Palisades Power Purchase Agreement to End Early; Nuclear Plant to Close in 2018

What is the agreement reached by Entergy and Consumers Energy?

Entergy Corporation and Consumers Energy, Michigan’s largest utility, have agreed to an early termination of their power purchase agreement (PPA) for the Palisades Power Plant in Covert Township in 2018, lowering the costs to Consumers’ customers by as much as $172 million over four years. The agreement is subject to the Michigan Public Service Commission’s approval of an amendment request for early termination of the existing PPA.

The original PPA agreement committed Consumers Energy to purchase nearly all of the power that Palisades generates through April 2022. If the MPSC approves the amendment request, the PPA termination date will move to May 31, 2018, which will benefit customers and communities by lowering costs without diminishing electric reliability.

The transaction is expected to result in $344 million in savings, as much as $172 million of which is expected to lower Consumers Energy customers’ costs over the early termination period from 2018 to 2022, and $172 million of which will be paid to Entergy in 2018 when the PPA terminates early.

What does this mean for the future of Palisades’ operations?

Entergy plans permanently to shut down the Palisades Power Plant on Oct. 1, 2018. Assuming regulatory approval of Consumers’ request to terminate the PPA in 2018, Palisades is scheduled to be refueled in the spring of 2017 and continue operations through the end of the fuel cycle, then permanently shut down on Oct. 1, 2018.

We recognize the consequences of a Palisades shutdown for our approximately 600 employees who have run the plant safely and reliably, and for the surrounding community, and we will work closely with both to provide support during the transition.

What other regulatory, corporate or other approvals are required for the transaction to close? Is there anything that could prevent a close on this transaction?

The agreement is subject to the Michigan Public Service Commission’s approval of the amendment request for early termination of the PPA. Additionally, the Midcontinent Independent System Operator (MISO) will review whether Palisades’ shutdown could challenge electric reliability.

Why was the decision made to close Palisades ahead of schedule?

Given the financial challenges our merchant power business faces from sustained wholesale power price declines and other unfavorable market conditions, we have been evaluating our portfolio of assets and reviewing financial projections to determine their retention, sale or closure.

We determined that a shutdown in 2018 is prudent when comparing the transaction to the business risks of continued operation. An early shutdown is also consistent with our strategy to focus on the growth of our utility business while managing risk and reducing the footprint of our merchant power generation.

The plan regarding Palisades comes as Entergy is in the process of selling its decommissioning Vermont Yankee nuclear plant and its James A. Fitzpatrick nuclear plant in central New York State, has sold its Rhode Island gas-fired power plant and prepares to shut down and decommission its Pilgrim nuclear plant in Massachusetts.

The plant is the area's largest employer and taxpayer. Is Entergy responsible for minimizing the negative impact that closure would have on the local community? If so, what actions will be taken?

We recognize the significant positive role our employees play in the community and the impact the plant has on the local economy. To support the community during the transition, Entergy and the Consumers Energy Foundation will provide a total of $10 million over several years in community development funding for the Southwest Michigan region. The companies will consult with the Council of Michigan Foundations and local stakeholders as it relates to the distribution of these funds.

Of the $10 million, the Consumers Energy Foundation will contribute $2 million and Entergy $8 million. The process for reviewing requests for funds and distributing them will be announced later, with a focus on sustainable economic development that will broaden the community’s tax base.

Additionally, Consumers has committed to work closely with Entergy as part of its ongoing talent recruitment efforts and will consider potential placement of up to 180 appropriately skilled employees from Palisades into the utility’s workforce over time.

My organization would like to apply for an economic development grant. How do I do that?

The process for reviewing requests for funds and distributing them will be announced later. The program will focus on sustainable economic development that will help broaden the tax base in this community.

What will happen to employees? What steps are being taken to take care of your workers should the deal go through?

We expect to continue operations with approximately the same staffing levels until the plant is shut down, when we will transition into decommissioning. Entergy is committed to treating employees fairly throughout this process and will provide assistance to employees who want to relocate within Entergy or leave the company.

Consumers has committed to work closely with Entergy as part of its ongoing talent recruitment efforts and will consider potential placement of up to 180 appropriately skilled employees from Palisades into the utility’s workforce over time.

Palisades has an immensely talented, dedicated, and loyal workforce, and the plant is recognized as a top performer in the industry. We recognize that closing the plant on this schedule was certainly not the outcome employees had hoped for, but we have concluded that it is the appropriate action for us to take under the circumstances.

What impact will this deal have on reliability here in Michigan? MISO has forecast shortfalls and challenges in the region beginning in 2017. Will CMS (Consumers Energy) be building new generation to replace Palisades, and if so, will that be guaranteed as part of the deal to satisfy the state?

Consumers and Entergy will sign a new PPA under which Palisades would continue to operate through the end of the fuel cycle, including during the summer of 2018 to support peak power reliability. Further questions should be directed to Consumers Energy.

Tell me more about Palisades. How many employees are there? What type of reactor does the plant have?

Palisades is a single-unit pressurized water reactor manufactured by Combustion Engineering. It began commercial operation on Dec. 31, 1971, and it is currently licensed to operate through 2031. It produces 811 megawatts of electricity – enough to power approximately 800, 000 homes – and employs about 600 people.

How will you keep the required number of employees at Palisades through closure in order to operate safely?

We expect to continue operations with approximate current staffing levels until the plant is shut down, at which time we will transition into decommissioning.

Entergy will work with employees at Palisades to ensure appropriate levels of staffing remain in place to continue to operate the plant safely and in accordance with our strict licensing standards.

As we did at other plants that we have decided to close, we will be transparent and realistic with our employees and other stakeholders about the process we are going through and give our employees as much clarity as we can about how this process will impact them.

Are you worried about attrition and safely operating the plant?

Entergy will take appropriate steps to ensure trained and qualified personnel remain on the job to continue with safe and secure operations.

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 (spent fuel pool or dry cask storage), removing any residual radioactivity, and restoring the site, such as the removal of structures, and possible re-grading and reseeding of 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 continue to provide oversight both before and during the decommissioning process.

How long will the entire decommissioning process take?

It is premature to address that question. A detailed analysis for decommissioning, called the Post Shutdown Decommissioning Activities Report (PSDAR), will be done at the appropriate time. The PSDAR is a description of planned decommissioning activities, a schedule for accomplishing them, and an estimate of expected costs. The report is due to the NRC within two years after a permanent shutdown of the plant and is made available for public review.

Where can I obtain more information on decommissioning nuclear plants?

The NRC maintains frequently asked questions on nuclear plant decommissioning at this site: https://www.nrc.gov/waste/decommissioning/faq.html