Maine Yankee too costly to save
More about Maine Yankee on the Internet
Earlier Maine Yankee coverage from the Press Herald
By Edward D. Murphy When the phone rang Thursday night, David Flanagan knew what to expect.
Staff Writer
©Copyright 1997 Guy Gannett Communications
Flanagan, chairman of the Maine Yankee nuclear power plant, had been negotiating the sale of the plant to Peco Energy Co. since May. But the talks had been at a standstill for weeks.
The two sides had pored over cost estimates for extensive repairs that were needed to get the Wiscasset plant running again; for shutting down and dismantling the plant in 2008; and for a contract obliging Central Maine Power Co. and the other owners of Maine Yankee to buy its power for the next decade.
Yet, despite two months of talks, ''tens of millions of dollars'' still separated the two sides, Flanagan said.
So when Peco's chief executive, Corbin McNeill Jr., telephoned him Thursday night, Flanagan expected bad news. He was right: McNeill told him Peco had finished its review of Maine Yankee and that there would be no sale.
Maine Yankee's 25-year life was over. Wiscasset and the lives of the 480 people working at the plant were about to change forever.
The nuclear plant's board met the next day to make it official. The talks with Peco were over. Next week the directors will formally vote to close the plant, beginning the long and expensive process of decommissioning Maine Yankee.
In interviews with the Press Herald and Maine Sunday Telegram late Friday and Saturday, Flanagan offered details of the past two months of negotiations over the fate of Maine's only nuclear plant - a time of highs and lows, of hope and tension.
The talks, he said, nearly ended in June over a simple misunderstanding. In mid-July, progress and a visit to Maine by McNeill gave Flanagan hope that a deal could be struck. Then, in the last week, that hope wilted as progress stopped and neither side could find a solution.
''It's been a roller-coaster ride here,'' Flanagan said. ''I've been more optimistic and less optimistic at various points along the road. It's been a very intense process using some of the best people we have.''
The effort to sell Maine Yankee began in May, a few weeks before the plant's board took a dramatic vote to close the facility if it could not be sold.
Flanagan - who also is chief executive officer of Maine Yankee's biggest shareholder, Central Maine Power - knew the eight utilities that own the plant were reaching the end of their rope with Maine Yankee, which began producing power in 1972 and had only 11 years left on its operating license.
The plant had not produced power since December. It went on the Nuclear Regulatory Commission's list of the nation's worst nuclear plants in January. The owners had spent $90 million on repairs in less than five months and costs were nearing $1 million a day by late May.
Flanagan also knew Peco was in the market to buy nuclear power plants.
''We got in touch with them when it became clear that (Maine Yankee's) existing owners were not ready to take the risks involved'' in getting the plant back on line, Flanagan said.
As unlikely as it sounds, Peco found Maine Yankee attractive.
The company's goal is to take advantage of the national trend toward utility deregulation by becoming one of a handful of nationwide electricity generators that would sell power to companies like CMP, which in turn would deliver it to homes and businesses.
Peco's strategy is to use nuclear plants to generate billions of kilowatts. Wall Street doesn't like the company's approach; while most stocks have been soaring, Peco's has been stuck below last year's levels.
Turnaround specialist
But Peco fancies itself as a nuclear turnaround specialist. Executives like to point out that the company's Peach Bottom plant in Pennsylvania has gone from one of the worst nuclear operations in the country to one the best.Flanagan said he and a handful of other Maine Yankee executives flew to Peco's Philadelphia headquarters in May to see if it would be interested in taking Maine Yankee off of its owners' hands.
McNeill and Flanagan had a long talk, Flanagan said, and he left a copy of a briefing book with details on the plant.
''They got back to us and said, yeah, they were interested,'' Flanagan said.
But within days, the talks went way off track.
For some reason, Flanagan said, Peco got the message that Maine Yankee's owners weren't interested in an agreement to buy the plant's electricity. Without a steady customer, Maine Yankee would be forced to sell the electricity on the open market, where price fluctuations could wipe out profits.
''We got an indication from them (Peco) that they didn't think anything could be done, it wasn't going anywhere,'' Flanagan said. ''One of the things they were interested in was a long-term power contract, and they didn't think we were interested. I think it was just not good communication.''
