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Spano: "Voluntary Retirement Plan" for Indian Point

June 14, 2005

Westchester County will aggressively pursue a two-pronged policy, including voluntary retirement, to see that the Indian Point plants are not relicensed, County Executive Andy Spano said today as he released a year-long study of the options for closing the plants and replacing their energy.

At a community meeting where Levitan & Associates presented its report, Spano said that the potential costs to taxpayers and ratepayers of condemning the plants made that option unrealistic and unwise.

Instead, he said, the county would expand its effort to see that the two nuclear reactors are not relicensed -- a “carrot and stick” approach where Entergy, the plants’ owner, would be offered incentives to build replacement power on-site instead of applying for license extensions, and where simultaneously the county would press the federal government to deny Entergy’s relicensing application.

“If we plan now, ratepayers, taxpayers and our economy will not be impacted. This is a pragmatic approach to our effort to protect the people of Westchester, but at the same time make sure that we have the energy that the region needs,” Spano said.

He added, “There are no quick solutions, but I call on Entergy to join me in this effort. It is not predestined that we should be adversaries in this matter. This report shows that if we work together, and partner with the state and federal governments, we can give Westchester residents the peace of mind they deserve after 9/11 and at the same time ensure we have affordable energy and that our local economy is protected.”

The current licenses for Indian Point 2 and 3 expire in 2013 and 2015 respectively. Although Entergy has not yet applied for license extension, the county expects it to do so and has been pressing the Nuclear Regulatory Commission (NRC) to adopt more stringent relicensing requirements – requirements that might preclude relicensing Indian Point.

Key members of the Board of Legislators joined Spano in accepting the Levitan report and pushing ahead.

"It's clear we have alternatives to nuclear power,” said Board Chairman Bill Ryan. “We need to identify and start implementing the best option. Converting to another fuel source will be a long and complicated process but the safety and security of our people requires that we begin making this change now. Any change needs to happen in a way where we continue to have the electricity we need with minimal economic impact to our workers, schools and the surrounding communities."

Legislator Michael Kaplowitz said, “The results of the Levitan Study are timely, in that we are at a critical phase in our fight to close, decommission and convert the Indian Point site from nuclear to natural gas or an alternative source of fuel. As the series of Board Resolutions have stated, particularly in Resolution No. 142-2002 which was passed by the Board unanimously, we need a comprehensive plan in order to be able to replace the power, jobs and taxes that Indian Point currently provides. The findings of the Levitan Study will be a key resource in that plan. I would like to thank the County Executive and the county’s Utility Agency for their partnership in this effort.”

Levitan & Associates, a Boston-based management consulting firm with vast experience in the power and fuel industries, was hired last year by the county and its Public Utility Agency. The study, paid for with funds from the utility agency with no impact on the tax levy, cost $385,000.

In April, Spano vowed he would do everything possible to prevent the relicensing of the nuclear plants. As a first step, he petitioned the NRC to broaden the criteria it uses when it acts on relicensing applications.

Current relicensing guidelines for nuclear plants allow the NRC to consider only issues such as the age of the power plants and the effect of aging on plant safety. Other issues such as local demographics, siting, and the ability to conduct an effective emergency evacuation are excluded from consideration in renewal decisions. In his petition and testimony to the NRC, Spano argued that the criteria must be broadened to protect the public.

“We insist that the NRC consider the current difficulties and realities if an emergency evacuation were to take place in a dense, congested population center with limited roadways, even though the area was not as developed when the facility was first constructed. If they do as we insist, there is no way Indian Point can be relicensed,”

Spano will continue to challenge relicensing with the NRC, but he will also pursue the parallel path of “voluntary retirement.”

The Case for Voluntary Retirement

Levitan & Associates evaluated a scenario in which the county, the state, Entergy and other stakeholders would negotiate a consensual agreement to retire Indian Point voluntarily. Under this scenario, Entergy would not submit applications for relicensing, and would work with the county, the state and other stakeholders to arrive at an acceptable solution.

