News

“Fight over Indian Point may have just begun” by Allan Drury

Entergy Corp. is threatening a flurry of lawsuits against any government agencies that play a role in closing the nuclear reactors at Indian Point, but legal experts have doubts about whether the suits would succeed.

Entergy and its shareholders may absorb billions of dollars in losses if environmentalists, political leaders and worried residents persuade regulators to decommission the reactors in Buchanan, legal experts say.

In addition, a permanent closing of the reactors would reverberate on Wall Street, as investors would lose even more confidence in the already-battered energy sector, especially companies that own nuclear plants, an analyst says.

The wholesale price of electricity in the New York City region, which includes Westchester, would increase up to 100 percent on days of peak demand, state officials say. On other days, the increases would be smaller, but consumers would still feel a pinch.

The U.S. Nuclear Regulatory Commission has never shut a nuclear plant permanently, meaning there is no precedent to determine whether Entergy would receive compensation, how investors would react or what else might happen.

NRC spokesman Neil Sheehan says regulators have seen nothing that indicates Indian Point should be closed. Sheehan says the agency would have to find that a plant posed an extreme and uncorrectable danger to terminate an operator’s license and order a plant decommissioned.

“It’s a pretty high bar,” Sheehan says.

The NRC hasn’t ordered a temporary shutdown since March 1987 when the Peach Bottom Nuclear Power Plant in Delta, Pa., had to close because control-room operators were sleeping on the job.

Entergy and advocates for the nuclear industry would surely wage a furious legal battle to prevent the government from closing Indian Point 2 and Indian Point 3, the two active reactors at the site.

Calls for closing

But a recent consultant’s report that says Indian Point emergency evacuation plans are inadequate has intensified calls for the plants to close permanently.

The $804,000 study, which was commissioned by Gov. George Pataki and prepared by a firm headed by James Lee Witt, the former director of the Federal Emergency Management Agency, say the public would face unacceptable levels of radiation in the event of a terrorist attack or other disaster at Indian Point.

Entergy has defended the evacuation plans and noted that the report did not say it is in violation of its NRC license. But three county executives, including Rockland’s C. Scott Vanderhoef and Westchester’s Andrew Spano, say they will not certify that the evacuation plans are adequate.

The State Emergency Management Office has until the end of this month to notify FEMA that adequate evacuation plans exist. Without that notification, Indian Point would be in violation of its NRC license.

The company has maintained it believes that there is virtually no chance of the NRC closing Indian Point. Company officials say they are confident that Entergy would win huge judgments if the government forced a permanent closing.

Compensation battle

Lawyers who specialize in energy law and property rights, however, are less sure. They say courts generally provide governmental agencies wide latitude to exercise oversight of private industry, especially when public safety is at issue.

“I would think they (Entergy) probably would have no claim against the government,” says David Stahl, a Chicago lawyer who has represented energy companies and practiced before the NRC. “There is an aura about the federal government that it has an almost absolute right to regulate for public safety and health.”

The so-called takings clause of the Fifth Amendment of the U.S. Constitution requires the government to compensate parties that lose their property to government seizure or, in some cases, the ability to use their property the way they want.

But Stahl says the takings clause “has much less weight” when regulators halt a business to protect public safety.

Entergy says if opponents force a permanent closing, the company will sue for money it paid to acquire the plants, the hundreds of millions of dollars it has put into improvements and the profits the company and its shareholders expected the plant to yield in the future.

Larry Gottlieb, a spokesman for Entergy in White Plains, says the New Orleans-based company does not have a specific figure in mind, but the number would be in “the billions and billions and billions of dollars.”

The company paid $502 million to buy Indian Point 2 from Consolidated Edison Inc. in 2001 and $967 million to buy Indian Point 3 and the James A. FitzPatrick plant near Oswego from the New York Power Authority in 2000.

“There’s a long list of items you would look at” when trying to determine compensation, Gottlieb says. “We’ve invested hundreds of millions of dollars back into the plants and you’re denying shareholders future earnings. Guys a lot smarter than us would sit down and come up with a number.”

In November, when Spano proposed buying the plants and replacing them with natural-gas fired generators at a cost of about $3 billion, an Entergy official says Spano had underestimated the cost of buying the plant by “several-fold.”

