By Michael Mariotte

Exelon's Ginna reactor, on Lake Ontario. Photo from IAEA.

Exelon’s Ginna reactor, on Lake Ontario. Photo from IAEA. Are my eyes deceiving me or is the containment building housed in a Potemkin structure?

Exelon has successfully convinced the New York Public Service Commission to take its side on the fate of the Ginna reactor–so far. The PSC ordered Rochester Gas & Electric, which had been buying power from the reactor, to engage in a new round of negotiations to continue purchasing its electricity–at least for the next four years or so.

A 10-year power purchase agreement between RG&E and Exelon expired this past summer, and Exelon has warned it may shut down Ginna if it can’t get another guaranteed purchase agreement. The PSC is concerned that a shutdown could lead to reliability problems in the region. The problem is that Exelon (in this case its subsidiary Constellation Energy) says it lost $100 million in the last three years of the old contract. That means any new agreement inevitably would lead to large rate increases for RG&E customers.

As explained in the Poughkeepsie Journal, under New York law, “If a power plant is losing money and planning to shut down, it files a notice with the Public Service Commission alerting the board of its intention. From there, it’s determined whether taking the plant off the grid will result in blackouts or service issues for customers in a particular region.”

But Exelon stopped short of actually declaring its “intention” to close Ginna, and certainly did not mention a date at which it would close the reactor if it doesn’t reach a new agreement.

Now, the Journal has revealed that in August New York City filed strong comments against Exelon’s approach:

New York City strongly opposed the state board’s eventual move. In its August filing, the city warned that allowing Ginna’s request could give power plants the upper hand over Consolidated Edison, the major electric utility downstate, and eventually lead to costlier bills. The city questioned why electric utilities haven’t done more to prepare for the closure of the aging plants — specifically citing Cayuga and Dunkirk — and took issue with Ginna failing to cite a specific closure date if an agreement isn’t approved.

“In New York City, it is possible that the loss of any baseload generating facility could cause a reliability problem,” the city’s filing said. “Thus, any New York City generator could hold (Con Ed), the commission, and New York City ratepayers hostage to threats of retirement without publicly stating any intention to retire and without the commission knowing whether the threat is real.”

The Cayuga and Dunkirk plants mentioned were cited as precedent by Exelon and the PSC. Both were fossil fuel plants threatened with closure and kept open by similar power purchase arrangements.

But as NIRS’ Executive Director Tim Judson points out, those were much smaller deals. The Dunkirk agreement amounts to about an 80 cent/month rate increase over ten years. The Cayuga agreement is bigger: it’s a $53/year increase, but only for about two and a half years. To cover Ginna’s stated losses would take a lot more–Judson calculates it would come out to about $216/year per customer for four years–or about four times higher than Cayuga over a longer period.

And that means the battle isn’t over, and Exelon hasn’t won. New York City’s opposition is based on its concern that a mere threat to shut down Indian Point would itself be enough to cause monstrous rate increases for downstate customers (of course, the PSC should be encouraging shutdowns of aging reactors like Ginna and Indian Point….). The PSC has rejected NYC’s position so far, but it hasn’t fully endorsed Exelon’s yet either.

According to the Journal, “The commission still will have to approve any agreement reached. RG&E also is soliciting proposals to potentially replace the 580 megawatts the plant can produce, which could give the PSC other options to consider before making a determination.”

New York City isn’t likely to back off its opposition; neither are the dozen or so clean energy and consumer groups that are opposing the PSC’s position.

So the battle lines are set. RGE and Exelon have until January 15 to reach an agreement (although the deadline could be extended). At this point, it’s difficult to see how an agreement could be reached that would both cover Exelon’s losses and keep rate increases to a level that wouldn’t provoke howls of outrage across the region.

Michael Mariotte

November 24, 2014


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Filed under: aging reactors, Nuclear Economics Tagged: Exelon, Ginna, Indian Point, New York City, New York Public Service Commission

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