UBS expects deal to secure economic life of Ginna nuclear plant

UBS Global Research Electric Utilities Analyst Julien Dumoulin-Smith expects that a new ‘Reliability Support Services Agreement’ (RSSA) will go a long way toward extending the economic life of the R.E. Ginna nuclear plant, located in New York State.

The R.E. Ginna Nuclear Power Plant LLC affiliate of Exelon (NYSE: EXC) on Feb. 13 filed the proposed agreement with both the Federal Energy Regulatory Commission (FERC) and the New York State Public Service Commission.

Ginna saw a long-term power contract expire in 2014, leaving it subject to low open market power prices. The nuclear plant has been trying to work out a reliability deal with local utility Rochester Gas and Electric (RG&E) that would keep the plant operating for the next few years for grid reliability needs.

Ginna is a roughly 600-MW pressurized water reactor (PWR) located in Wayne County, N.Y.

Nuclear proponents have said that single-unit merchant reactors like Ginna have been having a difficult time making money given the current state of deregulated markets geared more toward natural gas generation.

Looking at the proposed RSSA, “we find the plant as able to largely make up its projected ~$30-40 Mn/yr FCF deficit from New York market prices,” the UBS analyst said in a Feb. 20 assessment.

“The deal signed between RG&E and EXC is still pending before both the NYPSC and FERC, but is highly likely to be approved seeing the PSC’s historic support for nuclear generation (particularly through the transition to a carbon scheme and given its regional reliability needs prior to a transmission fix anticipated in 2019),” said Dumoulin-Smith.

“We are unsure if the plant is long for this world without support from future 111(d) regulations,” proposed through the Environmental Protection Agency’s Clean Power Plan, according to UBS. As things now stand, Ginna’s economic future is uncertain even if Regional Greenhouse Gas Initiative (RGGI) carbon prices should hit $8/ton in 2016.

In 2014, Exelon assumed operational control of five Northeast units, including Ginna, held by Constellation Energy Nuclear Group (CENG). The CENG units are jointly owned by Exelon and EDF Group. EDF has an option to sell its stake in the CENG units to Exelon at fair market value between 2016 and 2022.

UBS also considers the Clinton nuclear plant in Exelon’s Illinois fleet as another that is highly endangered. UBS expects to see Illinois lawmakers revise that state’s renewable portfolio standard (RPS) into a clean energy standard that would accommodate nuclear power, according to the commentary.

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.