Some may point to the costs of the Shoreham Nuclear Power Station as a guide for what Entergy would get for Indian Point.

The Long Island Lighting Co. fought for 25 years to generate nuclear power on Brookhaven’s north shore. The $5.5 billion plant was decommissioned in 1994, five years after Gov. Mario Cuomo and the utility reached agreement to dismantle it. The plant never operated commercially.

The loss was absorbed by the utility’s investors, electricity customers and federal taxpayers.

Gottlieb said the comparison is invalid.

“I’m sure all sides would put forth compensation models saying what the company should be paid,” Gottlieb says. “But I tell you the dollar figures put forth for Shoreham would be nothing close to what this would be. That was not even a working reactor.”

But sending a swarm of lawyers to the courthouse to file lawsuits does not guarantee success. To prevail, Entergy would have to show that the government shut the plants even though the company did nothing wrong, says Robert Temple, a Chicago lawyer who specializes in energy law.

The current evacuation plan was approved just last year. The company could argue that no factors within its control have changed since then, Temple says.

“The government would have to find something is wrong, but is it the fault of Entergy that the population density in the area has increased, for example?” Temple says.

The Indian Point license expires in 2014, but Entergy says it plans to file for a 20-year extension. The NRC generally issues licenses to nuclear operators for long periods of time to allow them to recover the costs of building, buying and running plants.

Blow to investors

Since the downfall of Enron Corp., investors have been wary of putting money in energy stocks. Energy companies have also had trouble getting financing to build plants and for other purposes.

Paul Larson, an energy analyst who follows Entergy for Morningstar Inc., says if the NRC ordered a nuclear plant permanently shut, investors would have even less confidence in energy stocks.

“When you have core assets that are threatened and can be shut at a moment’s notice, I think that’s going to raise the ire of investors,” he says. “It’s not like the energy industry hasn’t been shaken up enough and now you add this.”

A closing would also be a blow to Entergy’s strategy of increasing its profits by expanding its nuclear operation. The company generally depends on its nuclear division for about 20 percent of its profits.

Along with the three plants in New York, the company has purchased the Vermont Yankee plant in Vernon, Vt., and the Pilgrim Nuclear Station in Plymouth, Mass., in the past several years.

The company owns 10 nuclear plants at eight sites. It does not report profit numbers for each site in its Securities and Exchange Commission filings. But none of the other sites produce as much electricity as Indian Point.

The twin reactors combined are able to produce about 1,950 megawatts when operating at full power. A megawatt can provide electricity to about 1,000 homes, meaning the Indian Point plants can provide juice for nearly 2 million households.

Enough energy?

The state already has a tight energy supply and taking Indian Point out of commission would make the shortage worse, says Steve Sullivan, a spokesman for the New York Independent System Operator, which monitors the wholesale power market.

Sullivan says the NYISO is neutral on the question of whether Indian Point should stay in operation, but believes that it is important to point out what effect closure would have on the power supply.

The state barely has enough supply to meet its needs on peak demand days during summer heat waves, he says.

Sullivan says the NYISO ran studies to figure out how much the wholesale price of electricity would rise if the Indian Point plants were closed.

On a peak day, the wholesale price, which is what a consumer supplier such as Consolidated Edison Inc. pays a producer such as Entergy, would double for the New York City region, he says.

On an average day, the wholesale price in the New York City region would rise 25 percent.

Figuring precisely how much of a rise customers would see in their bills is difficult because a host of complicated factors would be involved. But the state Public Commission said in a July 1 report that Con Edison customers who used 250 kilowatts paid $50.91.

About $24.43 of that was for the supply of electricity, with the rest of the bill being for distribution, transmission, taxes and other fees.

A 25 percent increase would add $6.10 to the bill.

Reliability also would be an issue, Sullivan says.

The reserves the state has now should keep outages from happening more than once a decade, he says. If New York imported electricity from New England to make up for lost power, it would mean an outage on average every five years, he says.

“A lot of people say you can shut these units down and there will be no impact,” Sullivan says. “That’s not the case. There’s going to be a significant impact on price and on reliability.”

This article originally appeared in the Journal News

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