US capacity market revamp not sufficient to aid nuclear power units:
execs
Boston (Platts)--24Jun2015/452 pm EDT/2052 GMT
The US Federal Energy Regulatory Commission's recent approval of
PJM's plan to reward high-performing generating units in its capacity
auctions would be helpful to nuclear generators if replicated in other
competitive markets, but still falls short of changes in market designs
needed to assure units continue operations, two utility executives said
Wednesday.
"From a policy perspective, we view this FERC action as progress, but
capacity is only 15%-20% of [a nuclear power] plant's revenues," William
Mohl, president, Entergy Wholesale Commodities, said in an interview
Wednesday after his presentation at a Boston conference on the outlook
for nuclear generation, presented by Bloomberg BNA.
The FERC capacity performance plan, approved June 10, would reward units
with high performance and penalize those that fail to perform. The
intent is to reduce price spikes and other system disruptions during key
moments, such as extreme weather and high demand.
PJM said in its December 12 proposal that the reforms aim "to ensure
that resources committed as capacity to meet the PJM region's
reliability needs will deliver the promised energy and reserves when
called upon in emergencies, providing the reliability that the region
expects and requires."
Mohl said that ISO New England recently adopted "a performance
assessment mechanism" that he said is similar to the one implemented by
PJM, adding that the New England market capacity revision "will be
helpful to single-unit site [nuclear] plants."
Entergy operates the 620-MW Pilgrim site in Massachusetts. Entergy's
1,067-MW Indian Point-2, 1,080-MW Indian Point-3 and 849-MW FitzPatrick
in New York are within the New York ISO and "won't benefit" from the PJM
capacity market change, he said.
Daniel Weekley, Dominion Resources vice president, corporate affairs,
said in an interview Wednesday after his presentation at the conference
that the capacity market changes in PJM and ISO New England have
shortcomings.
"One of the things we look at in every market, in New England or PJM, is
whether capacity markets ... send the long-term pricing signals
necessary for building additional generation," Weekley said. "We
continue to argue that this is what's missing in these [ISO New England
and PJM] markets."
Dominion operates the 918-MW Millstone-2 and 1,276-MW Millstone-3 in
Connecticut.
Mohl said FERC should issue orders to ISOs that they revamp energy
markets, which determine the price paid for electricity. Noting that the
"energy [component] comprises about 85% of a plant's revenues," he said
"what we're asking [FERC] is that for both day-ahead and real time
pricing all actual dispatch costs are included."
In many deregulated markets now, he said, energy costs "include only
pricing and excludes things like load costs and startup costs."
"We're asking that those costs be included in the LMP [locational
marginal price]" and include the costs for starting up a unit when
called upon by an ISO.
Mohl said the cost to electricity consumers for implementing such
changes "varies based on region, but what we're talking about is
somewhere between a $3 and $5 a megawatt hour increase" in energy
prices.
An increase of this magnitude, he said, "is pretty minor compared with a
present market structure where we're shutting down viable plants."
Entergy shut Vermont Yankee at the end of December, saying that the
580-MW unit could not operate profitably in the New England market.
Dominion shut the 581-MW Kewaunee in Wisconsin in 2013, likewise saying
it could not operate profitably.
Most at risk within the Entergy fleet, Mohl said in a May 14 interview,
are Pilgrim and FitzPatrick. "I've made it clear FitzPatrick has been a
marginal unit for a while," he said. "We're really counting on some
positive changes in market design to be able to continue to run it."
--Jim Ostroff,
james.ostroff@platts.com
--Edited by Lisa Miller,
lisa.miller@platts.com
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