Deregulation silences Bay State on power plant deal
For a state that is widely known for high business costs, Massachusetts sure can be friendly to energy companies.
This state was left on the sidelines last year as regulators in New Hampshire and New York scrutinized every angle of the massive KeySpan-National Grid merger. Apparently, state officials here didn't like being left out of the fun: A measure giving state regulators oversight over similar utility mergers in the future was added to the state's broad-ranging energy bill that became law last week.
But another big energy deal is winding through the regulatory process this summer, and Massachusetts still doesn't have a seat at the table.
The Pilgrim reactor in Plymouth, the state's only nuclear power plant, is about to be spun off by Entergy Corp. into a new company with four affiliated plants. The new company, Enexus Energy, could be saddled with at least $4.5 billion in debt - a burden that has troubled state officials in New York and Vermont, where other Entergy nuclear plants are located.
Because this sale involves the transfer of power plants and not power lines, Massachusetts law still leaves this state without any legal authority over the deal.
That's why Attorney General Martha Coakley has been relatively quiet on the issue, according to a Coakley spokeswoman. Coakley's staff has hounded Entergy during license renewal proceedings for the Pilgrim plant. But Coakley's spokeswoman says the Legislature's deregulation of electricity generation in 1997 leaves little room for the attorney general to get involved in the spinoff.
Coakley's legal team did file a four-page request to get involved with the Federal Energy Regulatory Commission's review of the Enexus deal. But FERC endorsed the spinoff last month before Coakley got a chance to raise any legitimate concerns.
Meanwhile, Mary Lampert of Duxbury has been essentially a one-woman band, making noise about all sorts of issues regarding the proposal to renew Pilgrim's license. But she says she's simply too busy keeping an eye on the license renewal to get involved with the spinoff as well.
You should be able to count on unions at the plant to raise a stink, right? Not exactly. The Utility Workers Union of America Local 369 brought up concerns about the Enexus debt load with the Nuclear Regulatory Commission - until the local agreed to stop its opposition to the spinoff as part of recent contract negotiations.
The much smaller UWUA Local 590 hasn't given up the fight yet. Murray Williams, Local 590's departing president, says he's worried Pilgrim will end up with the lion's share of Enexus' debt. He also says that if one of the Enexus reactors runs into serious problems, the company could have a hard time coming up with the cash to fix it.
In contrast to what's happening here, Entergy's pending sale of the Vermont Yankee plant has been a politically charged issue in Vermont. The legislature there even passed a bill mandating that Entergy guarantee it will cover the costs to eventually dismantle Vermont Yankee before the spinoff can be completed. But that bill was vetoed by Gov. Jim Douglas.
It's not as if the Douglas administration isn't concerned, though. Stephen Wark, consumer affairs director at the Vermont Department of Public Service, says Enexus' projected debt load would likely outweigh the value of the company, putting it at significant risk in the case of any major unanticipated capital expenses. Wark says his agency will push for a reduction in the debt load, or at the very least a reduction in the amount of that borrowed money that would be passed on to Entergy.
These concerns inevitably will resurface as Entergy's proposal is weighed by New York and Vermont regulators. A Bank of America report recently questioned whether Entergy can complete the deal on time without significant concessions because of the state regulators' issues.
Despite the pressures, Entergy spokesman Alex Schott says the New Orleans-based company still is on track to spin off the Enexus plants by the end of September. He says the new company will be financially strong from the outset, with at least “half a billion” dollars from the debt load to cover plant expenses.
Schott doesn't gloss over the fact that the main motivation for the spinoff is to enrich Entergy shareholders. The theory is that the two companies - one devoted solely to nuclear plants, the other a more traditional electricity utility - would be worth more as separate investment vehicles than they are together.
You can't blame Entergy executives for trying to do right by their shareholders. That's their job. But it should be someone's job in our state government to ensure that the public interest is protected when our only nuclear power plant changes hands.
Jon Chesto is the business editor of The Patriot Ledger. He may be reached at email@example.com.