A $23 Billion Potential Shortfall For 27 Utilities With Nuclear Power Plants
A newsletter subscriber emailed me a question concerning the decommissioning cost for nuclear power operators, specifically what is Entergy (NYSE:ETR) exposure to the costs to shut down and dismantle their nuclear power plants. ETR recently announced the closing of the nuclear plant in Vermont and there have been concerns about this cost. I thought this question warranted and deserved a bit of research and a response. An additional 26 publicly traded companies have similar exposure to various degrees.
As part of the Nuclear Regulatory Commission commissioning and licensing of a power plant, the plant owners establish a trust fund, known as the Nuclear Decommissioning Trust, or NDT. The sole purpose of this trust fund is to provide funds for the cost to decommission the facility when that time comes. The owners contribute annually to the fund, in relationship to the percent ownership, based on projected costs and length of the license. The companies are the final backstop to shortfalls in funding to these trusts.
The origin of the capital for fund contributions is from customer rate cases – in other words, NDT funding is part of our monthly electric bills. Owners are required to review annually and submit every two years to the NRC both the fund balance and cost estimates for decommissioning. The NRC provides a formula of costs for operators to compare with the balances on the NDT, or the companies can file site-specific cost projections for each facility.