ASSEMBLY STANDING COMMITTEE ON ENERGY
ASSEMBLYMAN KEVIN A. CAHILL, CHAIRMAN
ASSEMBLY STANDING COMMITTEE ON CORPORATIONS, AUTHORITIES AND COMMISSIONS
ASSEMBLYMAN JAMES F. BRENNAN, CHAIRMAN
JANUARY 12, 2012 PUBLIC HEARING
WRITTEN TESTIMONY OF T. MICHAEL TWOMEY ON BEHALF OF ENTERGY
Good morning/afternoon Chairman Cahill, Chairman Brennan, and the members of the New York State Assembly Committee on Energy and the Committee on Corporations, Authorities, and Commissions. My name is Mike Twomey and I am the Vice President for External Affairs for Entergy Wholesale Commodities, 440 Hamilton Avenue, White Plains, New York. I appreciate the opportunity to discuss Indian Point with you today. The facility plays a critical role in ensuring a safe, clean, reliable, and reasonably-priced electricity supply for New York City and the lower Hudson Valley.
My presentation today addresses four topics: first, some background information on Entergy and Indian Point; second, an overview of license renewal; third, the role of Indian Point in powering the region; and fourth, specific responses to the Committees’ inquiries relating to certain financial information and decommissioning plans.
Although we are focused on Indian Point today, I would like to place this discussion into a broader context. The 104 operating nuclear power plants in the U.S. generate approximately 20% of the electricity for our country. There are nuclear power plants near many major American cities, including Boston, Philadelphia, Pittsburgh, Chicago, Detroit, Cleveland, Washington D.C., Baltimore, Charlotte, Miami, New Orleans, Phoenix, and San Diego, to name a few. Nuclear power plants do not burn hydrocarbons to generate electricity, so they produce virtually no greenhouse gases. In 2009, U.S. nuclear plants prevented the release of 647 million metric tons of carbon dioxide into the atmosphere. This is nearly as much carbon dioxide as is released from all U.S. passenger cars. Only 29% of our nation’s electricity comes from clean air sources, and nuclear power plants generate almost 70% of it. New Yorkers have the distinction of living in a state with the fourth lowest greenhouse gas emissions per capita – a situation made possible, in part, by the fact that New York State receives close to 31% of its power from nuclear plants.
BACKGROUND INFORMATION ON ENTERGY
Entergy is the second largest nuclear operator in the United States. It owns and operates eleven nuclear power units in New York, Massachusetts, Vermont, Michigan, Arkansas, Louisiana, and Mississippi. It also provides management support services for a twelfth unit owned by the Nebraska Public Power District. Entergy has approximately 30,000 megawatts of electrical generating capacity and delivers electricity as a retail utility provider to 2.7 million customers in the southeast U.S. Entergy was the first U.S. utility to voluntarily stabilize greenhouse gas emissions. Entergy has earned local, national, and international recognition for its leadership on a wide range of issues, including those related to the environment, corporate governance, and low-income assistance.
For example, in 2011, for the tenth straight year, Entergy was recognized by the Dow Jones Sustainability Index for its leadership in the areas of climate strategy, corporate governance, occupational health and safety, price and risk management, and scorecard measurements. Entergy has been included on either the Dow Jones Sustainability World Index or North America Index, or both, every year since 2002, a distinction held by no other U.S. utility.
In 2011, Corporate Responsibility magazine named Entergy one of the “100 Best Corporate Citizens” in the nation. It was the fourth time in five years that Entergy earned the distinction. The magazine’s annual ranking is based on performance in seven areas: climate change, environment, philanthropy, employee relations, financial, governance, and human rights.
In 2010, the National Fuel Funds Network recognized Entergy with its Corporate Excellence Award. Entergy received the honor for its work fighting poverty through its Low-Income Customer Assistance Initiative, a collection of programs that serve as a model for our industry peers and others.
In 1987, Entergy became the first electric utility holding company in the nation to commit to the NAACP’s Fair Share Principles. In the last ten years, Entergy has spent more than $2 billion with minority- and women-owned suppliers who provide a wide range of goods and services.
As part of electric deregulation in New York, Entergy purchased Indian Point Unit 3 and the James A. FitzPatrick facility in Oswego, NY from the New York Power Authority (“NYPA”) in 2000 through a competitive bid process. Entergy purchased Indian Point 2 from ConEdison in 2001. In the last ten years, Entergy has invested more than $1 billion in upgrades to the Indian Point facility.
