Grading the upgrade

June 20, 2003

The Vermont Public Service Department has spoken out on behalf of Vermont ratepayers as the Public Service Board has begun consideration of an increase in power output at the Vermont Yankee nuclear power plant in Vernon . It is important for the department to continue with a rigorous defense of the public interest.

Shortly after Entergy Nuclear purchased Vermont Yankee company officials announced their intention to seek permission to boost output at the plant by 20 percent. To do so would require an investment of perhaps $60 million in upgrading the aging plant. Sixty million is not a firm figure; earlier this year the company said that would be the cost of the project, but this week the company would not be pinned down to a number.

In return, the company could expect an additional profit of $20 million, according to William Sherman, the state’s nuclear engineer. He told the Public Service Board the state of Vermont should be entitled to some of the benefit of that profit.

It is the job of the Public Service Board to issue or deny a certificate of public good for the Yankee project, and public good must go beyond a fatter bottom line for Entergy. Entergy’s investment in the project entails some risk on Entergy’s part. There has been a history of some success and some problems in other projects for boosting power output at nuclear plants, and Entergy is shouldering the cost of the project.

But Vermont ratepayers are also at risk. If the power boost at Yankee runs into problems and the plant is off line for an extended period, Vermont ratepayers will have to find electric power somewhere else. That replacement power is likely to be more costly than power purchased from Vermont Yankee.

The agreement for Entergy’s purchase of Vermont Yankee contains provisions protecting Vermont ratepayers from fluctuations in the power market. Though Vermont utilities entered into a long-term agreement to buy Yankee power, the agreement provides that the price will fall if the market price falls. That way Vermont ratepayers will not be stuck paying for high-priced power, as they were in purchasing power from Hydro-Quebec.

It would be in order for the Public Service Board to require similar protection from problems that might arise from the “uprate” of Vermont Yankee. It is easy to assume that the project will come off smoothly, but protection should be built in in case it does not.

Apart from protection against rate shock, rate relief as a consequence of increased profitability would also be in order. Vermont cannot absorb the entire profit of the project; that would remove the incentive for the company to move ahead. But if the project is to demonstrate a public good, then a reasonable level of rate relief is not out of line.

The state must also ensure that the plant is suited for an upgrade. The Nuclear Regulatory Commission will have to conduct its review of the proposal, but the PSB cannot rely on the NRC alone. The PSB must watch out for coziness between Entergy and the NRC. Safety remains the paramount concern for everyone, and the PSB should ensure the most rigorous review possible precedes any action on Entergy’s proposal to boost output at Vermont Yankee.