Entergy 2013 Annual Report Download - page 40

Entergy Corporation 2013 INTEGRATED REPORT 39
ECONOMIC
Providing Service to Our Customers
EWC: Preserving Optionality and Managing Risk
EWC sells power to wholesale customers from its fleet of nuclear and non-nuclear generating
plants. In recent years, an abundance of U.S. shale gas has resulted in low wholesale energy
prices, while excess capacity due to low demand growth has led to low capacity prices. Both
of these conditions have negatively impacted earnings from the EWC business. At current
wholesale market power prices and with the closure of Vermont Yankee, we project EWC
earnings before interest, taxes, depreciation and amortization will decline in 2015 and 2016.
Our focus at EWC is on preserving optionality and managing risk, our dual strategic objectives
for this business. We preserve optionality and manage risk through operational excellence,
portfolio actions and advocacy for effective wholesale power market policies.
OPERATIONAL EXCELLENCE
Our operating focus is always on safety and security first, followed by operating efficiency and
productivity. We continue to evaluate opportunities to improve EWC nuclear fleet performance,
efficiency and productivity over the long term. Securing license renewal is essential to
preserving our ability to operate our generating assets. We continue to advance the license
renewal process at Indian Point Energy Center, a large two-unit plant that is a vital source
of power for New York City and Westchester County. Operational excellence also includes
effective hedging strategies that incorporate our dynamic point of view on commodity prices.
We regularly layer in hedges to reduce risks associated with expected market price trends.
PORTFOLIO ACTIONS
We evaluate assets in our portfolio on a regular basis and, when appropriate, act
opportunistically to create sustainable value for our stakeholders. In August, we announced
the difficult decision to close and decommission our Vermont Yankee Nuclear Power
Station in Vernon, Vt., in 2014 at the end of its current fuel cycle. Key factors driving
our decision include:
• Low wholesale energy prices.
• Vermont Yankee’s small size and resulting high cost structure.
• Financial impact of cumulative regulation.
• Wholesale market design flaws that result in artificially low energy
and capacity prices in the New England region.
In December 2013, Entergy and the state of Vermont announced a settlement agreement that,
subject to regulatory approval, provides more certainty to the plant’s operation through 2014
and its later transition to decommissioning.
In 2013, EWC sold its Entergy Solutions District Energy assets, which provide chilled water and
steam to customers in Houston and New Orleans, to Brookfield Infrastructure, a company that
is better positioned to grow this business. We also made the decision to retire and dismantle
the Robert Ritchie Unit 2 fossil plant located in Helena, Ark.
ADVOCACY
EWC continues to engage our external stakeholders, particularly on the license renewal
process for Indian Point and on a variety of issues related to wholesale power markets and
the importance of nuclear power. We are working with federal regulators and New York state
leaders and regulators to advance license renewal at Indian Point. We are engaging the public
through our Indian Point website at www.safesecurevital.com and an outreach campaign to
communicate clearly why Indian Point is right for New York.
We are engaged with independent system operators, regulators, federal and regional
policymakers and other stakeholders on wholesale market design and the importance of
fuel diversity. In March 2013, EWC President Bill Mohl testified before the U.S. House Sub
Committee on Energy and Power on the importance of nuclear power to a diverse electricity
generation portfolio. We are also contributing to discussions to improve the design of Northeast
wholesale power markets. Through published articles, meetings and other efforts, we are
advocating for market designs that adequately compensate nuclear operators for the reliability,
fuel diversity and environmental benefits they provide.
“Our focus at EWC is on
preserving optionality
and managing risk, our
dual strategic objectives
for this business. We
preserve optionality and
manage risk through
operational excellence,
portfolio actions and
advocacy for effective
wholesale power
market policies.”