Cost and revenue figures for decommissioning Vermont Yankee are outdated, deficient and incorrect, according to a recently released study by the Legislature's Joint Fiscal Office.
The author of the study, Arnie Gundersen, a nuclear expert for Fairewinds Associates, says the Legislature should ask Entergy to hire an independent consultant to recalculate decommissioning costs for the plant before lawmakers discuss the issue this session.
Depending on the extent of the contamination of soils at the Vermont Yankee compound, the fund could be insufficient to handle all decommissioning costs. Entergy has removed several tons of soil from the site already.
Gundersen questions the investment strategy for the decommissioning fund. He also raises concerns about the space allocation for Vermont at the Texas compact low-level radioactive waste site.
The latest official report on decommissioning costs for Vermont Yankee was submitted by TLG Associates in 2007, and it has so many problems that “we're making policy decisions about the future of Vermont Yankee blindfolded,” said Gundersen in an interview.
Gundersen contends that the plant could be dismantled immediately after a shut down in 2012, and decommissioning could be inexpensive enough that Vermont ratepayers would receive tens of millions of dollars in refunds from the decommissioning fund in the early 2020s.
Widely disparate cost estimates
Historically, decommissioning cost estimates have varied widely, according to the report. Four official calculations from TLG Associates show estimates ranging (in 2012 dollars) from $629 million in 1993 to $859 million in 2001.
The report also cites 2009 testimony to the Public Service Board, in which decommissioning projections ranged from less than $560 million to more than $900 million.
The lower estimate came from state nuclear engineer Uldis Vanags, who said Vermont Yankee would cost less to decommission than Maine Yankee.
Gundersen disagrees. He says the two reactor types are very different. Vermont Yankee, a boiling water reactor, would cost at least 40 percent more than Maine Yankee, a pressurized water reactor, to decommission, he said.
The $900 million-plus estimate came from William Cloutier of TLG. His testimony contains multiple scenarios in which the cost, in 2012 dollars, exceeds $1 billion.
Gundersen calls for new calculations to be commissioned immediately, which he says would take three months to prepare. Entergy owns TLG; Gundersen wants the new calculations to be performed by an independent company not owned by Entergy, citing an apparent conflict of interest.
The Nuclear Regulatory Commission requires Entergy to submit new decommissioning cost estimates in March. Gundersen said the estimates will likely provide too little detail.
Under the terms of their 2002 Certificate of Public Good from the state, Entergy is required to revise the 2007 calculations at least every five years. The next deadline is 2012.
Vermont Yankee spokesman Larry Smith said he had not read the report and couldn't comment at this time.
What's at stake
The size of the decommissioning fund relative to projected decommissioning costs could have an impact on policy decisions regarding Vermont Yankee.
If the fund is too low, one option is to delay decommissioning. Entergy has argued that if the plant is closed in 2012, decommissioning would be delayed for 12 to 15 years until the money, which is invested in the stock market, increases enough to cover the costs. Critics fear the fund won't grow as quickly as decommissioning cost projections.
Another option is to add more money to the fund. The Legislature has twice passed bills that would have required Entergy to add more to the decommissioning reserve; both bills were vetoed by Gov. Jim Douglas.
Neil Sheehan, spokesperson for the Nuclear Regulatory Commission, says the NRC required Vermont Yankee to address a shortfall in the fund in 2009. Entergy did so with a $40 million guarantee from its parent company.
If the plant is authorized to continue operating after 2012, the Department of Public Service has asked for a financial guarantee from the parent company covering all costs related to decommissioning, spent fuel management, and site restoration. Without that guarantee, recovering costs from the plant's parent company or companies could require protracted litigation.
If the fund is larger than the total decommissioning costs, Entergy and Vermont rate payers would split the surplus, according to a 2002 agreement between the state and Entergy. However, the NRC's Sheehan says that a plant's licensee could also request to apply the surplus to spent fuel storage costs.
The federal Department of Energy (DOE) is liable for spent fuel storage, courts have held, but Entergy has not yet negotiated the details of the settlement.
How decommissioning costs could escalate
First, the good news: Decommissioning costs could be lower than indicated in the 2007 TLG calculations.
