The R.E. Ginna Nuclear Power Plant LLC affiliate of Exelon (NYSE: EXC) filed with the Federal Energy Regulatory Commission on Feb. 13 what could be a life saving agreement for its nuclear plant in New York State.
R.E. Ginna had opened a proceeding last year at the New York State Public Service Commission 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. Several critics have already slammed this prospective deal, saying the plant should survive (or not) on the open market.
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.”
The cover letter added: “RG&E has undertaken a transmission project known as the Rochester Area Reliability Project (“RARP”) in part to address the potential for a long-term outage at the Ginna Facility. Although the RARP is not expected to wholly solve the reliability problems caused by Ginna’s retirement, it is expected to provide incremental reliability value that should make it easier for RG&E to find additional solutions to bridge the remaining gap. RG&E has also indicated that it has identified a transmission solution set, the “Ginna Retirement Transmission Alternative,” that would allow for the permanent retirement of the Ginna Facility. Accordingly, the Agreement is structured so that it will only remain in place until there is a suitable reliability replacement. Specifically, under the Agreement, RG&E has the option to both terminate the contract early, in case more cost-effective solutions become available earlier than anticipated, or extend the term of the Agreement until March 31, 2020 if continued operation is necessary to maintain reliability notwithstanding development of the RARP and consideration of other alternatives.”
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.