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Mich. regulators initiate proceeding to evaluate Palisades nuke closure

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Mich. regulators initiate proceeding to evaluate Palisades nuke closure

The Michigan Public Service Commission has requested information from Consumers Energy Co. on its decision to end early its power purchase contract with Entergy Corp.'s Palisades nuclear plant.

The PSC, in a Dec. 20 order, requested nine items, some of which focused on replacement generation. The three-person commission directed Consumers Energy to describe any alternatives considered to ending the power purchase agreement in 2018 for the output of the 811-MW plant, operated by Entergy Nuclear Inc. It was originally set to expire April 11, 2022. In early December, Consumers and Entergy said they were ending the PPA early and that Entergy would shut down the plant.

Consumers said at the time there were cheaper sources of electricity available to it. The PSC asked the company to detail the costs of new energy and capacity resources that might replace the Palisades output. The commission asked for backing behind the $344 million in savings, to be split equally between Consumers and Entergy, expected to be realized by replacing the Palisades output with other sources. PSC spokeswoman Judy Palnau confirmed the order is directed only to Consumers Energy. Consumers was also ordered to explain the bid process it plans to use to procure replacement capacity and whether any certificate of need permit requests are planned for the 2017-2022 period.

Furthermore, the PSC sought information on any regional electric grid impacts and implications to the state's emissions of NOx, SO2 and carbon dioxide from the early termination of the PPA, commissioners said in the order. Entergy plans to shut the plant down by Oct. 1, 2018, when its fueling cycle ends. The Palisades plant began operating in 1971 and Entergy acquired it in 2007.

In its order, the PSC said this request will provide the "initial information" that the commission needs to begin evaluating Consumers' termination of the PPA, but that the information will also be part of a "holistic plan" that includes "detailed analysis of the impact on reliability, customer costs, and the environment."

The request comes as the PSC has repeatedly voiced "concerns related to resource adequacy in the near to medium term, and the loss of this generation without immediate sufficient and reliable replacement sources would introduce additional uncertainty to the state's energy picture." The PSC in July released an analysis showing that the state's Lower Peninsula, known as Zone 7 in the Midcontinent Independent System Operator Inc.-controlled grid, could be short supply to meet local reliability requirements by 2017.

The "complexities of operating and decommissioning nuclear plants warrant additional considerations when making a decision as critical as a closure compared to other types of generation, such as the storage of spent nuclear fuel and ongoing care of the site," the PSC added. It ordered Consumers Energy to analyze the amount of trust funds needed to pay for the decommissioning and decades-long monitoring of the Palisades site.

The PSC ordered Consumers Energy to provide the information as "expeditiously as possible" in part because the agency has strict deadlines to meet with regard to the review of a $172 million buyout payment that Consumers plans to make to Entergy in exchange for the early termination of the PPA. The CMS Energy Corp. subsidiary opted for a securitization proceeding to get commission approval of the buyout payment, which it plans to recover through rates, but the 90-day proceeding does not give the PSC enough time to gather the information it needs to make a decision. In order to determine if the buyout payment is an appropriate amount, the PSC would need to make the "prerequisite determination of whether the broader plan for replacement of Palisades is reasonable and prudent and in the best interest of ratepayers," the PSC said in the order. (PSC Case No. U-18218).