Entergy and Consumers Energy announced on December 8 that they have agreed to an early termination in 2018 of their power purchase agreement (PPA) for the Palisades Power Plant – reducing the costs to Consumers’ customers by as much as $172 million over four years.
Originally, the PPA was intended to last through 2022.
Specifically, the transaction is expected to result in $344 million in savings – $172 million of which will reduce Consumers Energy customers’ costs over the early termination period from 2018 to 2022; and $172 million of which Consumers Energy will pay to Entergy for early PPA termination.
According to Entergy, “The early termination payment to Entergy will help assure the plant’s transition from operations to decommissioning, maintaining its commitment to meet US Nuclear Regulatory Commission requirements.”
The agreement also is subject to regulatory approval (Case No. U-18194) by the Michigan Public Service Commission (PSC). Separately, and assuming regulatory approvals are obtained for the PPA termination, Entergy intends to shut down the Palisades nuclear power plant permanently on October 1, 2018.
Entergy CEO Leo Denault commented, “We determined that a shutdown in 2018 is prudent when comparing the transaction to the business risks of continued operation.”
“We have a comprehensive plan to ensure ongoing reliability and affordability for our 1.8 million electric customers,” said Consumers Energy CEO Patti Poppe. That plan includes continued excellent power plant performance by Consumers Energy, robust waste-reducing energy efficiency programs, and adding more renewable energy and clean natural gas-fired generation to the company’s portfolio.
Since the power purchase contract began in 2007 as a condition of the sale of Palisades from Consumers Energy to Entergy, a number of things have changed. Entergy started to reduce its merchant footprint. At the same time, market conditions have changed and less expensive alternatives are now available to provide affordable power to the region.
Supporting southwest Michigan during this community transition process is a key focus for Consumers Energy. Accordingly, the utility said, Consumers Energy Foundation will contribute $2 million to support economic development and community transition initiatives, consulting with the Council of Michigan Foundations and local stakeholders. Separately, Entergy is committing $8 million, for a total of $10 million by the two companies.
“We’re committed to working with State and regional organizations to ensure the ongoing economic vibrancy of southwest Michigan,” said Poppe.
Consumers Energy plans to ask the Michigan Public Service Commission to approve the early termination of the PPA, effective May 31, 2018. CMS and Palisades will sign a new PPA under which the plant would continue to operate until Oct. 1, 2018. Entergy will notify the power grid operator, the Midcontinent Independent System Operator (MISO), as well as the NRC, of its intent to permanently shut down and decommission Palisades.