The R.E. Ginna Nuclear Power Plant LLC affiliate of Exelon (NYSE: EXC) filed with the Federal Energy Regulatory Commission and the New York State Public Service Commission on Feb. 13 what could be a life saving agreement for its nuclear plant.
R.E. Ginna had opened a proceeding last year at the New York PSC where it said that due to the expiration in 2014 of a long-term power sales deal, its nuclear plant couldn’t survive on the low-priced New York power market. So it wanted to work out a reliability deal with local utility Rochester Gas and Electric that would keep the plant operating for the next few years for grid reliability needs. That is the agreement that was filed with FERC on Feb. 13.
Ginna is a 581-MW, single-unit pressurized water reactor located along the south shores of Lake Ontario, in Ontario, New York, approximately 20 miles northeast of Rochester, New York. In 2004, the Nuclear Regulatory Commission extended the facility’s license to operate to September 2029.
From 2004 until the expiration of a power purchase agreement (PPA) with RG&E on June 30, 2014, RG&E purchased 90% of the generation output of the Ginna Facility. Since the expiration of the RG&E PPA, the Ginna Facility has been operating as a fully merchant generator in the wholesale power market administered by the New York ISO.
Before the expiration of Ginna’s PPA with RG&E, management analyzed the Ginna Facility’s projected revenues from energy and capacity sales in the NYISO markets and determined that those revenues would not be sufficient to cover the cost of the Ginna Facility’s continued operation, including required new capital investments, the Feb. 13 filing noted. Accordingly, in January 2014, representatives of company management met with commissioners of the NYPSC, RG&E, and NYISO to discuss the revenue insufficiency determination and to notify them that, absent a confirmed reliability need and unless supported by an acceptable Reliability Support Services Agreement (RSSA), Ginna’s management would recommend that Ginna’s Board of Directors authorize the facility’s retirement as soon as practicable.
In February 2014, Ginna, RG&E, and the NYISO entered into a Reliability Study Agreement to perform the Ginna Reliability Study. The study, attached to the Feb. 13 filing as Attachment G, confirmed that operation of the Ginna Facility was needed through at least Sept. 30, 2018 to avoid any adverse impacts on electric system reliability. Specifically, the study found that for the system as modeled, the retirement of Ginna would result in bulk and non-bulk reliability criteria violations in years 2015 and 2018.
Said the cover letter on the Feb. 13 filing with FERC: “Pursuant to section 205 of the Federal Power Act [and FERC regulations], R.E. Ginna Nuclear Power Plant, LLC (“Ginna”) hereby submits the attached executed, cost-justified Reliability Support Services Agreement between Ginna and Rochester Gas and Electric Corporation (“RG&E”), to be designated as Ginna’s Electric Rate Schedule FERC No. 1 (“RSSA” or “Agreement”). Under the Agreement, Ginna will provide Reliability Support Service from Ginna’s R.E. Ginna Nuclear Power Plant (“Ginna Facility”) to RG&E at a cost-justified rate agreed to by the parties after lengthy pre-filing settlement negotiations. The RSSA is necessary to provide a just and reasonable rate to enable Ginna to cover its costs of continued operation over a period when Ginna is vitally needed to preserve reliability in the Rochester, New York region. It is critical that the Agreement be accepted expeditiously to provide Ginna with the revenue stream that it needs to cover its costs of operating the plant.”
Said the Feb. 13 filing with the PSC: “The term of the RSSA runs from the start of the hour ending 0100 EPT on April 1, 2015 and remains in effect through the hour ending 2400 EPT on September 30, 2018 (the “Initial Term”), thus matching the time period of the 2014 Reliability Study that establishes the reliability need for the Ginna Facility. While the RSSA has a term of three and a half years, RG&E may, in its sole discretion, terminate the contract prior to the expiration of the Initial Term. 20 Pursuant to Section 2.2(c) of the RSSA, RG&E can terminate the agreement by providing twelve months’ prior written notice and making a “Settlement Payment.” The RSSA also provides for the possibility of a “Necessary Extension” of the RSSA should the continued operation of the Ginna Facility be required for reliability purposes after the expiration of the Initial Term and any such extension shall be for a period of eighteen (18) months. Notice of a Necessary Extension shall be provided no later than January 31, 2017.”
The PSC filing also noted: “Section 4.3 of the RSSA also provides for the possibility that market conditions could change sufficiently such that GNPP may elect to stay operational after the expiration of the Agreement, in which case it would be appropriate for GNPP to repay RG&E customers for a portion of the RSSA costs.”
The filing with the PSC also said: “The RSSA is the result of lengthy and carefully considered negotiations between GNPP and RG&E. The RSSA contains concessions from both sides, and is intended to be treated as a package. The RSSA is cost-justified because the payments required by the agreement are within the range of just and reasonable outcomes and are significantly lower than GNPP’s claimed full cost of service, as demonstrated by the GNPP cost-of-service analysis filed at FERC. As indicated in its FERC filing, GNPP is willing to accept the lower rate in the interest of avoiding litigation and establishing a just and reasonable rate for reliability service in a timely manner. The RSSA is also narrowly tailored to address the reliability need identified in the 2014 Reliability Study. At the same time, it performs the essential function of such an RSSA agreement, in that it maintains reliability in the Rochester, New York area. Thus, the RSSA is just and reasonable, in the public interest and should be accepted by the Commission.”