CONSTELLATION ENERGY NINE MILE POINT NUCLEAR STATION

NY regulators are considering subsidy payments to Upstate nuclear plants in an effort to hold down greenhouse gas emissions.

(AP)

SCRIBA, N.Y. - Oswego County is suddenly at the heart of a high-stakes debate over nuclear power and how it can help - or hurt - the state's urgent efforts to cut carbon emissions and combat climate change.

Environmentalists and energy experts all over the country are watching the technical debate play out. Meanwhile, Oswego holds its breath waiting to see whether its signature industry survives.

After months of warnings that three money-losing Upstate nuclear reactors could shut down next year - two in Oswego County and a third in Wayne County -- state officials suddenly face an imminent choice:

Approve nuclear subsidy payments that could cost utility customers as much as $7.6 billion over the next 12 years, or run the risk that three of Upstate's four nuclear reactors will shut down.

Why is this a climate change issue?

Some policymakers contend that shutting nuclear plants inevitably leads to an increased reliance on power from fossil fuels, usually natural gas. And that causes an increase in greenhouse gas emissions at a time when scientists are calling for urgent reductions.

Even Gov. Andrew Cuomo - who is not inherently friendly to nuclear power, given his tireless efforts to close the Indian Point plant - subscribes to the view that New York should prevent as many nuclear shutdowns as possible to avoid a short-term increase in carbon emissions.

Cuomo says Indian Point is too close to New York City to be safe, but he wants to save the Upstate nukes.

Supporters of nuclear subsidies include former NASA scientist James Hansen, a leading advocate of greenhouse gas reductions. Hansen this week joined dozens of scientists, academics and industry leaders in signing a letter urging the New York Public Service Commission to approve the nuclear subsidies.

The letter writers, organized by the pro-nuclear policy group Environmental Progress, cite PSC estimates that shutting down all four Upstate nuclear reactors would cause increased carbon dioxide emissions of 15.5 million tons a year. That would raise greenhouse gas emissions from the state's power sector by 50 percent.

But some scientists and climate activists contend that nuclear subsidies are an expensive waste of money that saps resources that should be invested in energy efficiency and renewable sources like wind and solar. Atmospheric scientist Mark Jacobson of Stanford University is among those who say climate goals can be reached with wind, water and solar power.

In contrast to New York, California regulators are mulling a plan to shut down that state's last remaining nuclear plant, Diablo Canyon, and replace it with solar, wind and other clean power technologies.

A coalition of more than two dozen New York activist groups this week sent a letter to Cuomo and the PSC opposing the nuclear subsidies, which they described as a $7.5 billion "nuclear tax."

Why is everyone suddenly so exercised?

At Cuomo's direction, the PSC started working in January to develop a clean energy standard aimed at boosting renewable energy to 50 percent of New York's power supply by 2030. The program aims to cut carbon emissions 40 percent during the same timeframe.

From the start, the PSC proceeding included a plan for some sort of nuclear subsidies over the short term, to preserve nuclear as a source of carbon-free power while renewable energy expanded its reach. The proceeding dawdled along for months.

Suddenly Friday, the PSC staff issued a completely revised formula for calculating nuclear subsidies that vastly increased the potential cost to utility ratepayers. The staff's previous cost estimate of between $8 million and $94 million per year suddenly ballooned to $482 million the first year and up to $805 million in Year 12.

Despite the magnitude of the changes, policy advocates and the public were given just 10 days to comment, an uncharacteristically small window for the normally plodding PSC. Unless pleas for an extension are granted, comments are due by July 18.

What's the rush?

Exelon Corp., which owns the two-unit Nine Mile Point nuclear plant in Oswego County and the single-unit Ginna plant near Rochester, made it clear to state officials in June that time is of the essence.

In a letter to the PSC last month, Exelon said it needed not just an approved policy but firm subsidy contracts in hand by September or it might be forced to order the shutdown of Nine Mile Unit 1 and Ginna.

The FitzPatrick plant in Oswego County also hangs in the balance. Plant owner Entergy Corp. decided in November 2015 to shut down the money-losing plant in January 2017. Entergy continues to plan for a shutdown, but the company acknowledged today that it also is negotiating a potential sale of the plant to Exelon.

Oswego County business leaders and labor activists have long hoped that Exelon would take over FitzPatrick. By incorporating FitzPatrick into the operation of the adjacent Nine Mile Point, Exelon could presumably achieve labor cost savings.

But the deal is contingent on New York adopting nuclear subsidies that are acceptable to Exelon.

"The proposed (clean energy standard) program, if approved, will give us the confidence to invest hundreds of millions of dollars in FitzPatrick in January to refuel the plant and upgrade systems needed to reverse the shutdown decision," said Chris Crane, Exelon CEO.

How much are the subsidies?

The PSC proposal sets the payments at $17.48 per megawatt-hour (MWH) for the first two years. That represents an increase of about 45 percent above what Upstate nuke plants earn by selling their power into the wholesale market.

Assuming the four reactors produce their typical 27.6 million megawatt-hours a year (enough for 3 million homes), the cost of the subsidies would start at about $482 million a year.

The PSC proposal anticipates that the subsidies would rise every two years under a 12-year contract, reaching $29.15 per MWH in the final two years. If wholesale power prices rise above $39 per MWH, as expected, the subsidies would decrease by the same amount.

Exelon has said it needs about $50 per MWH to break even in the Upstate market. The subsidy payments appear to guarantee the company $56.48 per MWH, enough to provide a profit.

How much money is the state allocating for wind and solar?

According to preliminary figures developed by PSC staff for the clean energy standard proceeding, the extra cost of supporting new and existing renewable energy sources over the next 14 years is estimated at $3.3 billion.

Payments to renewable energy suppliers vary because they are typically set through competitive bidding. In recent years, subsidies awarded by the state have ranged from $22 to $35 per MWH, typically for 20-year terms. Solar and wind projects also qualify for lucrative federal tax credits.

Renewable energy advocates worry that devoting millions to sustain nuclear power will sap resources away from wind, solar and other clean technologies.

Wind and solar currently supply about 3 percent of New York's electric power. The Upstate nukes account for about 17 percent. Including Indian Point, nuclear provides about 31 percent of the state's power.

What are the stakes for Central New York?

The sums of money proposed to subsidize nuclear plants are huge, but their impact dissipates when spread across millions of utility customers statewide. Thus far, the PSC estimates that Cuomo's clean energy standard will cost an average Upstate household an extra $1 a month.

But the economic importance of the nuclear plants to Oswego County, and to Central New York more broadly, is significant.

FitzPatrick alone employs about 600 people and contributes about $1 billion to the local economy, Exelon said today, citing a PSC analysis.

Exelon's three Upstate plants have 1,400 workers and an annual payroll of $266 million, and pay $47 million a year in property taxes.

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