Entergy Corp. (NYSE: ETR) described in its Nov. 4 quarterly Form 10-Q report how it is convincing the Louisiana Public Service Commission (LPSC) that its Entergy Louisiana (ELL) subsidiary was justified in shutting this year two aging, gas-fired steam units at the Willow Glen power plant.
“As a term of the LPSC-approved settlement authorizing the purchase of Power Blocks 3 and 4 of the Union Power Station, Entergy Louisiana agreed to make a filing with the LPSC to review its decisions to deactivate Ninemile 3 and Willow Glen 2 and 4 and its decision to retire Little Gypsy 1,” Entergy reported. “In January 2016, Entergy Louisiana made its compliance filing with the LPSC. Entergy Louisiana, LPSC staff, and intervenors participated in a technical conference in March 2016 where Entergy Louisiana presented information on its deactivation/retirement decisions for these four units in addition to information on the current deactivation decisions for the ten-year planning horizon. Parties have requested further proceedings on the prudence of Entergy Louisiana’s decision to deactivate Willow Glen 2 and 4. This matter is pending before an ALJ, and a hearing has been scheduled in March 2017 to determine, under applicable law, whether Willow Glen 2 and 4 units should be returned to service.”
The administrative law judge (ALJ) handling the case on Sept. 9 agreed to drop Ninemile 3 and Little Gypsy 1 from this case following a status conference held the prior day among the parties. “The attending parties explained that the Stipulated Settlement Term Sheet executed in Docket No. U-33510 only requires a determination of the prudence of the retirement or deactivation decisions for Little Gypsy Unit 1, Ninemile Unit 3, and Willow Glen Units 2 and 4 if a party disputes those decisions,” the ALJ wrote. “The attending parties further explained that no party has expressed objection to ELL’s decision to retire Little Gypsy Unit 1 and deactivate Ninemile Unit 3, and that deactivation or retirement of a generation resource does not require prior Commission approval. Accordingly, the attending parties suggested to the tribunal that consideration of ELL’s decision to retire Little Gypsy Unit 1 and deactivate Ninemile Unit 3 should be removed from the scope of the docket, so as to permit ELL to commence the retirement/deactivation procedures for those units.”
In Sept. 30 testimony in this case, John P. Hurstell, employed by Entergy Services as Vice President, System Planning, explained the decision to deactivate Willow Glen Units 2 and 4 (WG 2&4), which he said represented a lower cost option for customers than maintaining these units as operational through 2027. Hurstell wrote that in November 2015 the deactivation assumptions for WG 2&4 changed to 2016 to reflect the Entergy Operating Committee’s decision to deactivate those units effective June 2016.
Willow Glen Unit 2 (WG 2) is a 179-MW (installed capacity or “ICAP”) unit that has operated over 50 years, and Willow Glen Unit 4 (WG 4) is a 483-MW (ICAP) unit that has operated over 40 years. As of 2008, the deactivation date assumptions for WG 2&4 were for 2017. A Plant Condition Assessment completed by an independent engineering in 2010 estimated that WG 2&4 would, at that time, require an investment of approximately $60 million and $50 million, respectively, (excluding investment in common facilities) to continue to operate those units another 10 years. That feasibility study identified both critical and non-critical repair and replacement items, and has served as a general baseline for budgeting and to provide cost estimates to support periodic analysis of the economics of continued investment in WG 2&4.
By 2015, that detailed assessment of projected spending determined that the condition of each unit would require significant spending over the next three years to keep the two units in service through 2027. Given this new spending projection, the company undertook a new analysis, which indicated that deactivation in 2017 was more economic by $270 million to $400 million as compared to the program designed to sustain them through 2027, and that deactivation in 2016 could avoid an additional $27 million in capital and operations and maintenance costs. Based on this analysis, the Entergy Operating Committee approved deactivation effective June 1, 2016, and submission of an Attachment Y Notice to the Midcontinent ISO.
W. Dale Claudel, employed by Entergy Services as Vice President of Power Plant Operations-Louisiana within Fossil Operations, noted in companion Sept. 30 testimony: “Legacy steam units, like WG 2&4, utilize the Rankine thermodynamic cycle to convert heat into mechanical work, which in turn drives an electrical generator. By contrast. CCGTs utilize the Rankine cycle as a ‘bottoming’ cycle to recover energy from the exhaust of a gas combustion turbine (Brayton thermodynamic cycle), which would otherwise go unused, to perform work and further increase efficiency. As a result, the efficiencies of modern CCGT plants are much higher than that of legacy steam plants. ELL’s nine legacy steam units have been in service for several decades and subject to routine wear and tear across many years of operation. Their advanced ages. along with the 1960’s and 1970’s technologies they employ, suggest that most of these units are candidates for further assessment, [reliability/sustainability] programs, or deactivation.”
Notable is that Entergy Louisiana is currently before the commission for approval of two combined cycle gas turbine (CCGT) projects:
- Entergy Louisiana applied Nov. 2 at the Louisiana commission for approval of the construction of the Lake Charles Power Station (LCPS), a nominal 994-MW CCGT facility in Westlake, Louisiana. Entergy Louisiana said in that application that it has a substantial overall long-term need for base load and core load-following generation capacity. This need persists notwithstanding the completion of the Ninemile 6 CCGT facility, the acquisition of the gas-fired Union Power Station Power Blocks 3 and 4, and the anticipated construction of the proposed St. Charles Power Station. Without the future capacity additions reflected in ELL’s supply plan, the company would have a projected capacity deficit of over 2,400 MW in 2020. Assuming all of the other planned additions are made, without LCPS, ELL’s capacity deficit could nevertheless grow to more than 900 MW by 2020 and almost 1,900 MW by 2028.
- There is also a longer standing application for the St. Charles CCGT, 980 MW, with a Louisiana PSC decision expected in the fourth quarter of this year.