On December 8, 2016, Entergy Nuclear and Consumers Energy announced a plan to terminate their 15-year power purchase agreement. Both companies agreed that the PPA negotiated in 2007, when Consumers sold Palisades to Entergy, should end in 2018 instead of 2022. Since Consumers is the plant’s only customer, this agreement is essentially a Palisades shutdown plan.
The closure, scheduled for October 2018, would come 13 years before expiration of the 20-year license renewal that the Nuclear Regulatory Commission granted Palisades in 2011.
But first, the Michigan Public Service Commission must decide whether to allow or to veto the Palisades shutdown plan. MPSC scheduled its first hearing in the matter for March 9 and told Consumers to publicize the hearing and invite people to attend and comment.
Shortly after Entergy and Consumers announced their Palisades shutdown plan, the Executive Committee of Sierra Club Southwest Michigan Group passed a Resolution supporting the plan. The resolution has been uploaded to MPSC’s online docket as a comment. Attorneys have filed petitions to participate in the case on behalf of six different clients. I’ve looked at the case’s documents online, and it appears that the issue at question is how Consumers will pay for the PPA buyout. (Disclaimer: I’m not fluent in legalese.)
On the morning of March 9, Becky Mandrell picked up Karen Schuur and me for the trip to the hearing in Lansing. Fifteen to twenty members of the public showed up, plus a dozen or more attorneys who were on hand to hash out a schedule and procedures for the case.
Comments from the public came before the attorneys’ conference. Mark Muhich and I presented the only comments from the public. Mark was there on behalf of Sierra Club Michigan Chapter’s Nuclear Free Michigan Committee. I spoke on behalf of Sierra Club Southwest Michigan Group.
I was called on first, but I’ll start with Mark’s comment.
Mark Muhich’s public comment
Michigan electricity customers pay the highest electricity rates of any Mid-west state, and some of the highest rates of any state in the U.S.; 15.28 cents/kilowatt hour (U.S. Energy Information Administration, 2016).
The nearly seventy-year-old promise of inexpensive clean nuclear energy has never been realized. Nuclear power remains one of the most expensive technologies for generating electricity. Even though the mature nuclear power industry has received and continues to receive hundreds of billions of dollars in governmental and rate payer subsidies, it relies on a business model dependent on government grants, huge loan guarantees, insurance indemnification, construction work in progress charges, and tariffs charged to its electricity customers (See Nuclear Power: Still Not Viable Without Subsidies, Union of Concerned Scientists, 2011).
The current application by Consumers Energy to securitize its buyout of the existing power purchase agreement between Consumers and ENTERGY, the owner and operator of Palisades NP, illustrates how the nuclear power industry transfers to the public the costs and risks of doing business, while retaining any economic gain for its investors.
The burden of early termination of the PPA should be carried by Consumers and ENTERGY and not by the electricity rate payers of Michigan.
Hopefully it is true that ending the PPA four years early will save Consumers’ electricity customers $170 million. That would also indicate that Michigan citizens are currently paying premium rates due to the PPA. The PPA itself is a regulatory benefit provided by the MPSC to Consumers and ENTERGY when Palisades was sold in 2007.
Without doubt Palisades should be decommissioned and dismantled as soon as possible. Palisades NP is one of the oldest and most embrittled reactors in the world. The decommissioning of Palisades will require at least a decade and probably $1 billion to accomplish.
If indeed the decommissioning funds for Palisades NP prove to be inadequate, then it will be incumbent on the Michigan Public Service Commission to resist further requests to pass along to the public these charges in the form of subsidies or additional tariffs. The same would hold for the enormous future cost incurred to secure high level nuclear wastes generated by nuclear reactors in Michigan.
Beyond the scope of this hearing though still illustrative of the failure of nuclear power to deliver on its economic promise, is MPSC’s own January 31, 2017 report, Michigan Capacity Resource Assessment, published in conjunction with the Michigan Agency for Energy. The report indicates that Michigan utilities could meet peak power demand in August 2018 by utilizing demand response programs while Palisades and FERMI 2 nuclear plants were off-line for sixteen weeks!
Being a resident of Jackson, corporate headquarters for Consumers Energy, I take personal pride and interest in the success of CMS. In the future, we would support the recovery of costs associated with energy efficiencies, demand reduction programs and wind and solar generation, and increasing the renewable portfolio standard (see Economic Potential for Peak Demand Reduction in Michigan, AEE Institute 2017). In the matter before the MPSC today, we cannot support, and recommend the MPSC deny, the request to shift onto the public costs associated with the Palisades PPA early termination.
My comments at the March 9 hearing in MPSC case U-18250 regarding the Palisades shutdown plan:
Thank you, Your Honor, MPSC Commissioners, and Consumers Energy officials, for issuing notice of this hearing and for providing the opportunity for any interested person to attend and participate, and for allowing any person wishing to appear at the hearing to make a statement of position.
My name is Bruce Brown. I am a Consumers customer who lives in Portage, Michigan. I am also a member of Sierra Club Southwest Michigan Group. I am here to speak on behalf of the Sierra Club. I will also speak on my own behalf.
