FERC approves sale of FitzPatrick nuclear plant to Exelon

The Federal Energy Regulatory Commission on Dec. 7 approved an Aug. 19 application by Entergy Nuclear FitzPatrick LLC and Exelon Generation Co. LLC for approval of a transaction in which Entergy FitzPatrick will sell, and Exelon Generation will purchase, the James A. FitzPatrick Nuclear Power Plant in New York.

Entergy FitzPatrick is an Exempt Wholesale Generator that has been granted market-based rate authority by the commission. It is the owner of the FitzPatrick Facility, which is located within the balancing authority area operated by the New York Independent System Operator (NYISO) and has a generating capacity of approximately 837 MW (summer rating). Entergy FitzPatrick is a wholly owned, indirect subsidiary of Entergy Corp. (NYSE: ETR).

Exelon Generation’s affiliates own or control approximately 2,300 MW of generation in NYISO, including:

  • Nine Mile Point Nuclear Station LLC. Nine Mile is an indirect, wholly owned subsidiary of Constellation Energy Nuclear Group LLC, a joint venture between Exelon and EDF Inc. Nine Mile owns 100% of an approximately 637 MW unit, and an 82% share of an approximately 1,287 MW unit. Nine Mile sells all of the energy produced by its nuclear facility to Exelon Generation and EDF Trading North America LLC under long-term firm agreements that remain in effect through the complete and permanent cessation of power generation by the facility. Each of Exelon Generation and EDF Trading receives approximately 50% of the energy output of Nine Mile’s nuclear facility under its respective agreement.
  • R.E. Ginna Nuclear Power Plant LLC. Ginna is an indirect, wholly owned subsidiary of Constellation Nuclear and owns an approximately 582-MW nuclear facility located in NYISO. The commission has granted Ginna market-based rate authority and Ginna has entered into a Reliability and Support Services Agreement (RSS Agreement) with Rochester Gas and Electric that ends on March 31, 2017. Under the RSS Agreement, the electric energy and capacity from the Ginna Facility must be offered into the NYISO market. Following the expiration of the agreement, Ginna will sell all of the energy produced by the facility to Exelon Generation and EDF Trading under long-term firm agreements that will remain in effect through the complete and permanent cessation of power generation by the Ginna Facility. Each of Exelon Generation and EDF Trading will receive approximately 50% of the energy output of the Ginna Facility under its respective agreement.

Under an Asset Purchase Agreement, Entergy FitzPatrick will sell, and Exelon Generation will purchase, the FitzPatrick assets. Following consummation of this transaction, Exelon Generation will wholly own and operate the FitzPatrick assets, including the FitzPatrick Facility, and will sell capacity, energy and ancillary services from the FitzPatrick Facility to wholesale customers under its existing market-based rate authority.

Exelon Generation is part of Exelon Corp. (NYSE: EXC).

FERC rejected Public Citizen attempt to pull New York’s ZEC prorgram into this docket

The applicants told FERC that, if this transaction is not consummated, “Entergy FitzPatrick expects to proceed with its plans to close the [FitzPatrick Facility] in early 2017 or, if the [FitzPatrick Facility] has been refueled, at a later date.” As part of the terms of the transaction, the parties have agreed that Exelon Generation will incur certain net costs and liabilities associated with the re-fueling and operation of the FitzPatrick Facility prior to the transaction being consummated, or, if the FitzPatrick Facility is refueled but the transaction is not consummated, until a later date when the FitzPatrick Facility is retired.

Public Citizen protested any FERC approval of this transaction, arguing that the application is incomplete because it fails to incorporate any analysis of the state of New York’s Zero Emission Credit program (ZEC Program). According to Public Citizen, the ZEC Program, which will apply to the FitzPatrick Facility, will distort the NYISO energy and capacity markets and alter the economics of Exelon Generation’s operations in NYISO, including the economics of the FitzPatrick Facility.

The ZEC program is designed to protect upstate New York nuclear plants from low power market prices, allowing them to remain part of New York’s plans to reduce greenhouse gas emissions from the power sector.

Public Citizen also claimed that the structure of the ZEC Program may conflict with elements of the NYISO’s commission-approved tariff, in particular the commission’s mandate for incentives through the NYISO installed capacity market. Public Citizen requested that the commission consider the application incomplete, require the applicants to perform a market power analysis that incorporates the full market impact of the ZEC Program, and examine, as part of this docket, whether the ZEC Program conforms to the commission’s rules and regulations.

The applicants argued that the issues raised by Public Citizen are unrelated to the commission’s evaluation of this transaction under Federal Power Act section 203 and should be dismissed as outside the scope of this proceeding. According to the applicants, the commission has confined the scope of review under FPA section 203 to whether a transaction is consistent with the public interest, which the commission evaluates by analyzing the effect of a proposed transaction on competition, rates, and regulation, and whether a transaction will result in cross-subsidization concerns.

Said FERC’s Dec. 7 decision: “We will dismiss Public Citizen’s protest of the Proposed Transaction because the issues Public Citizen raises concern the ZEC Program rather than the effects of the Proposed Transaction on competition, rates, regulation or cross-subsidization. Under FPA section 203, the Commission must approve a proposed transaction where it finds that the proposed transaction will be consistent with the public interest and will not result in cross-subsidization.

“In evaluating a proposed transaction, the Commission focuses on whether the transaction will have an adverse impact on competition, rates, or regulation, or whether it will result in cross-subsidization, to determine if the transaction is consistent with the public interest. Public Citizen, however, focuses on the potential effects of the ZEC Program on the NYISO market rather than the effects of the Proposed Transaction. Accordingly, Public Citizen’s concerns are not relevant to the Commission’s analysis of the Proposed Transaction under FPA section 203 and we find that they are not properly raised in this proceeding. As the Commission has found, issues unrelated to the Commission’s consideration of a proposed transaction under FPA section 203 should be addressed in other proceedings or forums. Moreover, Applicants have demonstrated that the Proposed Transaction will not have an adverse impact on competition, and Public Citizen has not demonstrated otherwise or adequately supported the claim that the Application remains incomplete.”

Incidentally, the New York State Public Service Commission on Nov. 17 announced its approval of this sale. The transfer of this nuclear plant will facilitate the continued operation of the “carbon-neutral” plant as a bridge to a renewable energy future without the need for imported fossil fuels such as fracked gas and oil from out of state or for the restarting of coal plants to supply energy demand from across the state, said the commission.

The PSC added: “Today’s action also better enables the State to reach its 40 percent by 2030 carbon reduction goals and supports the Clean Energy Standard, the most comprehensive and ambitious plan in the state’s history to fight climate change, reduce harmful air pollution, and ensure a diverse and reliable energy supply at affordable prices for all New Yorkers.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.