US Entergy to continue operation of Palisades beyond 2018

2 October 2017

US Entergy Corporation announced on 28 September that it had reversed its decision to close the Palisades nuclear power plant in Michigan in 2018. The plant will now operate under an existing power purchase agreement (PPA) with Consumers Energy until the spring of 2022. The December 2016 decision to close the single-unit 798MWe pressurised water reactor plant was based on the early termination of the PPA, which had been due to expire in 2022.

Both the decision to close the reactor and the cessation of the PPA were awaiting regulatory approvals. On 22 September, the Michigan Public Service Commission approved Consumers Energy's request for early termination of the PPA, but granted it recovery of only $136.6m of the $172m it had requested for the buyout.  In light of the commission's decision, the two parties agreed to terminate the buyout transaction.  Palisades site vice president Charlie Arnone said Entergy would continue to "make all necessary investments and maintain appropriate staffing" at the plant in accordance with licensing standards.

Palisades, built by Consumers Energy, was connected to the grid in December 1971 and Entergy purchased the plant in 2007 for $380m. This included $242m for the plant, $83m for nuclear fuel stocks and $55m for other assets such as spare parts. Entergy also signed the PPA committing it to selling back the plant's output to Consumers Energy until April 2022.

By December 2016 the two companies had decided the remaining cost of the Palisades PPA exceeded the projected costs of purchasing energy on the market and decided to terminate the PPA in 2018, with Consumers Energy compensating Entergy for the early termination. Entergy decided to shut down Palisades in October 2018 having calculated that closure would result in expected savings of $344m between 2018 and 2022.

Palisades, the smallest of Michigan's three operating nuclear plants, is licensed to operate until 2031. The others Michigan plants are American Electric Power’s two-unit DC Cook plant and DTE Energy's single-unit Fermi 2, operated by Detroit Edison.

Entergy, which operates ten reactors in seven states, is committed to exiting the merchant nuclear power business. However, the short-term nature of deregulated electricity markets, coupled with competition from low-cost gas and federally subsidised wind power, have put some well-performing US nuclear plants at risk of premature closure for economic reasons.  “Market conditions have changed substantially, and more economic alternatives are now available to provide reliable power to the region,” Entergy had said when it announced its decision to close Palisades.

Photo: Palisades nuclear plant will continue operating until spring 2022 (Source: Entergy)

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