After carefully considering the news that Consumers and Entergy had negotiated a termination of the power purchase agreement between Consumers and Palisades Nuclear Generating Station, and the news that Entergy planned to close Palisades, the Executive Committee of Sierra Club Southwest Michigan Group adopted a Resolution in the matter. Sierra Club Michigan Chapter has endorsed our local Group’s Resolution, as has the national organization. It is Sierra Club national policy that “the Sierra Club speaks with one voice.” The national Sierra Club, by endorsing the Resolution that its Southwest Michigan Group adopted, expresses its support for the PPA buyout plan and the closure of Palisades, as well as all other positions that our Resolution takes.
Our Resolution lists several reasons why we support the Palisades closure plan. The reason most germane to today’s hearing is Consumers’ assurance that terminating the PPA will lower electric rates for their customers without threatening availability or reliability.
As Consumers has continued to honor its agreement to buy all the electricity that Palisades can produce, only seven of the lower 48 states have had higher residential electric rates than Michigan’s. That’s been the case for quite some time now.
Nuclear safety is expensive. So is maintaining an aging nuclear plant. The price of Palisades electricity would only increase if the plant were to continue operating. Early last year, business analysts came to the conclusion that closing Palisades would be financially beneficial for both Entergy and Consumers – and for Consumers customers. If the plant were to continue to operate, either Palisades would be forced to lose money selling electricity to Consumers at prevailing market prices, or Consumers would have to overpay so that Palisades could afford to keep going. Our Resolution expresses our stance that neither option is acceptable.
Our Resolution also asks that local, state, and national officials and legislators not provide financial assistance such as subsidies, tax breaks, rate increases, or similar considerations that would be paid by Michigan taxpayers or utility customers, and which would eliminate the savings that Consumers promises as a result of cancelling its Palisades PPA.
Our Resolution lists several other justifications for our position favoring the closure of Palisades, including the need to stop creating and storing high-level nuclear waste on Lake Michigan’s shoreline and to eliminate the release of radioactive waste into Lake Michigan and into Southwest Michigan’s atmosphere. Our Resolution also recognizes the threat of disaster that every nuclear reactor poses, a threat that grows as a reactor ages.
The commitment on the part of Palisades workers who have kept us safe from this threat must be recognized and generously rewarded. This is an important part of our Resolution.
While these issues are not part of today’s deliberations, and perhaps are not within MPSC’s purview, we nevertheless hold that these are important considerations.
Now I would like to take this opportunity to speak on my own behalf.
I am baffled by the way case U-18218 ended. This was the original case that dealt with the PPA buyout plan and the closure of the Palisades plant. The case opened on December 20 with a news release and a list of questions for Consumers. On January 6, Consumers filed its response. On January 20, MPSC issued an 11-page document listing more questions for Consumers. This same document ordered the case closed. An MPSC news release on the same day said the Commission was asking Consumers for more information. The news release was less than uninformative. It did not mention that the case was closed, or that MPSC was opening a new case. In fact, the third paragraph of the news release wasn’t even a complete sentence. The paragraph says in full, and I quote:
“In its order today, the MPSC said that because it is seeking additional information from the utility addressing issues related to cost savings, electric reliability and resource adequacy and risk management.”
It was only accidentally that I learned of case U-18250 that is under consideration here today.
I would hope that in the future, MPSC’s consideration of the very important matter of the PPA buyout and Palisades closure plan will be more public, more informative, and more transparent.
In conclusion, and speaking again for the Sierra Club as well as for myself, we must face the fact that Palisades has a well documented history of issues. The plant’s inability to produce competitively priced electricity at a profit is not the least of its problems. Forcing the plant to keep operating would be a disservice to Entergy, to Consumers, to Consumers’ customers, and – most of all – to the Michigan public.
Thank you for providing today’s opportunity for public comment.
After speaking my piece, I gave the court recorder a copy of my comment and a copy of Sierra Club’s Resolution, and I passed out copies of the Resolution to nine more people who wanted one.
After our two comments…
Administrative Law Judge Sharon L. Feldman got the attorneys started on their scheduling-and-procedures project, then she left the room. She came back every so often to see if they had anything for her yet. Then she’d leave again. It took less than an hour of trying to follow the discussions among the attorneys, and watching Judge Feldman pop in and out, before audience members were milling about, talking, getting acquainted, and gradually drifting away. At about 10:30, Becky, Karen, and I left. For us, the hearing was two public comments and a lot of unintelligible legalese.
Mark later uploaded several documents that supported his comment to MPSC’s docket for the case. Some time after that, Judge Feldman uploaded a Scheduling Memo – proof that the attorneys succeeded with their project. If I’m reading the memo correctly, it appears that a public hearing remains to be scheduled. The memo doesn’t mention a public comment period.
Anyone can go to MPSC’s online docket and review everything that’s been filed in the case, except for a confidential document that Consumers filed on February 10.
Attorneys representing Entergy, Consumers, and the state Attorney General are involved in the case, plus three other law firms.
- Clark Hill PLC is representing the Association of Businesses Advocating Tariff Equity (ABATE), an industry alliance that includes the likes of General Motors, Marathon, AK Steel, Dow, Enbridge, and others – a total of 20 businesses.
- Olson, Bzdok & Howard is representing the Michigan Environmental Council (MEC), a coalition of 70 environmental groups, including Sierra Club Michigan Chapter.
- Public Law Resource Center PLLC is representing Residential Customer Group (RCG), an organization of Consumers Energy customers.