Margolis: IBM “threat” does not compute

IBM employs approximately 5,000 Vermonters at its Essex Junction plant, making it the state's largest private employer.

Might IBM really abandon its Essex Junction plant if Vermont Yankee shuts down next year?

Or was the suggestion merely part of a concerted (or perhaps not-so-concerted) pro-Yankee political counter-attack by the corporate establishment and its allies?

Or a bargaining opener by IBM to finagle lower utility rates for itself in a post-Vermont Yankee world?

The answers are, in inverse order: maybe, maybe, and no.

The questions arose after Janette Bombardier, a senior official at the plant, told members of a Vermont Senate committee last week that a power interruption of as little as a quarter of a second could cost IBM more than $1 million.

When the Committee on Economic Development, Housing and General Affairs visited the IBM plant last week, Bombardier said reliable and efficient electric power was of “utmost importance” to the company, whose 5,000-person workforce makes it the largest private employer in the state.

Noting that the Vermont Yankee plant produces roughly a third of Vermont’s power, Bombardier asked, “How do we make up that generation? Where will it come from, what will cost? When will it be online?”

By design or otherwise, Bombardier’s statements set off a flurry of political activity on both sides of the contentious squabble over whether the nuclear power plant in Vernon should be allowed to operate after its original 40-year license expires in 2012.

On the pro-VY side, the Vermont Tiger website proclaimed that Bombardier had “spelled it out in plain American that if Vermont Yankee is shut down or even marginalized, they are out of here.”

Coincidentally or not, the Associated Industries of Vermont, a labor union representing Vermont Yankee workers, and the Vermont Energy Partnership (one of whose members is Entergy Corp., which owns Vermont Yankee) released a letter to Gov. Peter Shumlin in favor of relicensing the power plant.

“Realistic, viable alternatives to Vermont Yankee that are more affordable and reliable are not apparent,” the letter said.

Tiger was both ungrammatical (IBM is an ‘it’, not a ‘they’) and inaccurate. Bombardier perhaps hinted in spin-doctor/corporate-bureaucratese American. She never plainly declared that IBM would close the plant if Vermont Yankee closes its doors.

And the plant’s public spokesman, Jeff Couture, said (via e-mail), “we have never said that IBM would leave Vermont if Vermont Yankee closes.  We said that we are concerned about the rising cost of electricity in Vermont, which is likely to go higher if or when Vermont Yankee closes.”

That’s essentially what Tim Baechle, IBM’s Manager of Energy, Environmental and Chemical Programs, told House Natural Resources and Energy Committee Chairman Tony Klein last week.

The Essex Junction plant consists of 30 buildings on a 725-acre site. It has been designated a “Center of Excellence for Enterprise Operations” by IBM. Replicating it elsewhere would cost at least $3 billion.

According to Klein, a Montpelier Democrat, Baechle insisted that all IBM needed was “a sustainable low-price high quality supply of electricity.” That’s not really different from what Bombardier said. She just seemed dubious about the capacity of Vermont utilities to provide that supply of electricity without the 285 megawatts they now get from Vermont Yankee.

The utilities, though, don’t seem to be worried, which should have been clear last year when they failed to reach agreement with Yankee over how much power it would sell them and at what price. (Negotiations have resumed).

Vermont Yankee got something of a bum rap back then, with news stories reporting that it wanted to cut back on how much power it sold to Vermont’s utilities. Not so, said VY spokesman Larry Smith — “It was the utilities who wanted less from us,” and officials of VY’s two Vermont customers — Central Vermont Public Service and Green Mountain Power — confirmed that.

“We were requesting somewhat less,” said CVPS spokesman Steve Costello. “Both companies, as they looked to 2012 and beyond, wanted to diversify our portfolios.”

In fact, Costello and his GMPO counterpart Dorothy Schnure said both utilities wanted to get a smaller share of their total power supply from both Vermont Yankee and Hydro-Quebec, with which they and other Vermont utilities signed a new, long-term contract last year.

That means they want to diversify. It means they want to use more “renewable” (wind, solar, biomass) power.

But it also means something else: There’s plenty of power available. And, contrary to the worries of expressed in the Associated Industries et. al. letter to Shumlin, it’s available at an acceptable price.

Right now, in Vermont as in the rest of the country, there is an electric generating capacity glut, partly because of the recession, but also, as nuclear power consultant Arnie Gundersen put it, “because of some effective energy conservation.”

With or without Vermont Yankee, then, IBM need not worry about that quarter-second power blip. Making sure enough power gets where it’s supposed to go is more complicated than flicking a switch, so both the state and the utility industry will have to do some planning to assure IBM (and everybody else) that the juice will flow adequately. Why that planning didn’t start years ago is a legitimate question. But it is now under way.

“I don’t think there are serious reliability implications” if Vermont Yankee shuts down, said Peter Bradford of Peru, who once headed the public utility commissions of both Maine and New York and served on the federal Nuclear Regulatory Commission.

There, are, Bradford noted, price implications, but he, Gundersen, and the utility company officials all agreed that the price of power is going up no matter what happens to Vermont Yankee. Under the current contract, VY charges the utilities 4.2 cents a kilowatt hour. The price being discussed in last year’s negotiations, Gundersen said, was about 6.5 cents per kwh. (That’s not the “retail” price you pay; it’s the “wholesale” price the utility pays the producer).

“The New England market price has been in the 4 to 5 cent range in the last few years,” said Bradford. The price is likely to stay at around that level because of the increasing supply of relatively inexpensive natural gas. Even if VY’s operating costs are low, it is unlikely to charge less than the prevailing market price.

“What they’re aiming at is not just to cover their operating cost but to charge as much as they can,” said Bradford.

Besides, the cost of power is probably going to rise in other states, too. Right now, only Maine and Pennsylvania have lower rates than Vermont in the Northeast. No law prevents IBM from moving its semiconductor plant to another region. But presumably there are reasons it chose Essex Junction to begin with — perhaps proximity to markets and materials, almost surely a qualified, reliable, work force. Utility costs are lower in the Southeastern states; so are the standardized test scores of high school graduates.

The Essex Junction plant, according to Couture’s email, consists of 30 buildings taking up 3.5 million feet of its 725-acre site. It has its own water and sewage plants. It has been designated a “Center of Excellence for Enterprise Operations” by IBM. Replicating it elsewhere would cost at least $3 billion.

And IBM would consider abandoning it because moving elsewhere might save a penny or so a kilowatt hour?

That does not….uh…compute.