The three most likely nuclear plants of Exelon (NYSE: EXC) to be retired in the near future are Quad Cities, Clinton and Ginna, with the relative success of efforts to sell their power being a major determining factor in their futures, said Exelon in its Feb. 10 annual Form 10-K report.
Said the Form 10-K: “On September 10, 2015, after considering the results of the recent PJM capacity auctions, Exelon and [its Exelon Generation subsidiary] decided to defer decisions about the future operations of its Quad Cities and Byron nuclear plants and will offer both plants in the 2019/2020 auction in May 2016. As a result of clearing the other PJM capacity auction in September 2015 for the 2017/2018 transitional capacity auction, Exelon and Generation will continue to operate its Quad Cities nuclear power plant through at least May 2018. The Byron plant is already obligated to operate through May 2019.
“On October 29, 2015, Exelon and Generation announced the deferral of any decision about the future operations of its Clinton nuclear plant and plans to bid the plant into the MISO capacity auction for the 2016-2017 planning year April 2016. This decision was driven by MISO’s acknowledgment of the need for market design changes to ensure long-term power system reliability in southern Illinois, the desire to provide Illinois policy makers with additional time to consider needed reforms as well as the potential long-term impact of EPA’s Clean Power Plan.
“Exelon and Generation previously committed to cease operation of the Oyster Creek nuclear plant by the end of 2019. Exelon and Generation have not made any decisions regarding potential nuclear plant closures at other sites at this time.”
In December 2010, Exelon announced that Exelon Generation will permanently cease generation operations at Oyster Creek (625 MW net) in New Jersey by Dec. 31, 2019.
As of Dec. 31, 2015, all three of Exelon Generation’s plants at the highest risk of early retirement (Quad Cities, Clinton, and Ginna) pass the Nuclear Regulatory Commission minimum funding test based on their current license lives, the Form 10-K noted. However, in the event of an early retirement just before their next individual refueling outages, it is estimated that Clinton and Ginna would no longer meet the NRC minimum funding requirements due to the earlier commencement of decommissioning activities and a shorter time period over which the Nuclear Decommissioning Trust Fund (NDTF) investments could appreciate in value. Quad Cities would also be at risk. However, the size of the guarantees are ultimately dependent on the decommissioning approach adopted at each site (i.e., DECON, Delayed DECON and SAFSTOR), the associated level of costs, and the decommissioning trust fund investment performance going forward.
Considering the three alternative decommissioning approaches available to Exelon Generation for each site, parental guarantees of up to $315 million, $260 million, and $65 million for Clinton, Ginna, and Quad Cities, respectively, could be required in order for each site to access its NDTF for radiological decommissioning costs.
The sizes of each plant are Ginna (288 MW net, Exelon 50% share), Quad Cities (1,403 MW net, Exelon 75% share) and Clinton (1,069 MW net, 100% ownership).
Exelon Generation has received, has applied for, or plans to seek, 20-year license renewals for all of its nuclear units. Generation has successfully secured 20-year operating license renewal extensions (i.e., extending the total license term to 60 years) for twenty-one of its nuclear units (including the two Salem units co-owned by Generation, but operated by PSEG and Braidwood Units 1 and 2 for which the NRC approved the renewed license on Jan. 27, 2016). None of Generation’s previous applications for an operating license extension has been denied. The 20-year license renewal for Oyster Creek nuclear unit was obtained in 2009, however, operations will cease by the end of 2019.
For its remaining three operating units, Generation is in various stages of the process of pursuing similar extensions and has filed license renewal applications for two operating nuclear units and has until 2021 to seek license renewal for one remaining operating nuclear unit.
Ginna has gone through life extension proceedings at New York PSC and FERC
Ginna Nuclear Power Plant’s longstanding fixed-price power purchase agreement (PPA) with Rochester Gas & Electric (RG&E) expired in June 2014. In light of the expiration of the PPA and prevailing market conditions, in January 2014, Ginna advised the New York Public Service Commission (NYPSC) and the New York ISO that, in the absence of a reliability need, Ginna management would make a recommendation, subject to approval by the Constellation Energy Nuclear Group (CENG) board, that the Ginna plant be retired as soon as practicable. A formal study conducted by the ISO-NY and RG&E dated May 2014 concluded that Ginna needs to remain in operation to maintain the reliability of the transmission grid in the Rochester region through September 2018 when planned transmission system upgrades undertaken by RG&E are expected to be completed.
