VY’s incredibly bad deal for Vermont

John Greenberg

1) This price (6.1 cents) constitutes a 35.5% increase from the rate for 2012 in the current contract (4.5 cents).

2) Without the RSA contribution, this rate represents a savings on electric bills for average residential and commercial customers of roughly 1.5% from market rates currently anticipated for 2012 (AESC 2009).For the average residential customer, that works out to just over $1.30 per month. So, as I anticipated, my previously sent op-ed overstated VY’s case; I had suggested a figure of 5%.

3) The RSA, as I have argued in detail elsewhere, is most likely, in fact, to have no value at all. In any case, its contribution is VASTLY overestimated in Jay Thayer’s letter. Using the most transparent and accurate figures I can find (Paul Chernick’s spreadsheet testimony before the Public Service Board), the Vermont utilities’s share of the RSA under the proposed deal would amount, at the very most, under $70 million over 10 years. This figure assumes unprecedented and improbable rates of inflation, as well as similarly unprecedented and improbable capacity factors for Vermont Yankee, and also assumes that out-of-state utilties would not sue (as they clearly would) for what they believe is their share of the RSA. It would still need to be adjusted downwards because the slightly below-market proposed contract would reduce the revenues VY receives on about 18% of its output.

In the context of $4 billion to be paid out by Vermont customers, the highest conceivable contribution from the RSA is pretty meaningless; or put differently, it is well within anyone’s “margin of error” for this kind of forecasting. Because this is essentially a dead horse, I will not belabor it. There are more details in RSA.doc sent to you previously, or, for you gluttons for punishment, provided upon request. In short, the RSA is unlikely to change the picture painted above (#2) in any substantive way.

Additionally,

4) This contract price (6.1 cents) will be inflated annually by the same escalator as the RSA. Any extended analysis should look at whether alternative sources of power escalate as fast. It’s quite possible that they would not. Obviously, that will depend on the power source chosen, the nature of the contract, etc.

Perhaps most important, note that the contract is for 115 MW of power. At this time, I can’t say what that means for sure, but it certainly appears that the utilities are already planning to replace the other 155MW or so elsewhere. In any case, from this we can conclude:

5) We’re now discussing less than 15% of Vermont’s electricity, rather than 33%.

6) We should move forward with statewide efficiency efforts of at least 4% per year, as is currently being achieved in the target areas, which would replace another 60MW of this 115 without other purchases, and at less than 1/2 of the price of the proposed VY contract. The GDS figures in the DPSs 2007 of Vermont energy efficiency, concluded that Vermont could save the equivalent of 225MW cost effectively by 2015, meaning that all or virtually all of the remainder could be replaced by cost-effective efficiency efforts, NOT including voluntary efforts, smart grid efforts, or federal stimulus funds.

Assuming, however, replacement power is needed, to cite just one example, the remaining slug (55 MW) of VY power could be replaced with one biomass plant, which would also create roughly 250+ jobs, replacing those lost by the 218 Vermonters currently employed at VY (many of whom would not lose their jobs, thanks to decommissioning). Other alternatives — Vermont wind, out of state wind, solar hot water, solar photovoltaic, Canadian power, market power, natural gas, etc. abound and could easily supply this amount of power. If the 50MW of power in the just passed renewables bill is not already part of what is lowering the amount being purchased, it too would effectively replace the remaining power.

Finally,

7) This deal is contingent on Entergy’s completion of the Enexus spin-off.

This is an incredibly bad deal for Vermont.

John Greenberg
Marlboro, VT

Clairifying the problems of Nuclear Power in the Green Mountain State and beyond