfolio, and for meeting the nation's energy needs. Nuclear energy's benefits are numerous and important. Nuclear provides reliable and cost-effective power over the long term, it contributes to supply diversity and energy security as part of a balanced portfolio, and it provides almost two-thirds of America's clean-air electricity. Nuclear is an important part of Entergy's portfolio.
Tell me more about Vermont Yankee. How many employees are there? What type of reactor does the plant have?
Vermont Yankee is a boiling water reactor manufactured by General Electric. The plant uses the Connecticut River as a cooling source, with once-through cooling towers. It began commercial operation on Nov. 30, 1972, and it is currently licensed to operate through 2032. It has a maximum dependable capacity of 605 megawatts and employs approximately 630 people.
SOURCE: Entergy
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What a shame, been a tough year or so when it comes to shutting down nuke plants, Wisconsin, Vermont, California, Florida.
this is an example of damage done by wall street. shale gas revolution is I large part a financial bubble, with operators producing below cost and being subsidized by money printing. This too shall burst ,with damage in it's wake.
IMHO, this is the result of direct subsidies and purchase requirements for unreliable energy sources. They are cutting into the baseload requirement and making it hard for good, solid baseload to compete.
In 10 years when people are paying high prices for NG, they will blame the companies, not the real cause which IS the political boneheads
We can now watch Vermont slip back into the stone age, which is where their hippie governor wants them to be. As far as cheap shale gas, our President is more concerned with racial politics than with the gas companies destroying the country's drinking water supply.
It's buried a bit in a bullet, but a company was finally willing to say it clearly and publicly, "In addition, the financial impact of cumulative regulation is especially challenging to a small plant in these market conditions."
As a Vermont Yankee employee for over 30 years, I have had the privilege of working with a highly motivated and committed staff. As a licensed operator, system engineer, quality assurance auditor and now an instructor, these positions have enabled me to see the scope of the dedication that has enabled the site to achieve an impressive capacity factor and several breaker to breaker runs. The diligence to safety and operational excellence will be its legacy and the hallmark of these achievements is due to the dedication of the 600 employees which must now deal with a life changing experience.
