Entergy and Consumers Energy, Michigan's largest utility, recently agreed to an early termination of their power purchase agreement (PPA) for the Palisades Power Plant in Covert Township, Michigan. Assuming regulatory approvals are obtained for the PPA termination, Entergy intends to shut down the Palisades nuclear power plant permanently on Oct. 1, 2018.
"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 Leo Denault, Entergy's chairman and chief executive officer. "We determined that a shutdown in 2018 is prudent when comparing the transaction to the business risks of continued operation."
The original agreement committed Consumers Energy to purchase nearly all of the power that Palisades generates through April 2022. Under the current plan, and assuming regulatory approval of the request to terminate the PPA in 2018, Palisades will be refueled as scheduled in the spring of 2017 and operate through the end of the fuel cycle, then permanently shut down on Oct. 1, 2018.
The transaction is expected to result in $344 million in savings, $172 million of which is expected to lower 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. The early termination payment to Entergy will help assure the plant's transition from operations to decommissioning.
To support the community during the transition, Entergy and the Consumers Energy Foundation will provide $10 million over several years in economic development funding for the southwest Michigan region. The companies will consult with the Council of Michigan Foundations and local stakeholders as it relates to the distribution of these funds.
"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."
As a result of the agreement to terminate the PPA and its intention to shut down the plant, Entergy will recognize a non-cash impairment charge of approximately $390 million ($252 million after-tax) in the fourth quarter of 2016. In addition to the impairment charge, through the end of 2018 Entergy expects to record additional charges totaling approximately $55 million related to severance and employee retention costs.
The Palisades Power Plant, which began generating electricity in 1971, produces 811 megawatts of virtually carbon-free electricity, enough to power more than 800,000 homes.
For more information, visit www.entergy.com.
