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Costly Grand Gulf Nuclear Returns to the Headlines

3 min read

Grand Gulf Nuclear Station in Port Gibson, Mississippi, is back in the news, along with lawyers, regulators and dollar signs. But first, a snippet of history.

When the Grand Gulf nuclear power plant was commissioned along the Big Muddy in Claiborne County in 1985, its $5 billion cost overran its budget so wildly the project got a nickname: Grand Goof.

The original cost estimate was $1.2 billion, but the late ’70s were terrible years for long-term construction. Costs soared with inflation and interest rates during the Gerald Ford and Jimmy Carter administrations, when the average annual home mortgage rate hit 17%. By 1985, nuclear power was losing support and Grand Gulf’s builder, Middle South Utilities, now Entergy Corp., owed billions to the banks that  financed the plant. Customers paid bigger bills at  Middle South’s subsidiaries back then: Mississippi Power & Light Co., Arkansas Power & Light Co., Louisiana Power & Light Co. and New Orleans Public Service Inc.

AP&L is now Entergy Arkansas.

Between 1985 and 2012, customers of AP&L and Entergy Arkansas had to pay $4.5 billion to operate the Mississippi plant and subsidize Louisiana ratepayers under the terms of old agreements, according to the Encyclopedia of Arkansas. That was about $6,500 per Arkansas customer. Sen. Dale Bumpers called the nuclear plant a “boondoggle” and a “scam,” and as power bills went up, then-Gov. Bill Clinton threatened a state takeover of AP&L.

Over time, like most durable nuclear power projects, Grand Gulf started to redeem itself. After years of its low-cost, no-emissions generation, Entergy customers have enjoyed some of the cheapest electric power in the United States. In 2016, Grand Gulf gained clearance for another 20 years of service.

Now it’s back in the headlines, with possible implications for 715,000 Entergy Arkansas customers.

Entergy Mississippi reached a $300 million settlement with the Mississippi Public Service Commission on June 23, a deal that heads off increases in bills, hedges against future fuel-price volatility and gives $80 in cash or credits to the utility’s 461,000 customers. The Associated Press described the deal as the largest ever reached by Mississippi regulators, and Public Service Commissioner Brandon Presley called it “literally unheard of in today’s global energy crisis.”

The commission said in a news release that the settlement’s $200 million offset for rising natural gas costs will head off an average $15-a-month increase in electricity bills starting next year.

Mississippi regulators initiated the Grand Gulf litigation in 2017, arguing that Entergy’s return on investment for the power plant was inflated, and that the bad numbers had played into  several unwarranted consumer rate increases. The settlement also calls for Entergy to spend $600,000 over four years for annual audits of Grand Gulf accounting.

The Nuclear Station is also the focus of  similar complaints by the Louisiana Public Service Commission, the New Orleans City Council and the Arkansas Public Service Commission. Those regulators hold that an $800 million Entergy outlay for upgrades at Grand Gulf never improved its safety or performance, and that customers in those three states were overcharged by $361 million.

The deal in Mississippi is related to 13 proceedings litigated before the Federal Energy Regulatory Commission, and Arkansas PSC Chairman Ted Thomas told Arkansas Business last week that regulators in Little Rock are involved.

“The Arkansas PSC is a party in a number of FERC proceedings regarding the Grand Gulf generation facility,” said Thomas, a lawyer by training who has chaired the commission since January 2015. “We are aware of the settlement with Mississippi PSC related to some of those FERC proceedings.”

Thomas said Arkansas regulators will “carefully review the offer of settlement filed at FERC and will continue to do our best to represent the interests of Arkansas ratepayers in this litigation.”

Entergy Arkansas representatives referred those seeking comment to statements from Entergy after the settlement. 

In a June 23 statement, Entergy said that accounting, financing and operating records reported to FERC by Grand Gulf were “proper, well-reasoned and in the best interest” of its customers and the company. But the company said the ongoing cost of the FERC case and the uncertainty it was causing for customers, employees and stockholders “led the company to seek a resolution.” 

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