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The economics of aging nuclear plants

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The Vermont Public Service Board is wrapping up two weeks of hearings on whether to allow Vermont Yankee a permit to continue operating. The process comes as the operators of aging nuclear power plants are faced with tough economic decisions on whether to pull the plug.

The three-member, quasi-judicial board has heard from a parade of witnesses the last two weeks, taking testimony on everything from the intricacies of Yankee's reactor to the heated water it releases into the Connecticut River. But beyond these hearings and the ongoing legal battle between the state and Entergy, Yankee's parent company, the future of the Vernon plant may boil to a question of simple economics.

"They're in a vice because the cost of a kilowatt hours of electricity is driven largely by the price of natural gas," Peter Bradford said.

Bradford is a former Nuclear Regulatory Commission member now teaching at Vermont Law School. He says in several recent examples, from Wisconsin to Florida and California, the operators of similar 1970s era reactors faced with expensive aging plants, competition from cheap natural gas and dwindling profits decided to throw in the towel.

"It's the first plants in 15 years-- first nuclear plants in 15 years that have been closed and it's all because a combination of that low price, pending capital investment dynamic," Bradford said.

Indian Point, another aging Entergy reactor in New York, is also facing a tough slog. The plant is due for relicensing next year and concerns about heated water in the Hudson River could force the plant to build expensive cooling towers.

While Vermont Yankee for the moment might be profitable, future capital costs, like a pricey condenser replacement due for in the coming years may tip the balance. When it comes to tight economic margins, Bradford says safety also becomes a consideration for nuclear regulators.

"Most nuclear plant owners are responsible and in any case recognize there is nothing more against their self-interest than an accident, but there's always the possibility somebody will cut a corner," Bradford said.

State officials say the continued economic health of Entergy is vital.

"Our concern all along is about proper management and transition-- whether the plant is operating or not-- and we would prefer not. But how the citizens are treated the workers are treated, how the plant is decommissioned and all those issues require money," Vt. Public Safety Commissioner Chris Recchia said.

Entergy officials wouldn't comment on the economics at Yankee other than to say that they operate in a competitive wholesale electric marketplace.

The diminishing returns of nuclear power in the age of natural gas.

The Public Service Board is expected to make a decision on Vermont Yankee's continued operation by this fall or winter, which is also the same time frame for a decision on the state's appeal in federal court.

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