Nuclear operator seeks to end revenue deal with state
By New York Times
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The owner, Entergy Nuclear, is structuring a spinoff of its plants that the company claims would effectively end the agreement. State officials fear the plan could also free Entergy from several hundred million dollars in costs associated with the eventual decommissioning of the two Indian Point plants in Westchester County and the FitzPatrick plant in Oswego County. That could increase the risk that state taxpayers would have to one day foot the bill for closing the plants.
Details of EntergyÂ’s strategy were included in a lengthy securities filing issued this year in which the company laid out a plan to spin off nuclear plants in New York and elsewhere into a new company called Enexus. In a clause in one of its filings, Entergy claims that Enexus would not have to live up to a revenue sharing agreement between Entergy and New York. Under the agreement, the company is supposed to pay New York up to $72 million annually through 2014, and state officials had expected to receive the full amount.
Alex J. Schott, a spokesman for Entergy, said the spinoff “optimizes the value for all our stakeholders.”
As for the revenue sharing agreement, he said the state “was aware that Entergy was considering alternative structures for the nuclear business at the time the agreement was reached.”
“We remain hopeful that the spinoff will happen by the end of September,” he said.
Attorney General Andrew M. Cuomo said: “Entergy’s plan is ill conceived on a number of levels. It could ultimately cost taxpayers hundreds of millions of dollars, does nothing to guarantee adequate decontamination of the site, and does not anticipate a future New York without Indian Point.”
Under the agreement, the $432 million worth of revenue is to go to the State Power Authority, which provides low-cost electricity to businesses and municipalities and administers various programs like replacing coal furnaces in public schools and providing energy-efficient refrigerators to public housing residents.
The Federal Energy Regulatory Commission has already approved the spinoff, though the plan still needs the backing of the Nuclear Regulatory Commission as well as regulators in New York and Vermont, where Entergy owns an old reactor that it wants to include in the spinoff.
In New York, the proposal is working its way through the Public Service Commission, where it will eventually be voted on by the five commissioners.
Mr. CuomoÂ’s office has urged the commission to block the spinoff and hold public hearings, and lawyers representing the State Power Authority say they will battle Entergy in court, if necessary, to preserve the revenue sharing deal.
Opponents say the cost of decommissioning the plants in the future could be billions more than had been set aside, as required under federal law, and they worry that the new company — which would be significantly smaller in terms of revenue — may have too much debt.
“This is the kind of crystallized, focused corporate greed and irresponsibility that Entergy has perfected,” said Assemblyman Richard L. Brodsky, a Democrat from Westchester County who is a party to the Public Service Commission proceeding.
“They are mining the ratepayer and taxpayer for every penny they can and trying to evade their responsibilities,” Mr. Brodsky said.
Entergy officials say they have already set aside sufficient funds for decommissioning.
“Speculation by opponents of the spinoff concerning costs of decommissioning are not factually based and are misleading the public,” Mr. Schott said.
The terms of the revenue sharing deal said it would hold even if the plants were transferred to an Entergy affiliate. But company officials said that they are not creating a new affiliate but rather a new and independent company.
The state has feuded with Entergy over the revenue sharing deal in recent years and says the spinoff is simply the latest attempt by the company to avoid payment. In a letter last month, Max R. Shulman, a lawyer representing the State Power Authority, said the company’s claims that Enexus was not an affiliate were “wrong as a matter of law.”
Mr. Shulman contended, among other things, that the plants will actually be run by an entity called EquaGen, which will be a joint venture between Entergy and Enexus, and that all of EnexusÂ’s initial board members will be selected by Entergy.
Entergy officials, in letters and court filings, have rejected the state’s arguments and have said they were “in full compliance with all terms and conditions” of the agreement. They plan to spin off Enexus to their own shareholders, who could then sell or hold on to the new shares.
Christine Pritchard, a spokeswoman for the Power Authority, said it would fight Entergy in court if necessary.
“If the spinoff of Entergy’s nuclear plants is approved and, based upon the structure of the spinoff, Entergy then tries to evade its obligations under the value sharing agreements, N.Y.P.A. intends fully to protect its rights and challenge that unwarranted conduct in a court of law,” she said.
