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Entergy to shut Pilgrim nuclear power plant as early as 2017: exec

Washington — Entergy will permanently shut its 728-MW Pilgrim nuclear plant in Plymouth, Massachusetts, as early as the spring of 2017, because the unit is losing about $40 million annually with little chance that its economics will improve in the foreseeable future, a company executive said Tuesday.

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In addition, Entergy will announce by month's end whether it will shut its 849-MW FitzPatrick nuclear unit in Scriba, New York, that "is facing similar economic situations" as Pilgrim, William Mohl, president of the Entergy Wholesale Commodities business segment, told a briefing Tuesday.

Pilgrim began operating in 1972. Its license was renewed in 2012, allowing it to operate until 2032.

Pilgrim would become the second Entergy nuclear plant in New England to be permanently closed as a result of market conditions, following the retirement at the end of 2014 of the 635-MW Vermont Yankee station.

The exact timing of the closure depends on further discussions with the region's grid operator, ISO New England, and will be decided in the first half of 2016, Entergy said in a statement Tuesday. However, it said the plant will shut no later than June 1, 2019.

Low current and forecast power prices have "significantly impacted Pilgrim's revenues," Entergy said. Prices have declined about $10/MWh recently, representing a decline in revenue for the single-unit plant of $40 million/year, the company said.

During the briefing, Mohl said an evaluation of Pilgrim's operating costs and revenues begun earlier this year made it "clear" that "Pilgrim is simply no longer financially viable." He said the evaluation concluded the plant would sustain "losses of revenue of over $40 million annually" for the foreseeable future.

Mohl ascribed this financial outlook to ISO New England's "poor market structure, regional energy prices and increased operating costs." Citing low "natural gas prices driven by an abundance of shale gas," he said the "delivered price [of electricity] has dropped substantially" since the summer of 2014 "to below $10/MWh." This commonly is referred to as the energy price, versus the forward, capacity price.

Platts peak forward power prices at the Massachusetts electricity pricing hub have declined this year. Mass hub 2016 forward prices have fallen by more than 13% from January 2 to October 9, a drop of $8.25/MWh to $53.30/MWh.

Similar declines have taken place in forward Massachusetts hub power prices for delivery in 2017, 2018 and 2019, Platts data shows.

Mass hub peak 2019 prices had fallen to $48.90/MWh October 9 from $55.80/MWh January 2, a decline of 12.4%. Day-ahead prices in ISO-NE have also fallen compared with a year ago. Average monthly Platts day-ahead prices for Massachusetts in September were down 4.8% from September 2014.

In addition, Mohl chided the state of Massachusetts for proposing an energy policy that he said would provide economic incentives for the state's utilities to buy electricity generated by hydroelectric facilities in Canada.

Mohl said another factor in the company's decision to shut Pilgrim was the estimated cost of $45 million to $60 million that would be required to bring the plant into compliance with US Nuclear Regulatory Commission requirements to remediate issues that prompted NRC earlier this year to move Pilgrim to the agency's highest level of oversight -- short of forcing the plant to shut -- as a result of recent operational issues.

The Entergy executive said it will decide by the first half of 2016 whether to carry out refueling and maintenance at Pilgrim that is scheduled for the spring of 2017. If a decision is made not to refuel Pilgrim, Mohl said the unit would be permanently shut, decommissioned and placed in Safestor, which can last for up to 60 years. He did not specify when the unit would be shut if it is not refueled in 2017.

Should Pilgrim close before June 1, 2019, the date it provided to ISO New England late Monday, according to Mohl, he said Entergy would make arrangements to buy electricity to meet its commitments to the ISO.

Mohl said Entergy will announce by the end of October whether it will shut FitzPatrick, noting: "We've made it clear that this facility is in a similar situation, facing similar economic" and financial situations as Pilgrim.

Julien Dumoulin-Smith, a UBS analyst, said in a note Tuesday: "We see the Pilgrim plant retirement as a positive in so far as the company is closing" it, adding: "We suspect the company could well opt to retire the plant early (May, 2017), even if [it ends up] paying a premium to secure additional capacity."

In addition, he said, "we expect [Entergy] to announce a comparable decision around its Fitzpatrick unit in coming weeks. The question remains how Massachusetts will meet its own carbon goals alongside federal [Clean Power Plan] targets given the nuclear retirement. This lends additional credibility to large-scale transmission solutions, such as [Eversource Energy's] Northern Pass line."

--Jim Ostroff,
--William Freebairn,
--Edited by Keiron Greenhalgh,