Entergy’s operation of Indian Point has been outstanding. The facility ranks among the most reliable in the nation. Indian Point has held the highest safety ratings (Green) for the last six years and passed key safety assessments performed by both the Nuclear Regulatory Commission (“NRC”) and the Advisory Committee on Reactor Safeguards as part of the license renewal application. A 2008 Independent Safety Evaluation stated that Indian Point nuclear operations are conducted competently and professionally, and that plant safety systems are well maintained, reliable, and backed with full resource commitment by Entergy. The capacity factor of the Indian Point facility – that is, the percentage of time the units are available to produce electricity – has increased substantially under Entergy’s ownership.
Entergy employs approximately 2,000 individuals in New York. The Indian Point facility employs over 1,100 highly-skilled, full-time individuals, many of whom are members of the Teamsters and the UWUA Local 1-2. In addition, on an annual basis during operations and refueling outages, we employ hundreds of additional union personnel, including Boilermakers, Carpenters, Laborers, Steamfitters, Millwrights, Divers, and Engineers.
The State of New York enjoys substantial economic benefits from Entergy’s ownership of these nuclear units. These benefits include approximately $130 million in full time annual employee payroll, more than $350 million in annual local purchases, $75 million in annual property tax payments and value sharing agreement payments to state and local governments, and approximately $2 million in annual charitable contributions.
According to an economic study done by the Nuclear Energy Institute in 2004, the Indian Point facility generates close to $1 billion in annual economic activity for the region.
The current licenses for Indian Point Units 2 and 3 expire in September 2013 and December 2015, respectively. In April 2007, Entergy submitted a license renewal application for the Indian Point facility to the NRC. In August 2011, the NRC issued a safety review finding Indian Point to be safe and supporting the relicensing of the facility. In the license renewal proceeding, there are twenty contentions raised by various parties such as Riverkeeper and New York State that will be the subject of hearings before the Atomic Safety and Licensing Board. The hearings are expected to begin in 2012. After resolution of the admitted contentions, the NRC may proceed with a final decision regarding whether to grant renewed licenses. Under federal law, because the application was submitted five years prior to the license end dates, Indian Point may continue to operate while the NRC proceeding is pending.
INDIAN POINT POWERS NEW YORK
In New York State, the flow of electricity is from west to east and north to south, where demand is greatest. This flow corresponds to population density within New York and where the demand for electricity is higher. Due to the transmission constraints limiting the delivery of power into New York City and Westchester County, the local power plants that serve this load are vital.
Indian Point is of particular importance to the region. On an almost continuous basis, Indian Point supplies approximately 2,000 megawatts of baseload power 24 hours a day, seven days a week to homes, businesses, municipalities, hospitals and other critical regional infrastructure. To put this number in perspective, 2,000 MW is enough power to serve at least two million homes. According to the NYISO, Indian Point currently provides between 25% and 30% of the electricity needed to serve load in NYISO zones G, H, I and J (encompassing all New York City, all of Westchester County, and parts of several other Hudson Valley counties).
New York utility customers depend on Indian Point. For example, in August 2011, Entergy and ConEdison signed a contract extension for 500 megawatts of power from Indian Point. The term of the five year agreement extends to 2017, and is contingent on license renewal. In addition, NYPA (which serves government entities including the MTA, operator of MetroNorth and New York City’s subways) stated in its 2010 annual report that it has contractual obligations to purchase 200 megawatts from Indian Point. These purchase power agreements (“PPAs”) represent only one method through which utilities purchase power from Indian Point. Some critics of the facility frequently mischaracterize Indian Point’s contribution to the regional grid by looking only at the amount of power it delivers to utilities under PPAs and not the total amount of power it supplies. In fact, utilities typically supply their needs with a mix of PPAs and short-term open market purchases. The mix of these purchases from Indian Point can change, but approximately 2,000 megawatts from the facility is continuously provided to the New York electric system at the competitive wholesale market price. Without Indian Point, the competitive wholesale market price would be higher -- and retail prices for residential, business, and industrial customers would also be higher -- because Indian Point’s output would be replaced by higher cost power plants, including plants that generate air pollution in lower income areas of the region.
