Strong market boosts Vermont Yankee trust fund

Vermont Yankee 2010
The Vermont Yankee nuclear power plant in Vernon. Photo courtesy of the Nuclear Regulatory Commission

VERNON – It’s been a good year for financial markets, and that’s good news for the Vermont Yankee decommissioning trust fund.

New figures show that the fund has grown by $13 million this year despite Entergy making regular, substantial withdrawals.

Entergy administrators say the gains are directly attributable to strong investment returns.

The trust fund is “conservatively invested in a diversified portfolio which closely performs with the market,” said Joe Lynch, Entergy’s senior manager for government affairs. “Given the performance of the market thus far in 2017, this is not surprising.”

Entergy stopped power production at Vermont Yankee at the end of 2014, and the plant’s decommissioning trust fund is to pay for the site’s eventual cleanup.

That’s why there have been many battles over use of the fund. Vermont officials have sought stronger restrictions on Entergy’s ability to tap into the trust, but the federal Nuclear Regulatory Commission – which oversees the fund – repeatedly has ruled against the state’s arguments.

The trust fund also is key to Entergy’s proposed sale of Vermont Yankee to NorthStar Group Services, a New York-based decommissioning company. The deal is contingent on the trust containing $513.5 million when the sale closes, and Entergy would be on the hook to make up the difference if the fund falls below that amount.

Entergy has been drawing on the trust fund since Vermont Yankee’s closure to fund ongoing work and security at the plant. The trust started at $664.56 million around the time of shutdown, and it had fallen to $561.6 million by the beginning of this year.

In a reversal of that trend, new figures from Entergy show that the trust fund climbed to $574.6 million at the end of August.

Entergy withdrew $22.8 million from the fund from January through August, and there also were $2 million in fund expenses – which are mostly taxes – during that time.

But Entergy also is reporting that the trust fund saw $37.8 million in market-related gains in the first eight months of 2017. That led to the trust’s net increase of $13 million for the year thus far.

Financial markets have stayed strong throughout 2017, with the Dow Jones Industrial Average up 14.6 percent for the year as of Tuesday. The S&P 500 is up 13 percent since the start of 2017, and the Nasdaq index has increased by 21 percent.

The trust fund is managed by Bank of New York Mellon Corp., which serves as trustee.

The NRC keeps a close watch on withdrawals, as Entergy is required to send the federal agency regular notices of proposed disbursements from the fund. The latest such notice says Entergy plans to take $4.5 million from the trust in September.

In total, Entergy’s withdrawals so far this year have been less than last year’s pace. But Lynch said there’s no connection between lower spending and the planned sale of the plant to NorthStar, since withdrawals “are being made consistent with the original decommissioning plan” Entergy submitted in 2014.

But it looks like Entergy’s trust fund spending is about to increase. That’s because the company – via a “pre-closing” contract with NorthStar – is undertaking about $30 million worth of work this year and next year in preparation for decommissioning, and that money will come from the trust fund.

With the increase in spending and the vagaries of the stock market, it’s difficult to predict future growth for Vermont Yankee’s trust fund. Under federal regulations, Entergy can project a 2 percent annual growth rate for the fund, but Lynch said that may be on the conservative side.

“Historically, the (Vermont Yankee) balances have exceeded the 2 percent growth rate assumption allowed by the NRC,” he said.

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