A recent legal analysis disputes claims by Arizona Public Service that the Palo Verde Nuclear Generating Station would be forced to close if the Clean Energy for a Healthy Arizona ballot measure passed in Arizona. We’ll get the other side of the story from consultant Matthew Benson of the consulting firm Veridus. Benson represents Arizonans for Affordable Electricity, which is fighting the clean energy initiative. The group has taken over a million dollars in funds from Pinnacle West, which is the parent company of Arizona Public Service, part owner of the Palo Verde nuclear power plant.
TED: A RECENT LEGAL ANALYSIS DISPUTES CLAIMS BY APS THAT THE PALO VERDE NUCLEAR GENERATING STATION WILL BE FORCED TO CLOSE IF VOTERS APPROVE A BALLOT MEASURE THAT CALLS FOR STRONGER RENEWABLE ENERGY STANDARDS. WE RECENTLY HEARD FROM BACKERS OF THE BALLOT MEASURE WHICH AGREES WITH THE LEGAL OPINION. HERE NOW, WITH THE OTHER SIDE IS MATTHEW BENSON OF THE FIRM VERDES, HERE REPRESENTING A GROUP FIGHTING THE INITIATIVE, AND WE SHOULD NOTE, THAT THE GROUP RECEIVED FUNDS FROM PINNACLE WEST, THE PARENT COMPANY OF APS WHICH IS PART OWNER OF PALO VERDE. GOOD TO SEE YOU AGAIN.
MATTHEW BENSON: GOOD TO SEE YOU.
TED: WE MENTIONED PART OWNER OF PALO VERDE. THAT'S ONE OF THE THINGS THE THIS LEGAL OPINION TALKS ABOUT. APS IS SAYING IF THIS BALLOT MEASURE GOES THROUGH, THERE WILL BE SO MUCH EXCESS, THE POSSIBILITY OF SO MUCH EXCESS ENERGY, AND THERE'S NOWHERE TO SELL THIS STUFF, IT WOULD BEHOOVE APS TO SHUT DOWN PALO VERDE, AND THEY'RE ARGUING THAT CAN'T HAPPEN. WHY DO YOU THINK IT COULD HAPPEN?
MATTHEW BENSON: WELL, LOOK, THERE ARE MULTIPLE OWNERS OF THAT PLANT, BUT THE FACT OF THE MATTER IS, APS IS THE LARGEST OWNER, THEY A RETHE OPERATOR OF THE PLANT, AND IF IT IS UNECONOMICAL FOR APS TO OPERATE PALO VERDE, IT WILL BE UNECONOMICAL FOR ANY OF THE OWNERS TO BE INVOLVED IN THAT FACILITY. AND AGAIN, IT COMES DOWN TO BASIC ECONOMICS. THE DOUBLE-EDGED SWORD OF SOLAR POWER IS THAT IT FLOODS THE GRID WITH ENERGY DURING TIMES OF THE DAY AND TIMES OF THE YEAR WHEN THERE'S NOT DEMAND FOR IT. IT ESSENTIALLY CROWDS OUT THE NUCLEAR THAT IS PROVIDED BY PALO VERDE AND, OF COURSE PALO VERDE AS A BASE LOAD PLANT RUNS 24-7, 365. THERE’S NO SWITCHING IT ON AND OFF.
TED: THE LEGAL ANALYSIS, LETS KIND OF GO THROUGH POINT BY POINT, I DON’T WANT TO GET TOO DEEP IN THE WEEDS, BUT JUST IN GENERAL TERMS.
MATTHEW BENSON: I APPRECIATE THAT.
TED: AS YOU MENTIONED, SEVEN ENTITIES OWN PALO VERDE. APS THE LEADER THERE. BUT IT’S ONLY 25% OUTRIGHT, I THINK 4% IS LEAST, IT’S 29% SOMETHING ALONG THESE LINES. WHY WOULD THE OTHER OWNERS OF PALO VERDE AGREE WITH APS TO SHUT THIS THING DOWN?
MATTHEW BENSON: WELL, IF IT'S NO LONGER ECONOMICAL TO OPERATE THAT PLANT, THEN OF COURSE THEY'RE GOING TO SHUT IT DOWN. AND LOOK, WE'VE SEEN THIS PLAY OUT. THIS IS NOT THEORETICAL. IN CALIFORNIA WHICH HAS THE SAME 50% RENEWABLE MANDATE THAT ARIZONA IS CONSIDERING, THEY'VE BEEN SWITCHING OFF NUCLEAR PLANTS AS THEY HAVE RAMPED UP WITH SOLAR. SO WE HAVE SEEN IT PLAY OUT ELSEWHERE. IF YOU DON'T WANT TO TAKE MY WORD FOR IT, IF YOU DON'T WANT TO TAKE APS' WORD FOR IT, THEN JUST CONSIDER THAT EARLIER TODAY, THE RESIDENTIAL CONSUMER OFFICE WHICH IS A STATE AGENCY CHARGED WITH REPRESENTING THE INTERESTS OF ARIZONA CONSUMERS RESIDENTIAL RATEPAYERS, THEY ISSUED A REPORT SAYING PALO VERDE WILL CLOSE BY 2029 IF THIS INITIATIVE BECOMES LAW. THAT IS DECADES EARLIER THAN PLANNED.
