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Entergy to Close Vermont Plant; Will an Increase in Energy and Capacity Prices in NEPOOL Result?

August 27, 2013

Today, Entergy Corporation, an electric power producer and retail distributor, announced that it was closing its Vermont Yankee Nuclear Power Station in Vernon, Vermont. The station is expected to shutdown in the fourth quarter of 2014; in the meantime, the Nuclear Regulatory Commission (NRC) will monitor the station throughout the process of decommission in order to ensure it runs smoothly. The decommissioning procedure will also required significant labor from a large portion of Vermont Yankee’s roughly 600 employees.

Several factors led to the decision to close the station, including:

A natural gas market that has seen sustained low natural gas prices and wholesale energy prices in response to a paradigmatic shift in supply due to the impacts of shale gas.

A high cost structure for the plant. The company has reportedly invested more than $400 million in order to ensure that it runs safely and reliably.

Flaws in the design of the wholesale energy market continue to cause superficially low energy and capacity prices in the region. Additionally, they do not provide the necessary compensation to the fuel-diversity-providing merchant nuclear plants.

Making the decision now for a fourth quarter, 2014 shutdown expectation allows for plenty of time to close the plant in a safe and orderly fashion and compliance with the NRC. In order to ensure a responsible closing, Entergy will establish a decommissioning planning organization. Once shut down, workers will de-fuel the plant’s reactor and place it into safe storage (SAFSTOR), a process in which a nuclear facility is place and maintained in a way conducive to safe secure, monitor, and storage.

Vermont Yankee began commercial operation in 1972, and Entergy acquired it in 2002. As recent as March 2011, the NRC renewed the station’s operating license for twenty additional years until 2032.

The closure may result in a decrease in available capacity in the NEPOOL market, which would likely cause an increase in energy and capacity prices.