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Exelon to shut Nine Mile Point-1, Ginna reactors if New York fails to OK compensation plan

Exelon Generation told the New York State Public Service Commission thecompany needs to know by September whether the regulator will approve acompensation plan for nuclear generators, otherwise Exelon will shut the NineMile Point-1 and Ginna reactors, according to a letter.

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The letter, filed Tuesday by the Harris Beach law firm of Albany, NewYork, on Exelon's behalf, noted the company in May submitted comments on aproposal that would require all companies that sell electricity in the stateto buy power from upstate nuclear plants at potentially above-market rates tohelp ensure the units' continued operation.

The proposal by the state Department of Public Service stipulatesExelon's 597-MW Ginna reactor in Ontario, New York, and the 640-MW Nine MilePoint-1 and 1,205-MW Nine Mile Point-2 units in Oswego, as well as Entergy's849-MW FitzPatrick in Oswego, would be eligible to receive payments via azero-emissions credit, or ZEC, from state electricity retailers.

Exelon "must make critical business decisions by the end of September2016" in order to spend about $55 million on fuel to be fabricated for NineMile Point-1, which is slated to shut in March 2017 for refueling andmaintenance, Steven Wilson, an attorney with Harris Beach, said in the letter.Refueling at Nine Mile Point-2 was completed this spring.

The letter said Ginna must notify the PSC by September 30 whether it willcontinue to operate, noting this is the deadline for such notification under areliability support services agreement (RSSA).

The US Federal Energy Regulatory Commission in March conditionallyapproved a contested settlement agreement that will Ginna operating throughMarch 2017.

RSSAs are power purchase agreements used to address local reliabilityissues, and are similar to reliability-must-run contracts in otherjurisdictions.

The ZEC is not a credit, but payment to a nuclear power operator for eachmegawatt hour of electricity purchased by a distributor or generator who alsosell into the wholesale or retail markets, according to a January white paperthe Department of Public Service issued when it issued the proposed plan.

Although specifics will be set by the PSC, all companies that sellelectricity in New York state, whether generators or distribution-onlyutilities, but excluding companies that exclusively operate nuclear units,will be required to buy a specific number of ZECs annually, the paper says.

The ZEC is an offtake agreement for the purchase of power to ensure thecontinued operation of an electricity generator. The ZEC sets a price topurchase power that may be above prevailing rates in order to providefinancial support to a power generator, according to the paper.

--Jim Ostroff, james.ostroff@spglobal.com--Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com