Flanagan said he felt the need for more structure to the talks.
''I had this sense of ships passing in the night and things kind of drifting,'' he said.
Energizing the talks
Flanagan gave David Marsh, CMP's chief financial officer, the job of negotiating with Peco.''The negotiations got energized after that happened,'' Flanagan said. Marsh and his counterparts at Peco ''worked very diligently from the middle of June to the middle of July to make something work.''
Most of the negotiations consisted of Marsh and Peco executives going over documents and cost estimates in an office, Flanagan said.
''It was a couple of senior financial people in an office comparing notes and discussing issues like return on equity and what the power supply market was like and things like that,'' he said. ''There were no long tables with flags and flowers and that kind of thing. There weren't any histrionics or table-pounding.''
Peco's nuclear experts checked out Maine Yankee and found it in need of - but not beyond - repair.
''They made enough progress that McNeill and Dickinson Smith (Peco's chief nuclear officer) wanted to come up and see for themselves,'' Flanagan said. ''They were very impressed by the plant and by the people down there.''
The talks on the financial side were coming to a head. Maine Yankee's owners were willing to pay to have Peco take the plant.
Flanagan would not provide specific numbers, but he said the deal would have included the current owners' turning over the $183 million already collected for decommissioning and part of what's still needed for that task - likely to be at least $200 million more.
They also would have paid part of the $50 million or so needed to complete repairs at the plant and get it restarted.
Costs too high
Even a few years ago, Flanagan said, that deal might have worked. But Peco would have had only 11 years to produce and sell enough power to fill the decommissioning fund, pay for its share of the repairs and still make a profit.Peco likely was pushing Maine Yankee's owners to come up with the full $200 million or more to pay for decommissioning. That's what Peco demanded when it bought a stake in a Louisiana nuclear plant this spring - and even then it pulled out of the deal for undisclosed reasons last month.
As the last week of July neared, the two sides were no closer to a deal and there seemed no way to bridge the gap.
When Peco officials told Flanagan they weren't going to take a proposal to Peco's board last Monday - the company's self-imposed deadline - the talks were all but dead.
''When they told us they weren't going to bring it to the board, they indicated it was very hard to reconcile'' the two positions, Flanagan said.
Maine Yankee's board waited until Friday to meet, but there was no surprise at what Flanagan had to tell them, he said.
The board set up committees to prepare for decommissioning and talked about how layoffs would be handled - more than half of the 480 workers are expected to lose their jobs within six months.
''There was obvious disappointment and concern,'' over the failed talks, the layoffs and the headaches that decommissioning will surely bring, Flanagan said.
''It was a businesslike meeting, but everyone knew it was a significant and somber occasion,'' he said. ''We had to recognize that the end of the era has come.''
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More about Maine Yankee on the Internet
- The Maine Yankee Employee Grassroots Committee is a worker-created site supporting the sale of the plant.
- Maine Yankee's official home page.
- Peco Energy, the company that is considering buying Maine Yankee, has a searchable site of its promotional and regulatory documents.
- Entergy, the company hired to take over Maine Yankee's management, has a home page describing its business.
- Stockmaster has an Entergy page with current stock quotes and links to company information.
- RadNet is a highly technical anti-nuclear site by H.G. Brack of Hulls Cove, who uses Maine Yankee to illustrate his points.
- The U.S. Nuclear Regulatory Commission offers a transcript of the Oct. 18 briefing on the Integrated Safety Assessment Team Inspection at Maine Yankee.
- A New England nuclear power page leads to a government-sponsored Maine Yankee page.
- The U.S. Nuclear Regulatory Commission has a page describing the plant and its systems. It also has a quite technical page on occupational radiation exposure.
- The University of Michigan chapter of the Health Physics Society maintains a comprehensive radiation protection page, including a Questions and Answers section and a page on radiation and risk.
- The Nuclear Information World Wide Web Server offers information on nuclear power plants and nuclear science.
- Todd Postma, a nuclear engineering student at the University of California, has assembled an impressive collection of nuclear-related links.
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