Entergy Gives Palisades Nuclear Plant Five More Years to Run

Entergy Corp. will keep the Palisades nuclear power plant in Covert, Michigan, open until the spring of 2022, owing to a shortfall in recovery granted to Consumers Energy by state regulators.

In a bid to actively exit the merchant nuclear power business, investor-owned Entergy had decided to shutter the 798-MW plant by October 1, 2018.  “Market conditions have changed substantially, and more economic alternatives are now available to provide reliable power to the region,” it said when it announced its decision about a year ago. 

The decision came as a surprise because Entergy has a power purchase agreement with Consumers Energy—Michigan’s largest utility and the principal subsidiary of CMS Energy—which committed the company to buying nearly all the power generated at Palisades through April 2022. Entergy reasoned the plant’s closure could save Consumers’ customers as much as $172 million over four years, even after Consumers paid Entergy $172 million to terminate the contract.

On September 22, however, the Michigan Public Service Commission granted Consumers a recovery of only $136.6 million of the $172 million it requested for the buyout of the power purchase agreement.  That was the key reason Entergy and Consumers agreed to terminate the buyout transaction, said Charlie Arnone, Entergy’s site vice president at Palisades.

“We greatly appreciate the continued patience of our employees and the local community in Southwest Michigan throughout this regulatory process, and we will continue to focus on the plant’s safe and reliable operations,” Arnone added. “Entergy will continue to make all necessary investments and maintain appropriate staffing, in accordance with strict licensing standards.”

For Entergy, which employs 600 workers at Palisades, the decision is expected to be financially beneficial. “The impact of the decision on free cash flow is expected to be positive $100 million to $150 million compared to the [power purchase agreement] amendment with Consumers Energy,” it said.

In a statement on September 28, Consumers said the decision to terminate the buyout transaction was reached after “careful review.” It was the “best path forward,” it said.

 

—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)