One technical advance could create more low-level nuclear waste, but lower the total costs. Gundersen points to the Zion nuclear power station in Illinois, where a nuclear demolition company is treating everything as radioactive waste, rather than laboriously separating the non-radioactive waste. He refers to a report in The New York Times that touts the method as being faster, simpler, and 25 percent less expensive.
The catch is that it's not clear whether the space available to Vermont in the Texas Compact low-level radioactive waste site is sufficient to accommodate the increased volume of waste. The Texas Compact Commission, in a controversial 5-2 vote on Jan. 4, opened the site up to 36 other states besides the two compact states, Vermont and Texas.
Gundersen says that the waste facility is scheduled to open later this year, but that it has yet to receive all its permits. The site must reserve space for Vermont's radioactive waste from Yankee and other sources, like hospitals, but he said that the space calculations are “highly speculative,” and he suggests Vermont may succeed in shipping all its radioactive waste there only if the site is expanded.
Computer software that helps optimize the shipping of radioactive waste could also reduce decommissioning costs.
The third possible reduction comes from fending off what Gundersen terms a “raid” on the decommissioning fund of more than $200 million.
TLG charges the fund for storing spent nuclear fuel on the site. That's a reversal from previous calculations for Vermont Yankee, says Gundersen. Furthermore, he said, the charges violate NRC rules.
Sheehan seems to agree that NRC rules do not normally allow corporations to charge spent fuel storage to the decommissioning fund.
Jay Thayer, who was Entergy Nuclear's vice-president for operations at the time, told the Vermont Senate Finance Committee in April 2009 that Entergy would not take the spent fuel storage costs from the decommissioning fund. By that time, he said, courts had decided the DOE would reimburse companies for the cost of on-site storage of spent nuclear fuel.
The next month, William Cloutier of TLG was less categorical in his testimony to the Public Service Board, but he indicated that Entergy expected DOE reimbursement for interim spent fuel storage, and he provided the board with decommissioning cost calculations with separate totals for spent fuel storage.
At this time, there appears to be no dispute that the decommissioning fund need not cover spent fuel storage, which Cloutier says costs about $4 million per year.
The bad news is that the soil contamination revealed during last year's excavations, as Entergy scrambled to fix leaking underground pipes, may cause decommissioning costs to balloon. The 2007 TLG calculations were made before Entergy reported the leaks. The contaminated soil could “dramatically” add to decommissioning costs, Gundersen said.
The fund's performance has reflected the last several years' roller-coaster ride of the Dow. It grew from $310 million in 2002, when Entergy bought the plant, to $440 million in 2007, and then lost $100 million in value, according to Gundersen.
It returned to $440 million two months ago, and now it's at $460 million.
Gundersen says he asked an investment banker, who wishes to remain anonymous, about the fund, and the banker said that a third of it was aggressively invested in the stock market. Gundersen suggests a more conservative investment of the fund may be more appropriate.
Aggressive growth that is somehow not affected by future bear markets may be necessary for the fund to cover costs.
A 2008 study by William Jacobs of GDS Associates, commissioned by the Public Service Department, concluded that the decommissioning fund would need to grow at nearly 14 percent annually for it to be sufficient to fund immediate decommissioning of the plant after it closes in 2012. If the plant is mothballed for some period of time after 2012, the fund would need to grow by 7 percent or 8 percent.
The annual return after taxes since June 2002 has been just under 5 percent; since the fund started dipping in value in 2007, the return has been close to 1 percent.
NRC rules allow decommissioning calculations to assume that the fund balance will grow at a rate up to 2 percent per year faster than the costs of decommissioning.
What if the fund is inadequate?
Vermont Yankee is now scheduled to close in March 2012 unless the NRC grants a license extension, the Legislature reverses last year's Senate vote and allows the Public Service Board to issue a new Certificate of Public Good, Gov. Peter Shumlin signs the bill, and the Public Service Board determines that an extension is in the best interest of Vermonters.
The legislative leadership is unlikely, however, to take a vote on Vermont Yankee this year.
If the decommissioning fund fails to catch up with costs, then NRC policy is to seek reimbursement from the parent company. In discussions of Entergy's failed proposal to spin off Vermont Yankee and other aging nuclear power plants into a separate company, Entergy assured regulators that the parent company would still be financially responsible for assuring decommissioning.
