This was supposed to be a bad year for Entergy, the New Orleans–based company that owns the Indian Point nuclear power plants in Westchester County. On the defensive in the months following Sept. 11 about operating a Three Mile Island–sized facility with a flawed safety record just 35 miles north of Times Square, Entergy was vilified as a real-life manifestation of Montgomery Burns-a bumbling corporation jeopardizingthe well-being of New Yorkers for profit.
But through a combination of cunning public relations, hard-nosed negotiation and help from broader trends, Entergy’s executives have managed simultaneously to blunt a burgeoning campaign to close the plant and make themselves into the financial darlings of the troubled energy industry. Even as battles over the plant’s fate continue to rage in the communities of Westchester and Rockland counties, and environmentalists continue to raise troubling allegations about the company’s operations, Entergy is quietly winning the War of Indian Point.
The business community, at least, is delighted. “They’ve just been making all the right decisions,” said Daniele Seitz, an energy analyst for Salomon Smith Barney. “It’s actually amazing, considering the scrutiny they’ve received in the papers.”
Said another analyst: “They’ve just been kicking ass-they got a great deal for the Indian Point plants, and they’re making a ton of money on them. The grassroots stuff about closing the plant had some momentum after Sept. 11, and that seems to be over now. They’ve got great P.R. and they’re going to benefit from an energy undersupply-they’re just in an extremely good position.”
The most obvious manifestation of Entergy’s reversal of its recent fortune in New York is in the battle for public opinion. After the unthinkable happened at the World Trade Center, it occurred to many New Yorkers that maintaining a facility loaded with highly volatile radioactive materials just outside of the city may not be a wise idea. A movement to shut down the plant that for years had been the domain of the hard-core no-nukes crowd suddenly was joined by politicians of all stripes, leaders of the business community and ordinary citizens who had never before given much thought to the issue of nuclear power. The media produced a steady stream of stories detailing the inadequacies of Indian Point’s outdated evacuation and facility defense plans.
Things started changing around the beginning of this year, when Entergy hired Burson-Marsteller, the public-relations giant that has represented such black hats as Union Carbide, Philip Morris and the regime of Romanian dictator Nicolae Ceausescu. Suddenly, the words “Safe, Secure, Vital”-Entergy’s now-ubiquitous Indian Point rallying cry-were on the mouths not only of official company spokespeople but of local officials and facility employees whose jobs and livelihoods, they explained, depended on the plant’s continuing operation. Each time one or another of the anti–Indian Point groups organized a demonstration, an even louder and better-organized group of Entergy employees would materialize to shout them down. (Compare the slickness of that campaign to its predecessor, a long-playing record put out in the 1970′s by Con Ed entitled “Let’s Clear the Air.” The recording included such reassuring statements as, “Radiation is something that man has been exposed to since the dawn of time.”)
“Entergy did an excellent job in terms of P.R.,” said lobbyist and public relations veteran Ethan Geto, who currently does work for the Independent System Operator, the oversight body for New York’s power grid. “They obviously mobilized their supporters, especially unions, and had them start turning out and becoming very vocal and making arguments for the plant’s safety. And they brought it off in a very hostile environment at a time when people were convinced that this thing was going to blow up tomorrow.”
As coverage of the plant’s dangers dwindled, so has the plant’s potency as a political issue. Many politicians were quick to condemn Indian Point following Sept. 11, and some of those who didn’t, such as Westchester County executive Andy Spano, flip-flopped under huge amounts of pressure from a frightened public. But now some public officials, especially those who represent areas outside the immediate vicinity of Indian Point, feel that the issue has faded somewhat. “I think it’s kind of fallen off the radar,” said New York City Councilmember Eric Gioia, who participated in hearings on Indian Point in May. “It’s certainly fallen off the legislative agenda. It doesn’t look like anything is changing at all, which is certainly a victory for Entergy.”
In addition, the politicians who remain the most vocal in their opposition to the plant seem to be those who are farthest from the levers of power; those who could conceivably make it happen-Governor George Pataki, Senators Charles Schumer and Hillary Clinton-have avoided any suggestion that the plant should be closed. In the New York gubernatorial race, for example, both of Mr. Pataki’s Democratic challengers, Andrew Cuomo and H. Carl McCall, have called for the closure of Indian Point. The Governor, like Senators Schumer and Clinton, has made proposals to improve safety measures and plant security while stopping short of calling for a shutdown. (Technically, only the federal government could order the plant closed, but Mr. Pataki is in a position to wield enormous influence over the process.)
Representative Eliot Engel, a Bronx Democrat who was the first member of Congress to call for Indian Point’s closure, suggested that any lack of political momentum was temporary. “If there’s a lull it’s because we’re moving away from Sept. 11, and people are hoping that there won’t be any more Sept. 11′s,” he said, “but the change in the public’s attitude towards Indian Point was permanent.”
Of course, several recent developments suggest that the plant’s opponents will have an increasingly hard time persuading New York’s power brokers to do anything to hinder the operations of the Indian Point facility. For one, Con Edison announced recently that the city’s power supply is barely keeping up with surging demand, making the power generated by Indian Point perhaps more valuable than it has ever been. It currently provides close to 20 percent of the city’s electricity, without which New York’s power regulators have said that there would probably be price hikes and blackouts.
