January 22, 2007

            LANSING - Attorney General Mike Cox today announced that he is presenting expert testimony during hearings at the Michigan Public Service Commission (PSC) this week opposing Consumer Energy Company's proposal to sell its Palisades nuclear power plant, located near Covert, Michigan, to Entergy Nuclear Palisades, LLC.

"My experts conclude that ratepayers will pay at least $62 million more for electricity for the next nine years than they otherwise would if the sale did not go through," Cox said.

"In addition, the State of Michigan would lose its ability to regulate costs and operations at Palisades.  Moreover, there are no guarantees of energy availability or price stability after the proposed contract ends in 15 years.  And, finally, there are serious questions about whether a proposed refund shortchanges the amount of funding needed to properly decommission the plant and pay for the clean-up.  For these reasons and more, my experts strongly recommend opposing the sale of the Palisades nuclear power plant."

Under the proposed sale, Entergy Nuclear Palisades, LLC would purchase the Palisades nuclear power plant for $380 million.  Consumers Energy Company would receive $375 million; ratepayers would receive $5 million. 

In addition, ratepayers would need to find a replacement source of electricity after 2021, when the 15-year contract between Consumers Energy and Entergy Palisades expires.

Among the conclusions reached by the Attorney General's expert witnesses are the following:

• Under the terms of the sale, and using figures provided by Consumers Energy, ratepayers will pay at least $62 million more in electricity costs for the next nine years than they would if the sale of Palisades did not go through.
• Entergy, under the terms of the sale, has the ability to terminate the agreement at any time, with only 12 months notice.  Thus, any estimated savings that ratepayers are scheduled to see in years 10-through-15 (2016 to 2021) may never materialize.
• Because the buyer, Entergy Palisades LLC, is a wholesaler of energy, it eliminates the Michigan Public Service Commission's ability to regulate future costs and operations at Palisades (and also the Attorney General's ability to intervene).  That's important, because over the last four years Michigan citizens have paid $1.7 billion less in utility costs than were originally proposed because of the intervention by the Attorney General.
• The Nuclear Regulatory Commission (NRC) has just extended the operating license for Palisades through 2030.  However, the contract between Consumers and Entergy is only for 15 years, through 2021.  Under this proposal, ratepayers will have no right to receive electricity from Palisades from 2022 through 2030, and no price assurance regarding costs for replacement energy during that nine-year period.  Without price protection and an assurance of electricity during these nine years, retail customers could pay substantially higher prices from 2022 through 2030 than they would pay if Consumers Energy continued to own Palisades.
• Consumers Energy Company is also proposing to obtain refunds totaling between $200 and $316 million, which would come from nuclear decommissioning trust funds.  First, this is ratepayers' own money.  Second, this raises serious questions about whether enough money will remain in the decommissioning funds to pay for the future clean-up of this nuclear power plant.  If the full refund is given, approximately $250 million will remain in the decommission trust funds.  But the Maine Yankee plant, which is roughly the same size as Palisades, is costing approximately $500 million to decommission.  Any shortfall in funds would be paid by our children and grandchildren.

"I will make every effort to persuade the Public Service Commission to reject this application," Cox stated.  "Ratepayers will pay more money up front for the cost of electricity, the power sale contains an escape clause for Entergy Palisades that could void any savings to customers, the State loses its ability to regulate costs, and any savings or refunds could easily be eaten up by the costs of cleaning up the site of the nuclear power plant when it is decommissioned.  For all these reasons and more, the PSC should not approve the sale of Palisades."

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