Due to its size and location, Indian Point plays a major role in maintaining grid reliability. Through its ability to provide what is known as “reactive power,” Indian Point helps to ensure stable power flows across the transmission system – whether that power is generated by Indian Point or another generation facility. It is worth noting that New York has expressed strong interest in attracting high tech manufacturing facilities. A stable and reliable flow of electricity is critical for such facilities.
In August 2011, the City of New York’s Department of Environmental Protection (“NYCDEP”) released an independent report (“the CRA Report”) on the impact of a possible Indian Point shutdown on New York City. You have heard from the City’s representatives today, so I will not discuss the report in detail. It bears repeating, however, that without Indian Point New York City consumers would likely face an increase of $2 to $3 billion in electricity prices through 2030 and there would be a state- wide increase of $10 to $12 billion over the same period; New York would see approximately a 15% increase in carbon emissions under most conventional replacement scenarios, with roughly a 7 - 8% increase in nitrogen oxide emissions; and the reliability of the City’s electrical system would be compromised without the addition of generation and/or transmission facilities.
The CRA Report’s key findings are consistent with similar independent studies that have been conducted over the last several years, including the City of New York’s 2011 PlaNYC Report, which stated that closing Indian Point would increase local air pollution due to increased reliance on carbon- intensive energy sources; the 2010 New York State Energy Plan, which stated that the retirement of Indian Point may present tradeoffs including higher electricity prices and higher CO2 emissions; and a 2006 National Academy of Sciences study, which stated that Indian Point is a vital part of the system supplying electricity to the New York City region and any significant interruption of power could have serious consequences.
Critics of Indian Point argue that there is a current surplus of energy in New York. While true, this simplistic statement fails to acknowledge that removing a relatively low-cost resource, such as Indian Point, from the generation supply would increase costs to customers because all replacement options are more expensive than Indian Point. And, while some argue that capacity installed anywhere in the State can be used as a substitute for Indian Point, that statement ignores the realities of the transmission system and the physical properties of electricity.
Some point to a Renewable Portfolio Standard (“RPS”) as an option to replace Indian Point. Through 2010, New York has achieved only 40% of its 2015 RPS goal. 2,200 MW of new generation is needed just to satisfy the un-met RPS goal. Moreover, the intermittent supply of electricity from wind or solar power does not offer a realistic substitute for the baseload electricity supplied by Indian Point. And, the price of electricity from wind or solar resources is typically far higher than from conventional generation facilities. Customers in New York already pay among the highest electric rates in the United States – substantial reliance on renewable energy would unquestionably lead to much higher rates.
Some claim that energy efficiency programs can reduce the need for Indian Point generation. To date, New York utility customers have invested more than $1 billion in energy efficiency programs. For the years 2008-2010, however, the NYISO reported that only 47% of New York's energy efficiency portfolio standard targets had been achieved.
Frequently, opponents of Indian Point embrace various generation or transmission projects as “alternatives” to Indian Point. It is important to note that Entergy has no plans to shut down the Indian Point facility. The NRC license renewal proceeding can be expected to continue for several years and, as noted above, the plant has a right to operate throughout the NRC proceeding, regardless of how long it takes to be completed. Thus, the so-called “alternatives” to Indian Point should be viewed each on its own merits, irrespective of the status of Indian Point. For each project, the following questions, at a minimum, should be answered:
How much will it cost New Yorkers? Which customers will bear what portion of the cost? How does the cost of the project compare to existing or proposed alternatives? What are the environmental benefits and burdens of the project? Who will receive those benefits and who will bear the burdens? How do the environmental benefits and burdens compare to those presented by existing facilities? What are the reliability consequences of the project? What risks are being taken by pursuing the project as compared to other alternatives? How do the reliability consequences of the project compare to existing facilities?
THE NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION AND COOLING TOWERS
The notice of today’s hearing requested information concerning the potential construction of cooling towers at Indian Point. Presently, Entergy is engaged in a proceeding before the New York State Department of Environmental Conservation (“DEC”) where a central issue is the staff’s proposed decision regarding the potential installation of cooling towers. Entergy believes wedgewire screens are a far better alternative for protecting the Hudson River.
