Download the 2009 Annual Report
Download the 2009 Annual Report
Entergy Non-Utility Nuclear

Entergy non-utility nuclear

Managing a Valuable Option


n April 2010, Entergy announced its decision to unwind the business infrastructure created for Enexus Energy Corporation and EquaGen LLC and redirect efforts to other strategies. Work began immediately to eliminate dis-synergies related to the spin-off. This followed the ruling by the New York State Public Service Commission in March 2010 to reject the spin-off of our non-utility nuclear assets. While we have not yet received an order in the case, we believe there are serious questions arising out of the proceedings based on the dialogue at recent meetings and will preserve all our legal rights. On the business side, however, we believe it is time to move forward to create and capture the value that remains unrealized. We believe these unique, clean, non-utility generating assets, which are located in attractive power markets, offer multiple potential upsides for our stakeholders. We will work diligently to realize the full potential.

Delivering Vital, Clean Nuclear Power

Our nuclear operations team maintains a clear focus on delivering safe, secure and reliable nuclear power. Our non-utility nuclear fleet achieved a capability factor for 2009 of 93 percent and the second highest generation output ever. This outstanding performance is evidence of our ongoing commitment to operational excellence in every facet of our nuclear operations.

We are also pleased to report that the Nebraska Public Power District agreed to extend its nuclear services agreement at the Cooper Nuclear Station for an additional 15 years. NPPD’s decision to extend the agreement is a testament to the significant improvements in regulatory and operational performance that have been achieved since Entergy assumed responsibility for operations at Cooper in 2003.

In 2009, Entergy Nuclear was also honored to receive two Top Industry Practice Awards from the Nuclear Energy Institute. Every year NEI recognizes the best new practices supporting safe and efficient nuclear plant operations. Vermont Yankee employees received an award for implementing a remote system that improved the plant’s ability to conduct certain inspections. Entergy Nuclear corporate employees received an award for their Innovations Group, a first-of-its-kind group of subject matter experts dedicated to driving innovation across all nuclear departments. Finally, last April, Entergy Nuclear announced it will team with energy firm ENERCON to offer nuclear development services ranging from plant relicensing to full-service, new plant deployment. { continued | 1 of 4 }

Entergy non-utility nuclear

Restoring Trust in Vermont

In January 2010, tritium was found in a groundwater monitoring well at Vermont Yankee Nuclear Power Station. In March, we identified the source of the tritium, stopped the leak and began remediation. While Entergy has always met all appropriate standards, we have committed to become an industry leader in tritium leak prevention, detection and mitigation. To that end, we have embarked on a fleet-wide initiative that includes partnering with Exelon Corporation, the acknowledged industry leader in this area, to advance industry knowledge and practices with emphasis on prevention or early detection rather than detection through groundwater well monitoring. Specifically, the six-point initiative includes benchmarking industry best practices, prioritizing structures, systems and components, improved inspection techniques and improved strategies for prevention, monitoring and mitigation of leakage.

Since the tritium was first found, we have worked to restore trust with Vermont citizens given their concerns about conflicting information provided to state officials regarding underground piping carrying radionuclides. We immediately engaged independent outside counsel to review all aspects of our communications to resolve known inconsistencies, find any discrepancies or less than clear information supplied in the process and correct the record. The review did not find that any Entergy employee intentionally misled any state official, but did identify communications that were incomplete or answers that were inaccurate absent the full context in which questions were asked and answered. Entergy takes full responsibility for not making the record clear and, as a result of these findings, we went to great effort to clarify the record and establish new management with clear direction on the need for complete transparency in everything we say or do.

We have made the third-party report available to the Vermont Public Service Board and we are cooperating fully with the Vermont attorney general’s investigation into this matter. That is how Entergy operates. We highly value the trust and confidence of our stakeholders and are committed to regain the confidence of Vermont leaders and citizens regarding the integrity of our processes and of Entergy itself.

Advancing the License Renewal Process

We continue to pursue license renewals for our non-utility nuclear plants. The Nuclear Regulatory Commission renewed licenses for two of our six non-utility nuclear units – James A. FitzPatrick Nuclear Power Plant and Palisades Power Plant – in 2008 and 2007, respectively. We continue to work through the final stages with the NRC on Pilgrim and Vermont Yankee license renewal proceedings. Currently, the NRC is reviewing one remaining appeal for license renewal for Pilgrim and Vermont Yankee, { continued | 2 of 4 }

Entergy non-utility nuclear

and in one instance the NRC remanded for hearing an Atomic Safety and Licensing Board decision at Pilgrim.

Resolution of the Vermont issues previously discussed is necessary before that state can resume efforts associated with license renewal approvals. Under Vermont law, an affirmative vote in the Vermont legislature in a special session or next year’s legislative session, followed by affirmative action from the Vermont Public Service Board is necessary for Vermont Yankee to obtain its Certificate of Public Good for continued operation. A decision is required by second quarter 2011 when substantial commitments need to be made.

We continue to work with the NRC and state regulators on license renewal for Indian Point Energy Center Units 2 and 3. The final safety evaluation report on Indian Point, issued in November 2009, concluded that the renewal application should be approved. Further, the final energy plan adopted by the New York State Energy Planning Board acknowledged that Indian Point is important from a reliability perspective due to critical voltage support provided to New York City and the Hudson Valley region and that risks from retirement include higher electricity prices and higher CO2 emissions.

Although the New York State Department of Environmental Conservation denied our initial request for water quality certification at Indian Point in April 2010, it should be noted that this is just one step in a lengthy process that offers multiple opportunities to reach settlement and achieve necessary approvals. In fact, our request for water quality certification at our FitzPatrick plant met with an initial staff denial but ultimately, a settlement was reached with the state, paving the way for the operating license renewal by the NRC. We will continue to work toward license renewal for Indian Point using the well-documented process that we used to secure license renewal at FitzPatrick.

Acting on Our Points of View

In 2009, Entergy continued to pursue forward-contracting opportunities with natural buyers and other participants who can commit for large blocks of power on a long-term basis. We made progress in contracting for years 2010 to 2012 consistent with our points of view on power pricing. At year-end 2009, 88 percent of our planned generation for 2010 was under contract, 74 percent for 2011 and 31 percent for 2012 at average energy prices per MWh of $57, $56 and $56, respectively. Of the 122 million MWh of generation over the three-year period, more than $4 billion of projected revenues has been contracted in a volatile commodity-market environment.{ continued | 3 of 4 }

Entergy Non-Utility Nuclear

We pursue operational excellence in all aspects of our non-utility nuclear business. Under Entergy ownership, performance as measured by capability factor and production cost has improved dramatically.

Entergy non-utility nuclear

Seeking Long-Term Growth in Attractive Power Markets

We believe Entergy Nuclear will benefit from potential long-term growth in electricity demand combined with a capacity-constrained electric infrastructure in the northeastern United States. Beyond a potential supply/demand imbalance, potential upsides include the effects of an economic rebound on market heat rates, capacity markets and natural gas prices. In addition, the increasing likelihood of more stringent federal and state environmental laws favors clean baseload generation.

Revenue projections over the next five years are expected to routinely fluctuate based on commodity markets – one of the most important fundamental drivers for this business. While forward power prices as this report goes to print would show a decline in the long-term financial outlook for this business compared to 2010, the non-utility nuclear portfolio offers a valuable option over the longer term. This option is related to the potential positive effects of an economic rebound, new environmental legislation and/or regulation. Entergy Nuclear’s current contracted position and superior operations support its business in the near term and provide the option to benefit from the long-term potential.{ 4 of 4 }