According to Levitan, there are several reasons why Entergy might be willing to consider this alternative:

• In order to continue operating beyond the term of the existing licenses, Entergy would have to replace its once-through cooling system with a closed-cycle system that would protect millions of fish. The estimated cost of that conversion and other repairs or improvements, required by the state Department of Environmental Conservation, would be about $1 billion.

• In addition to avoiding the cost of building cooling towers, Entergy could avoid the estimated nine-month shutdown to convert to the closed-cycle system and the performance penalties that cooling towers would impose.

• If the NRC refuses to relicense Indian Point, Entergy would not be entitled to any financial compensation.

• If Entergy voluntarily retires the plants and does not construct the cooling towers, the site could accommodate a gas-fired combined cycle plant. Although Levitan could not determine the maximum size plant that could be located on the site, it may be possible to replace all of the Indian Point capacity.

Levitan believes these factors provide a window of opportunity for the parties to negotiate a consensual agreement that could accomplish three goals: allow Entergy to continue operating Indian Point through the end of the existing licenses, develop on-site replacement generation that would maintain many of the local economic benefits, and assure power system reliability for state ratepayers.

An additional benefit to the county would be that it would no longer have to spend in excess of $4.4 million in security costs associated with protecting the public and for the planning, technology and training associated with the emergency response plan.

If an agreement were reached by Dec. 31, 2010, Entergy and other developers would have three to five years to replace Indian Point nuclear power -- sufficient lead time to construct replacement generation and maintain system reliability.

The Indian Point site has many advantages for a gas-fired replacement plant, including a transmission pathway to downstate markets and a nearby interstate gas pipeline. In fact, Entergy had proposed building a gas-fired plant at the site three years ago, but later dropped those plans.

Said Spano, “I am calling on Entergy to meet with me to discuss these issues. A cooperative approach would be better for the company, its shareholders, and the residents of Westchester. I am calling on the Governor, and all our other federal, state and local officials to join us in getting a cooperative effort underway. But at the same time Entergy should understand we are serious about our effort to change the NRC’s relicensing guidelines if Entergy is unwilling to work with us,” he said.

The Case Against Condemnation

When Levitan was hired, one of its directives was to determine whether it was financially and legally possible for the county and/or state to acquire Indian Point through condemnation. The consultants concluded that condemnation was not a good strategy for the following reasons:

• Entergy would be entitled to just and reasonable compensation. The consultants estimate this value at about $1.8-2.7 billion, assuming a Jan. 1, 2008 acquisition and retirement date. Entergy most certainly would argue the compensation should be even greater, with the likelihood that the price would get settled by the courts.

• The county would become responsible for plant decommissioning as well as storage and disposal of existing spent nuclear fuel. Although existing decommissioning funds should be sufficient to pay for some of those activities, decommissioning requires specialized skills and resources. Levitan projected an additional cost of $240 million associated with disposal of spent nuclear fuel.

• Condemnation would hasten a drop in property tax payments, employment, local spending on goods and services, and other economic impacts. While employment and local spending impacts would not be felt immediately as decommissioning and spent fuel activities continued, the loss of property tax payments would hurt local communities unless replacement generation was built on the site.

Background on Levitan & Associates, Inc.

Levitan & Associates, Inc. (LAI) is a management consulting firm that specializes in the energy industry. Founded in 1989, its clients have included many utilities, end-users, and agencies throughout the Northeast, as well as the New York Independent System Operator (NYISO), ISO-New England, and the Pennsylvania-New Jersey – Maryland Interconnection (PJM).

LAI’s staff of experts prepare fuel cost and power price forecasts, evaluate project feasibility, model pipeline network deliverability and electric transmission system flows, assist customers with self-generation options, recommend fuel supply / storage / transportation strategies, recommend competitive market design improvements, and provide financial assessments to investors and financial institutions. LAI was assisted by a subcontractor, WPI, in this assignment. WPI is an energy consulting firm with specialized expertise in nuclear decommissioning and spent fuel management.

The full report will be posted on the web at: www.westchestergov.com



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