For another, Congress has just passed a bill that will open up Yucca Mountain in Nevada as a giant underground nuclear dump. Although it will be years before nuclear waste will be shipped there, it will have a direct impact on facilities such as Indian Point, whose main limitation is a finite capacity for storing radioactive spent fuel. The prospect of making room for more waste on-site means that Entergy will be able to extend the operation of Indian Point, at least in theory, indefinitely.
“All of this definitely helps the company,” said Entergy spokesman Jim Steets. “This will prove to be a valuable investement well into the future.”
Reaping a Windfall
What must be most gratifying for Entergy and its shareholders is the financial windfall they stand to reap from Indian Point. Entergy, which operates nine nuclear plants across the country, bought the historically troubled Indian Point facility in 2000-2001 for approximately $1 billion. According to Paul Fremont, an energy analyst with the investment bank Jefferies & Co., Entergy is earning 20 percent on its original investment in the plant each year it operates, an exceptionally good return compared to conventional power plants. Mr. Fremont said that, barring mishaps, he expected that rate of return to hold steady for as long as the plant is operating.
Of course, it is never a given that the operation of a nuclear plant will be glitch-free-especially this one. One of the two reactors operating at the Indian Point facility has the worst safety record of any plant still operating in the United States, and its most recent mishap-a radioactive leak-caused it to be shut down for 10 months in 2000. But Entergy has found a way around this potential problem as well, setting up individual holding companies-limited liability corporations-for each of its plants, effectively freeing the parent corporation from financial responsibility for cleaning up any unforeseen messes.
This strategy hasn’t escaped the notice of the plant’s opponents, who smell an Enron-type scheme in the making. “If things go sour, they’ll just be able to cut and run,” said Robert Alvarez, executive director of the STAR Foundation, an anti-nuclear group. “That way, they protect the parent company no matter what goes wrong. If there’s a blackout-it doesn’t have to be a major terrorist incident-the taxpayers will end up holding the bag.”
Even the federal Nuclear Regulatory Commission has expressed concern about the increasingly complicated organizational structures of reactor licensees like Entergy as far back as 1993. “A licensee subsidiary without assets other than the licensed reactor could renege on its decommissioning obligations if forced to shut down prematurely,” said one report.
Entergy officials say that it’s just good business. “Naturally, limitied liability corporations limit liability,” said Mr. Steets. “But none of that exonerates us from our responsibilities.”
In addition to limiting the risks normally inherent in the energy business, Entergy has managed to increase its potential upside by profiting from a novel source: the funds required by law for the eventual decommissioning of one of the plants. The way it works is this: During the 30 years it owned the plant, Con Edison collected $430 million from ratepayers-close to the value of the entire plant-so it could afford to dismantle it by 2013, when its license was scheduled to expire. According to the New York Public Service Commission Web site, that money was transferred to Entergy with the plant’s license, with an added provision that the company could keep any money left over in the fund if the plant is decommissioned before its license expired in 2013. If the plant is decommissioned after 2013, Entergy would keep half.
Incentive to Skimp?
Not surprisingly, this, too, has become a point of controversy. A similar proposal has recently caused a ruckus in Vermont, where Entergy is trying to purchase another reactor plant, Vermont Yankee. That state’s Public Service Board has questioned the propriety of the deal, which it suggested would give Entergy a financial incentive to skimp on decommissioning costs. It is impossible to know how much it will cost to close Indian Point without knowing when, or if, it will close, but there is currently enough money in the fund to pay for decommissioning as envisioned under an old formula. But Entergy is unlikely to use anywhere close to the entire fund.
For one thing, Entergy executives are planning to keep the plant running for much longer than first envisioned, which would allow the fund to grow in the meantime. For another, there are now cheaper ways to shut down a plant, and when Entergy acquired Indian Point, it negotiated a contract that could allow it to save a bundle on decommissioning, thus increasing the money left over in the fund.
For example, company executives insisted during hearings before the N.R.C. in 2000 that they not be held to the so-called “greenfield” standard of cleanup that was demanded of Con Edison, which meant that they wouldn’t have to restore the land to its natural state when the plant was closed. They’ll be able to do even better if the N.R.C. adopts new regulations it is currently considering that would allow nuclear power companies simply to entomb the entire plant in concrete after it is shut. (The only plant that has ever been decommissioned in this fashion is Chernobyl.)
Decommissioning funds now make up nearly 7 percent of the company’s total assets, and constitute the company’s fastest-growing holding, and the Indian Point fund could provide an added windfall for the company.
Critics say that Entergy’s potential profits from these funds would give them a reason to spend as little as possible on cleaning up the nuclear mess that would be left after the plant closed. “The decommissioning trust funds should be taken out of play for the company,” said Arjun Makhijani, president of the Institute for Energy and Environmental Research, an environmentalist think tank. “It gives them every incentive to cheap out.”
Mr. Steets replied that since Entergy was assuming responsibility for decommissioning, they were entitled to excess money in the fund. “If they had to decommission sooner, they don’t want to be liable in ways that harm the investment they’re making,” he added. “If, looking down the road, things occurred differently than they anticipated when they purchased the plant, they don’t want the stockholders to be in a bad position.