Infamous Three Mile Island latest casualty of shale boom
Competition from cheap natural gas has claimed another U.S. nuclear power plant in a state that has balked at government aid for financially ailing reactors.
Exelon Corp.’s Three Mile Island reactor near Harrisburg, Pennsylvania, site of the worst commercial nuclear accident in U.S. history in 1979, will close in 2019 after losing money for five years, the company said Tuesday in a filing. At least five nuclear power plants have retired in the past five years including Fort Calhoun in Nebraska, which closed in October, as shale gas and rising output of wind and solar power depress prices.
While New York and Illinois have stepped in with mandates that customers pay more for nuclear power to save jobs and curb greenhouse gas emissions, Pennsylvania has not. Last year, Illinois approved a $235 million-a-year lifeline for Exelon’s Quad Cities and Clinton reactors after the company announced they would close.
The announcement smacks of “posturing,” Shahriar Pourreza, a New York-based analyst for Guggenheim Securities, said by phone Tuesday. “This is no different than what they did in Illinois. It’s the right tactic. They’ve got time.”
The Pennsylvania plant, with one reactor still in operation, has become a money loser amid falling power prices, according to Chicago-based Exelon. For the third consecutive year, the plant failed to win generating capacity payments last week in an auction held by PJM Interconnection LLC, the largest U.S. power market.
Pennsylvania probably needs to act this year, and no later than next year’s first quarter, to prevent Three Mile Island from closing, Pourreza said.
Pennsylvania “has an opportunity to take a leadership role by implementing a policy solution to preserve its nuclear energy facilities,” Exelon Chief Executive Officer Christopher Crane said Tuesday in a statement. “We are committed to working with all stakeholders to secure Pennsylvania’s energy future, and will do all we can to support the community, the employees and their families during this difficult period.”
The Pennsylvania Nuclear Caucus, a group of lawmakers who want to keep the state’s five nuclear plants operating, will face stiff opposition from the natural gas lobby, according to Pourreza. Pennsylvania is the largest gas-producing state behind Texas, and a glut of the fuel from its prolific Marcellus Shale has worsened Three Mile Island’s situation, he said.
State Senator Ryan Aument, a member of the nuclear caucus whose district is near the plant, didn’t immediately return a call seeking comment.
The plant, about 90 miles west of downtown Philadelphia, was at risk of early retirement after failing to win capacity payments last week, Exelon said on May 24. With the sector reeling from lower power prices and flat demand, nuclear plants have become more dependent on capacity payments for revenue to cover their costs. Three Mile Island is now scheduled to close on or about Sept. 30, 2019.
The power plant will forever live in infamy after one of its units partially melted down on March 28, 1979. The accident released “significant” radiation into the air, according to the Nuclear Regulatory Commission. While about 2 million people were exposed to higher than normal levels of radiation, studies concluded it had “negligible effects” on health or the environment, the commission said. No new nuclear reactors were ordered in the U.S. for the following three decades.
Exelon will record one-time costs of as much as $110 million pretax in the second quarter to retire the plant before its license expires in 2034, according to the filing. Charges of as much as $25 million a year may be recorded in 2018 and 2019. Cash costs related to the closing may reach $70 million, mostly for employee-related expenses. The plant employs about 675 people, the company said in the statement.
Exelon shares rose 0.5 percent to $36 at 10:53 a.m. in New York, outperforming the S&P 500 Utilities Index.
“Investors want them to close the plant,” Pourreza said. “It’s not a great plant. It’s old, it generates negative cash flow.”