The Federal Energy Regulatory Commission’s decision to move forward with a complaint on the prudence of an $875 million capacity expansion at Entergy’s Grand Gulf nuclear plant a decade ago and its operating performance threatens the facility’s survival, Entergy said in a filing at the agency Friday.
Entergy subsidiaries, including System Energy Resources Inc., or SERI, which owns 90% of the 1,443-MW Grand Gulf power plant, asked FERC to reconsider its mid-November decision to hold hearings on key elements of a complaint by utility regulators from Arkansas, Louisiana and New Orleans.
“The commission’s decision not to dismiss [the prudence] claim … suggests that SERI may be liable for refunds at a level that well exceeds SERI’s ability to pay and thus jeopardizes Grand Gulf’s ability to continue,” Entergy said.
The complaint is one part of a sweeping dispute at FERC involving SERI, which sells capacity and energy from the Grand Gulf power plant in Port Gibson, Mississippi, to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans under a “unit power sales agreement.”
In a complaint filed in March 2021, the Arkansas Public Service Commission, the Louisiana Public Service Commission and the Council of the City of New Orleans contend that the 178-MW “uprate” of Grand Gulf in 2012 was imprudent. They also said the plant was imprudently run from 2016 through 2020 based on the plant’s capacity factor and alleged safety shortfalls.
The regulators asked FERC to order SERI to provide at least $360 million in replacement energy costs as well as unspecified refunds related to the uprate.
Last month, FERC said the dispute required hearings and settlement judge procedures. The agency rejected a request by the regulators that the unit power sales agreement be amended to require reviews of any projects at Grand Gulf expected to cost more than $125 million.
FERC’s decision to keep the complaint alive was flawed, according to SERI’s rehearing request.
The state and city regulators approved the uprate, and under FERC precedent they cannot challenge a utility action years later, SERI said.
“Complainants did not dispute that they were informed of and involved in SERI’s decision to commence the uprate and were aware of its increasing estimated costs; Complainants did not dispute their failure to object contemporaneously; Complainants did not dispute that they permitted full retail cost recovery of the costs of the uprate after an adequate opportunity to investigate; and Complainants did not dispute that they delayed many years before objecting about the uprate project to the commission,” SERI said.
FERC also erred by failing to identify what changes to the unit power sales agreement could be considered at the hearing or to analyze whether potential changes are consistent with the safety policy of the Nuclear Regulatory Commission, according to SERI.
The agency made a mistake when it ordered a hearing using an administrative law judge before a federal court can weigh in on whether FERC’s administrative law judges are constitutional, SERI said, pointing to a May appeals court decision involving Securities and Exchange Commission administrative law judges.
SERI also said a complaint based on “unsubstantiated allegations” should not be set for hearing.
The Mississippi Public Service Commission and Entergy in June reached a roughly $300 million agreement settling multiple issues related to Grand Gulf. They include SERI’s authorized return on equity and capital structure, renewal of its sale-leaseback arrangement, treatment of uncertain tax positions, and a broader investigation of rates under the unit power sales agreement, according to Entergy.
In mid-2021, Moody's Investors Service changed SERI’s outlook to negative from stable, saying complaints at FERC could erode SERI's earnings power and cost recovery mechanisms at the same time that the Grand Gulf plant has been underperforming industry averages.