Cooling towers, each the size of Yankee Stadium, would take 10-12 years to construct – including four years of blasting – at an estimated cost of at least $1.2 billion. Both units at Indian Point would be off-line simultaneously for close to a year. And, it is not clear that cooling towers could receive the necessary construction, blasting, and zoning permits required. A major interstate gas pipeline owned by another company will have to be dug up and relocated – a process that requires approval from the Federal Energy Regulatory Commission (“FERC”). Furthermore, if placed into operation, on an annual basis, the cooling towers would emit more than 100 tons of particulate air pollution into the atmosphere in an area that is already in non-attainment status with respect to federal air quality standards.
In February 2010, Entergy presented DEC staff with the findings of an independent engineering firm and leading, nationally recognized biological experts that wedgewire screens would be superior to cooling towers for protecting the Hudson River over the 20-year license renewal period. Wedgewire screens have a proven track record of effectiveness on large-scale power plants. In fact, the DEC approved wedgewire screens for use at the Charles Point Resource Recovery Facility, located adjacent to Indian Point in Peekskill.
FINANCIAL INFORMATION AND DECOMMISSIONING
In the notice of hearing for today’s proceeding, the Committees included requests for certain financial information from Entergy. We must respectfully decline the requests, consistent with our responses to earlier requests for such information. The specific data requested, which is outlined in Section 66(6) of the New York State Public Service Law (“PSL”), is designed to assist the New York State Public Service Commission in regulating a utility’s rates. Such information may be relevant to an agency’s determination of the appropriate rates a utility should be permitted to charge in a regulated environment. But wholesale generators, such as Indian Point, sell electricity in a competitive market, and thus are not subject to this provision. If Indian Point were required to disclose confidential, competitive information, it would be at a serious disadvantage in the competitive marketplace. The State of New York is preempted by the Federal Power Act from requiring wholesale generators to report information on an entity’s revenue and financial transactions of the parent company. The FERC has exclusive jurisdiction over wholesale generators’ electric sales, a determination long upheld by federal courts.
Wholesale generators annually file at FERC the records and information that FERC has found to be necessary and appropriate. These reports are made electronically. Wholesale generators have been required to file these reports with FERC since as early as 1991, and the reports have been, and continue to be, available to the public on FERC’s website.
The notice of today’s hearing also requested certain information regarding plans for decommissioning the Indian Point facility as well as documents relating to the decommissioning fund controlled by NYPA. Under NRC regulations, nuclear plant licensees are not required to develop a plan for decommissioning activities until two years following permanent cessation of operations of the nuclear plant. Because Indian Point Units 2 and 3 are still operational, those facilities have not been required to, and have not, developed decommissioning plans at this time. The NRC requires each nuclear power licensee to report to the NRC on a bi-annual basis the status of its decommissioning fund for each reactor it owns. Entergy made a filing with the NRC on March 31, 2011 for all its nuclear plants, including Indian Point Units 2 and 3. The filing, using the December 31, 2010 trust fund balances and parent guarantee amounts, indicates that the plants covered by this submittal met or exceeded the NRC's funding requirements.
The decommissioning funds for Indian Point 3 are held by NYPA. As part of the agreement whereby Entergy acquired Indian Point 3, NYPA retained the obligation to decommission the plant. Pursuant to that agreement, however, NYPA can assign to Entergy the plant decommissioning obligation, along with a transfer to Entergy of decommissioning funds being held by NYPA. To date, NYPA has not made that assignment, and it still holds the trust funds and the decommissioning obligation. NYPA reports to Entergy trust fund balance information for purposes of Entergy’s reporting to the NRC on decommissioning, but Entergy does not maintain documents concerning the fund.
Indian Point is vital for the power it produces, the jobs it provides, and the overall economic, environmental, and electric reliability benefits it provides to the region and to the State. Alternatives to Indian Point would increase electric rates, will likely decrease reliability, and will likely increase air pollution. We will continue to give New Yorkers the facts about our proven and continued commitment to safe operations as well as the significant benefits that Indian Point provides.
With respect to the debate over the extraction of natural gas using hydraulic fracturing, Governor Cuomo recently said: “I know that the temperature is high.” . . . “We have a process. Let’s get the facts. Let the science and the facts make the determination, not emotion and not politics.” That recommendation applies with equal force to the issues surrounding the future of Indian Point.
This concludes my prepared remarks. I am available to answer questions. Thank you.