Entergy: VY decom fund now only $40 million short

BRATTLEBORO, Oct 31, 2009 (Brattleboro Reformer - McClatchy-Tribune Information Services via COMTEX) -- ETR | Quote | Chart | News | PowerRating -- In December 2008, the Nuclear Regulatory Commission notified Entergy that the trust fund set aside for the eventual decommissioning of its Vermont Yankee nuclear power plant in Vernon was $87 million short.

In order to achieve the necessary returns to ensure the fund would grow to adequate levels, the NRC demanded that Entergy determine how it would make up for the shortfall.

The shortfall was due to the stock market crash that happened at the end of last year. In September 2007, the fund amount was $440 million. But by October 2008 it had lost $77 million.

Since the crash, the fund has recouped most of its losses and as of September of this year contains $420 million. New numbers for October are due out on Monday.

In July, the NRC notified the owners of 26 nuclear power plants that their trust funds were too low to meet decommissioning requirements.

At that time, Yankee's fund was $372 million. On that basis, the NRC requested a deposit of $87 million to make up for the shortfall.

In September, Entergy replied that because of increases in the fund since the July accounting it would need to deposit only $58 million into the trust fund to make it whole.

The NRC then asked Entergy to present the calculations it used to determine how much the fund was short.

On Thursday, Entergy presented its calculations in a letter to the NRC, which included a determination that because of increases in the fund through September,

it is now only short by $40 million.

In the letter, Entergy said it would provide Yankee with a $40 million parental guarantee to cover the shortfall.

"The fund's total value has rebounded and as that growth continues or reverses, the total amount of the Entergy Corporation guarantee may change," said Larry Smith, Yankee's director of communications. "This plan will true up the overall fund value to meet NRC requirements assuming a permanent shutdown as early as 2012."

However, said Smith, "A renewal of Vermont Yankee's operating license would add 20 more years of operation and thus 20 more years on the investment horizon for the fund."

Entergy has applied to the NRC to extend Yankee's operating license from the current end date of 2012 to 2032. In addition to NRC approval, it must also get the OK from the Vermont Public Service Board and the Vermont State Legislature.

Entergy said it will issue its $40 million parental guarantee by the end of this year. The NRC will review Entergy's letter and respond within 30 days.

Entergy has applied to the state to transfer Yankee into an independent holding company named Enexus. If the transfer is approved, the funding assurance obligation will become Enexus' responsibility, said Smith.

Three days following the transfer, according to the letter submitted to the NRC, Entergy would terminate its parental guarantee.

"If needed," stated the letter, "Yankee will obtain additional financial assurance in the form of a letter of credit in an amount equal to the Entergy parent guarantee ... or through deposit into a trust fund ... in the amount representing the cash value that, with earnings would result in total available funding equal to the NRC minimum amount ..."

The NRC estimates it will cost about $550 million to clean up the site when it is closed. But that doesn't include additional clean-up requirements imposed by the state when the plant was sold to Entergy in 2002.

Those requirements could drive decommissioning costs close to $1 billion.

The Enexus transfer has already been approved by the NRC, the Securities and Exchange Commission and the Federal Energy Regulatory Commission.

The power plants Entergy would like to spin off include Yankee, Pilgrim in Massachusetts, Indian Point and Buchanan in New York and Palisades in Michigan.

Entergy has until January to finalize the spin off with Vermont and New York State, which both have the authority to deny the transfer of the power plants within their state boundaries.

If the spinoff is not consummated by January, Entergy will have to apply to the NRC for an extension.

Bob Audette can be reached at raudette@reformer.com, or at 802-254-2311, ext. 273.

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