However, Gundersen says an attorney he consulted anticipates that Entergy could delay further payments for decades through litigation.
Also, it's not clear what would happen if decommissioning began and the funds ran out when the site had been cleaned up to NRC standards, but not to the “green field” standard that Entergy agreed to with the state. There could still be structures, like the cooling towers, on site, and a higher level of radioactive contamination.
Sheehan says that the NRC license is terminated when the licensee meets NRC decommissioning requirements. Vermont's decommissioning standards are more stringent: The state's 2002 decision to allow Entergy to purchase the plant contains a requirement that the plant site be returned to a green field.
If Entergy isn't forthcoming with the additional funds, the burden of decommissioning falls to the state, in which case Vermont could sue the plant's parent company or companies.
Conflict of interest?
Gundersen's report says that while TLG has performed all the decommissioning calculations for Vermont Yankee's owners since 1991, the relationship of the client and the consultant had turned into a conflict of interest at the time of the 2007 report.
The study was the first one since Entergy purchased the plant in 2002 and, by that time, it had also acquired TLG. The relationship between the companies is so close that TLG does not charge Entergy for services, according to testimony from TLG's Cloutier.
Gundersen calls for an independent firm to carry out the next decommissioning cost calculations. The TLG-Entergy connection is too close, he says. He identifies two changes in the 2007 report that he says “are not in the best interest of the state of Vermont.” Curiously, the changes work in opposite directions.
One is the “raid” on the fund for spent fuel storage. The DOE has liability to cover spent fuel management. Charging those costs to the fund increases decommissioning costs by over $200 million, Gundersen says, which may be a ploy to pressure the state to extend the plant's operation beyond 2012. The idea, he says, is that if the fund is perceived as woefully inadequate, Vermonters would be more interested in keeping the plant open and generating revenues.
Despite the “raid,” TLG's total decommissioning cost calculation in 2007 is significantly less in constant dollars than any of its calculations performed before it was owned by Entergy. At about that same time, other nuclear plants were facing increasing real decommissioning costs, Gundersen says.
Asked about the relationship between the companies, the NRC's Sheehan replied in an e-mail, “The NRC has no objection to TLG conducting decommissioning studies for Entergy.” The agency has a formula to which it compares the calculations, he explained, regardless of who does the study.
It's unclear how the state will respond to Gundersen's report. The report summarizes four recommendations:
• An updated and independent decommissioning analysis of the Vermont Yankee nuclear plant should be completed prior to any legislative discussion of Vermont Yankee decommissioning costs.
• The allocation of the Decommissioning Fund Stocks should be determined.
• A new wholly independent contractor should be chosen to perform a new and updated decommissioning analysis.
• Texas Compact Contract and By-Laws require significant review and adjustment in order to fully protect Vermont.
Gundersen says that it takes three months to update the decommissioning analysis and expects that an independent contractor could make it available by mid-April - several weeks before the legislative session ends.
It's hard to see how that timeline could be met. The state would need to be convinced that TLG has an unacceptable conflict of interest, even though the NRC is comfortable with the TLG-Entergy relationship.
The state would further need to be convinced that it's important to conduct the new study now, rather than waiting until 2012, and it would need to take immediate action to get Entergy to draft and issue a Request for Proposals, receive bids, and select a consultant.
The Public Service Board seems to be an unlikely venue for a quick order; they were still holding hearings this month as part of a docket opened last February to investigate, among other things, whether to shut down Vermont Yankee immediately in response to the leaks.
Don't expect the Legislature to wait for a new, independent analysis. Ann Cummings, chair of the Senate Finance Committee, says that her committee has examined the fund each of the last several years, and she expects to do so again this year.
However, even if a new report were made available by mid-April, it would be too late. The “crossover” date - when new bills are expected to have passed from the Senate to the House, or vice-versa - is traditionally Town Meeting Day, which is March 1 this year.
As for how aggressively the decommissioning fund is invested, the Public Service Board or the Legislature could investigate. Both bodies have been highly conscious of not intruding on radiological safety decisions reserved for the NRC, so they would likely want to begin by understanding what authority, if any, they have over a fund regulated by it.