By Russell Gold and Cassandra Sweet 

Utilities are closing U.S. nuclear-power plants at a rapid clip as they face competition from cheaper sources of electricity and political pressure from critics.

New York's Indian Point plant about 35 miles north of Manhattan, a major source of power for the city and its surrounding suburbs, is the latest casualty. Owner Entergy Corp. said Monday that it will close the facility as part of an agreement with the state of New York, whose governor, Andrew Cuomo, has long criticized the plant as a safety threat.

Its closure would bring the tally of plants set to close by 2025 to four, including PG&E Corp.'s Diablo Canyon plant in California and Entergy's Palisades unit in Michigan. Four others have already closed in the past four years, including Dominion Resources Inc.'s Kewaunee plant in Wisconsin.

The retirements are poised to leave 61 nuclear plants in the U.S. by the middle of the next decade. That includes two facilities that are building new reactors. A small number of nuclear plants have closed in the past because of safety concerns or the need for expensive repairs. What's new is the number of plants closing that are licensed and operational, but no longer profitable in competitive markets.

Nuclear plants everywhere are facing a powerful economic foe: fracking. The extraction technique has unlocked vast amounts of natural gas, making generating electricity from that fuel much less expensive and lowering power prices across the U.S.

Entergy cited competition from natural gas as a key factor in the closure of Indian Point on Monday, disclosing that it will recognize a $2.4 billion pretax impairment charge in connection with the closure of the plant's remaining units.

"Record low gas prices, due primarily to supply from the Marcellus Shale formation, have driven down power prices by about 45%, or by about $36 per megawatt-hour, over the last 10 years, to a record low," said Bill Mohl, president of Entergy Wholesale Commodities. That reduced annual revenues by about $160 million for power plants such as Indian Point, he added.

Despite making the decision to close the facility, Mr. Mohl worried that if the country loses too many nuclear plants, the result could be relying too much on natural gas. "We know that with natural gas, at some point, there will be price movements," he said.

Nuclear plants generated 20% of U.S. power in the past 12 months, following natural gas at 35% and coal at 30%, according to federal energy data. The remaining balance was 7% hydro, 6% wind and 1% solar.

The increasingly poor economics of nuclear power have led nuclear-plant operators in New York, Illinois and elsewhere to seek new state subsidies to keep the plants operating. The owners argue that they create high-paying jobs in rural areas, and are critical tools to combat air pollution and climate change because they produce emissions-free electricity.

Lawmakers in Connecticut, Ohio and Pennsylvania are expected to face tough choices in the next couple of years: Approve rate increases or other changes to bolster the finances of nuclear plants, or prepare for them to close.

Exelon Corp., the largest U.S. nuclear-power-plant operator, has succeeded in persuading states to provide new financial incentives to keep its nuclear-power plants open.

Last month, Illinois lawmakers voted to allow Exelon to collect as much as $235 million annually from customers in exchange for keeping two nuclear-power plants open. Earlier in 2016, the New York Public Service Commission agreed to pay as much as $480 million annually to keep three upstate nuclear plants open. Exelon operates two of the three, and has a deal to purchase the third from Entergy, pending federal approval.

Joe Dominguez, Exelon's executive vice president for public policy, said states were paying for clean electricity, similar to how the federal government subsidizes wind and solar energy. Nuclear power "is the cheapest and most reliable zero-carbon resource," he said.

FirstEnergy Corp. said recently that it could close three plants in Ohio and Pennsylvania if it couldn't arrange better compensation for the power they provide.

A FirstEnergy spokeswoman said the company had watched the Illinois legislation closely and hoped to negotiate something similar.

Kristine Hartman, who tracks energy laws for the National Conference of State Legislatures, said she expects Arizona, New Jersey and New Mexico to consider modifying laws that encourage wind and solar to include nuclear as a power source free of greenhouse-gas emissions.

Without more support, "you will continue to see plants that are challenged," said Maria G. Korsnick, the president and chief executive of the Nuclear Energy Institute, an industry advocacy group.

An analysis by the U.S. Energy Information Administration found that when nuclear plants were closed, states raised their use of natural gas and coal to generate power.

Jessica Lovering, director of the energy program at the Breakthrough Institute, an environmental think tank, said a modern gas plant can have just a dozen employees, while nuclear plants need upward of 1,000.

But those large workforces are proving to be a political selling point as owners argue to state legislators that nuclear-power plants have great economic importance in rural areas. All five nuclear-power plants receiving new subsidies in Illinois and New York are located in rural areas.

Still, the deals have been controversial. "I am pronuclear power, but I am not pro-bailing nuclear out," said Jeanne Ives, a Republican state representative from Wheaton, Ill.

In New York, the deal brokered by Mr. Cuomo, a Democrat, to keep three upstate nuclear-power plants alive has been met by protests against what activists claim is a nuclear tax.

The new subsidies have also riled up independent power producers, which claim that nuclear operators are being given an unfair advantage.

Dynegy Inc. and NRG Energy Inc., which operate coal- and natural-gas-fired power plants, are suing New York regulators to reverse their decision to provide what they estimate could be more than $7 billion in subsidies to nuclear plants.

Bob Flexon, chief executive of Houston-based Dynegy, said he hopes the Trump administration will set a national energy policy that allows for a level playing field. "Someone needs to let them know that you're killing coal if you throw billion-dollar subsidies to nuclear," Mr. Flexon said.

--Mike Vilensky contributed to this article.

Write to Russell Gold at russell.gold@wsj.com and Cassandra Sweet at cassandra.sweet@wsj.com

 

(END) Dow Jones Newswires

January 09, 2017 11:43 ET (16:43 GMT)

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