THERE'S A STORM coming. This tempest threatens to inundate management and shred shareholder value. It can't be avoided, only survived. Only those who batten down the hatches will survive.
The issue is nuclear plant decommissioning. While many would prefer to comfort themselves that the dark clouds on the horizon are still far off, trouble may come sooner than they think.
Of the 106 operating plants in the United States, more than half were licensed before 1978. Of the plants that have shut down so far, not one has reached the expiration of its license period. Only one, the Consumer's Energy Big Rock Point plant, has exceeded 30 years of operation before permanent shutdown, and many plants have shut down with significantly less operating history. Combined with a regulatory environment that may reduce costs of replacement power generation and result in an inability to recover certain stranded costs, many utilities may find that continuing to operate nuclear plants is too costly.
The decision could come at any moment. For example, during a planned outage, it may be determined that steam generators need to be replaced. An owner then must determine whether there's sufficient life remaining in the unit to recover the associated capital costs. Or utilities' state legislatures could pass restructuring legislation that opens local markets to retail competition and makes continued generation uneconomical.
The Odds Don't Look Good