Market Conditions Doom Another Nuclear Plant, Palisades, to Closure in 2018

Entergy Corp. has decided to permanently close the Palisades nuclear power plant on October 1, 2018.

The news comes as a bit of a surprise, because Entergy had a power purchase agreement with Consumers Energy-Michigan's largest utility and the principal subsidiary of CMS Energy-which committed the company to buying nearly all of the power generated at Palisades through April 2022.

Late last year, however, UBS utilities analyst Julien Dumoulin-Smith suggested that the contract appeared to be potentially break-even or under water. Terminating the deal early was presumably the best option for both companies.

In a press release, Entergy said Consumers' customers would save as much as $172 million over four years, even after paying Entergy $172 million to terminate the contract. The early termination payment is expected to "help assure the plant's transition from operations to decommissioning."

The 798-MW plant located about five miles south of South Haven, Mich., faced economic difficulties similar to other single-unit facilities, such as the recently closed Fort Calhoun Plant, and the R.E. Ginna, Nine Mile Point, FitzPatrick, and Clinton plants, which only remained viable after subsidies were approved in New York and Illinois. Entergy said, "market conditions have changed substantially, and more economic alternatives are now available to provide reliable power to the region."

"Entergy recognizes the consequences of a Palisades shutdown for our approximately 600 employees who have run the plant safely and reliably, and for the surrounding community, and we will work closely with both to provide support during the transition," said Entergy Chairman and CEO Leo Denault. "We determined that a shutdown in 2018 is prudent when comparing the transaction to the business risks of continued operation."

Assuming regulatory approval of the deal, Entergy plans to refuel the Palisades reactor, as scheduled, in the spring of 2017. It would then operate the unit through the end of that 18-month fuel cycle, and permanently shut down the plant in late 2018.

Entergy plans to provide $8 million in economic development funding for the Southwest Michigan region to help support the community through the transition. The Consumers Energy Foundation intends to contribute $2 million toward the cause. The companies expect to consult with the Council of Michigan Foundations and local stakeholders as part of the process of distributing the funding.

"Entergy is committed to treating our employees fairly throughout this process and will assist employees who want to relocate within Entergy or leave the company," said Bill Mohl, president of Entergy Wholesale Commodities, a business unit within Entergy. "Additionally, Consumers Energy has committed to work closely with Entergy as part of its ongoing talent recruitment efforts and will consider potential placement of up to 180 appropriately skilled employees from Palisades into the utility's workforce over time."

-Aaron Larson, associate editor (@AaronL_Power, @POWERmagazine)

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