In November 2014, in response to a petition filed by Ginna, the NYPSC directed Ginna and RG&E to negotiate a Reliability Support Services Agreement (RSSA). In February 2015, regulatory filings, including RSSA terms negotiated between Ginna and RG&E, to support the continued operation of Ginna for reliability purposes were made with the NYPSC and with the FERC for their approval. Although the RSSA contract is still subject to such regulatory approvals, on April 1, 2015, Ginna began delivering the power and capacity from the Ginna plant into the ISO-NY consistent with the technical provisions of the proposed RSSA contract.
In April 2015, the Federal Energy Regulatory Commission issued an order which directed Ginna to make a compliance filing to ensure that the RSSA does not allow Ginna to receive revenues above its full cost of service and which rejected any extension of the RSSA beyond its initial term; rather the order required that any extension be subject to the rules currently being developed by the ISO-NY. In response to the FERC’s April 2015 order, in May 2015, Ginna submitted a compliance filing to the FERC containing proposed revisions to the RSSA addressing the FERC’s requirements and maintaining the April 1, 2015, proposed effective date. In July 2015, the FERC accepted Ginna’s compliance filing effective April 1, 2015. The FERC accepted Ginna’s proposal for market revenue sharing subject to a cap effective April 1, 2015, and rejected requests for rehearing by intervenors on a number of matters related to jurisdiction, the reliability need, the RSSA term, and possible price suppression.
In August 2015, Ginna reached a settlement in principle with intervenors modifying certain terms and conditions in the original agreement. The proposed RSSA under the settlement preserves the value of the contract originally negotiated with RG&E, but shortens the term from 3.5 to 2 years, expiring March 31, 2017, and required RG&E to complete a new transmission reliability study to determine whether an interim reliability solution is required beyond March 31, 2017. That reliability study was completed in October 2015, and it identified certain RG&E projects that are needed to solve reliability problems that would be caused by an early retirement of Ginna.
Under the settlement agreement, Ginna was required by Dec. 29, 2015, to submit a bid to provide reliability services beginning April 1, 2017, until the necessary RG&E transmission upgrades are in service, which RG&E expects will be no later than Oct. 31, 2017. Ginna submitted such a bid in December 2015. RG&E has the right until June 30, 2016, to select Ginna as an ongoing reliability solution. If such a need exists, and if Ginna is selected, Ginna and RG&E could enter into an additional RSSA commencing April 1, 2017, on the rates, terms and conditions set forth in Ginna’s bid, or as might be otherwise agreed by Ginna and RG&E.
If RG&E seeks a reliability solution with Ginna, but RG&E and Ginna do not reach an agreement on a new RSSA by March 31, 2016 (or by June 30, 2016 if RG&E elects to defer the decision date), the settlement agreement requires Ginna to file an unexecuted additional RSSA with the FERC for adjudication. If Ginna is not selected for continued reliability service and does not plan to retire shortly after the expiration of the RSSA, Ginna is required to file a notice to that effect with the NYPSC no later than Sept. 30, 2016. Under the terms of the proposed RSSA, if RG&E does not select Ginna to provide reliability service after March 31, 2017, and Ginna continues to operate after June 14, 2017, Ginna would be required to make certain refund payments related to capital expenditures to RG&E.
The August 2015 settlement was filed at the NYPSC and at the FERC in October 2015 and remains subject to review and approval by both agencies. Exelon said both reviews are not expected to be completed until the first quarter of 2016. While the RSSA is expected to receive regulatory approvals and, therefore, permit Ginna to continue operating through the RSSA term, there is still a risk that, for economic reasons, including the possibility that the FERC or the NYPSC may condition the approval of the RSSA on a modification of the rates set forth in the RSSA, Ginna could be retired before 2029, which is the end of its operating license period.
Exelon Generation has ownership interests in fourteen nuclear generating stations currently in service, consisting of 24 units with an aggregate of 19,460 MW of capacity. It wholly owns all of its nuclear stations, except for Quad Cities (75% ownership), Peach Bottom Generating Station (50% ownership), and Salem Generating Station (42.59% ownership). In addition, Generation owns a 50.01% interest, collectively, in the Constellation Energy Nuclear Group stations, which are Calvert Cliffs, Nine Mile Point (excluding LIPA’s 18% ownership interest in Nine Mile Point Unit 2) and R.E. Ginna. Its partner in CENG is EDF out of France.