Entergy, Vermont settle over capacity auction issues

Parties that include subsidiaries of Entergy (NYSE: ETR), the state of Vermont and ISO New England (ISO NE) have filed a proposed settlement with the Federal Energy Regulatory Commission (FERC) regarding a forward capacity auction (FCA).

The proposed deal is meant to resolve issues surrounding Entergy’s bid submitted for the Vermont Yankee nuclear plant in the fifth forward capacity auction held by ISO NE to procure capacity for June 2014 through May 2015 period.

Entergy submitted a “dynamic de-list bid” on behalf of Vermont Yankee at a price ($4.278/kW-month) which was below the 0.8 times Cost of New Entry (CONE) ($4.279/kW-month) threshold for submission of a dynamic de-list bid, according to the settlement document dated Sept. 14.

Under the auction structure, a capacity resource that submits a de-list bid that clears in the auction will not be assigned a capacity supply obligation for the applicable capacity commitment period unless ISO-NE rejects the resource’s de-list bid for reliability reasons. Entergy’s FCA 5 de-list bid for Vermont Yankee cleared the auction based on price but was rejected by ISO-NE for reliability reasons.

On Aug. 11, 2011, the Vermont Department of Public Service filed a protest, challenging Entergy’s de-list bid price as unjust and unreasonable under Section 205 and requesting that the commission either set the price Entergy would be paid for Vermont Yankee capacity at the capacity clearing price of $2.855/kW-month (supply prorated), or, in the alternative, set the issue of the just and reasonable price for hearing.

The Massachusetts Attorney General filed a pleading in August 2011 that supported the Vermont position.

But the Entergy subsidiaries filed an answer, arguing that compensation at the de-list bid level was justified by certain financial risks Entergy claimed Vermont Yankee faced if it were not allowed to operate.

Entergy and Vermont Yankee argued that if these risks were eliminated, they could accept compensation at the non-prorated floor price of $3.209/kW-month. ISO-NE also filed an answer to the protests, stating that Entergy’s bid complied with the tariff but taking no position with respect to the appropriate compensation level for Vermont Yankee.

Vermont and Entergy continue to be at odds over operation of Vermont Yankee. Vermont has refused to issue the nuclear plant a new certificate of public good even though NRC has issued Vermont Yankee a renewed operating license that would allow it to run until March 2032.

The “settling agreement” spells out how Vermont Yankee would be treated under four possible scenarios.

The case involves ISO New England Inc., Docket No. ER11-3891-000.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.