TED: IF IT DOES HAVE TO CLOSE EARLIER, RIGHT NOW I THINK THE TIME LINE IS 2045, 2047, DECOMMISSIONING SOMEWHERE ALONG THOSE LINES AND OBVIOUSLY THE COST OF DECOMMISSIONING IS WELL OVER $2 BILLION DOLLARS. IT’S NOT A CHEAP THING TO SHUT DOWN A NUCLEAR POWER. IF YOU CLOSE IT EARLIER BECAUSE THE BALLOT INITIATIVE GOES THROUGH, THE ARGUMENT IS EITHER, APS NOR THE OTHER OWNERS DON'T HAVE THE RESOURCES TO PAY FOR THAT DECOMMISSION.
MATTHEW BENSON: WELL, IF YOU CAN NO LONGER OPERATE THE PLANT BECAUSE IT NO LONGER MAKES FINANCIAL SENSE, YOU'RE GOING TO CLOSE THE PLANT. NOW OF COURSE THEY'RE GOING TO LOOK AT BOTH SIDES OF THE EQUATION, WEIGH THE COSTS BUT AGAIN, THE INDEPENDENT ENTITY HERE, RUKO, A STATE AGENCY LOOKED AT THIS VERY THING AND SAID THE PLANT WILL CLOSE. IN CALIFORNIA, WE HAVE SEEN WHERE PLANTS HAVE CLOSED. SO, WE BELIEVE THIS IS GOING TO HAPPEN, AND IF IT HAPPENS, THE RAMIFICATIONS ARE ENORMOUS ECONOMICALLY, ENVIRONMENTALLY. IF YOU ARE SOMEONE SITTING AT HOME AND YOU ARE WATCHING THIS AND YOU WORRY ABOUT CLIMATE CHANGE, THE LAST THING YOU SHOULD WANT TO DO IS CLOSE THE NATION'S SINGLE LARGEST PROVIDER OF CLEAN CARBON-FREE ELECTRICITY. AND AGAIN, I ASK YOU THIS QUESTION, IF THE YES CAMPAIGN INTENDED TO PROTECT PALO VERDE. IF THEY SUPPORT NUCLEAR ENERGY IN THE WAY THAT SUDDENLY THEY DO BECAUSE THEY'VE DONE POLLING AND FOCUS GROUPS AND CLEARLY THEY'VE DONE A 365 HERE OR 360 ON THIS ISSUE, WHY WOULDN'T THEY PROTECT PALO VERDE IN THE BALLOT LANGUAGE? WHY WOULD THEY EXPLICITLY DEFINE CLEAN ENERGY TO EXCLUDE NUCLEAR?
TED: DO YOU THINK THAT IF APS THOUGHT THEY HAD TO CLOSE IT, IT’S COST EFFECT TO CLOSE IT AND GRANTED THEY COULD GET ENOUGH OF THE FELLOW OWNERS TO GET OVER THAT 50% TO AGREE TO CLOSE THING, DO YOU THINK THE CORPORATION COMMISSION WOULD GO ALONG WITH SUCH A THING? THE RELIABILITY OF VOLATILITY ON NATURAL GAS PRICES WOULD SKYROCKET. IS THAT WHAT WOULD BE GOOD FOR THE CONSUMER?
MATTHEW BENSON: LOOK, I CAN'T SPEAK TO WHAT A CORPORATION COMMISSION TEN YEARS DOWN THE ROAD MAY OR MAY NOT DO. THAT IS IMPOSSIBLE TO SAY. BUT I'M NOT SURE THAT THE CORPORATION COMMISSION WOULD REALLY BE ABLE TO STAND IN THE WAY OF MULTIPLE UTILITIES SAYING THIS PLANT IS BLEEDING US DRY, WE HAVE NO CHOICE. WE HAVE TO CLOSE IT.
TED: UM AND THE LAST PART, THE FOURTH ASPECT OF THIS LEGAL OPINION WAS THAT APS DOES SEE GENERATION OVER GENERATION AS A PROBLEM, YOU CAN ALWAYS CUT BACK ON FOSSIL FUEL, YOU CAN ALWAYS START INVESTING IN STORAGE CAPACITY, YOU COULD FIND, THIS IS A LEGAL OPINION HERE, YOU COULD FIND WAYS TO COMBAT THIS PROBLEM OF TOO MUCH ENERGY.
MATTHEW BENSON: SURE, THAT'S EASY FOR THEM TO SAY. THE FACT OF THE MATTER IS IF THIS INITIATIVE PASSES, REGARDLESS WHETHER IT PASSES, APS IS MAKING AND THE OTHER UTILITIES ARE MAKING MASS INVESTMENTS IN RENEWABLES IN STORAGE, IN OTHER ADVANCES IN THE GRID. SO THAT IS HAPPENING ALREADY. BUT THE IDEA WE'RE GOING TO CLOSE THE NATION'S SINGLE LARGEST PRODUCER OF ELECTRICITY AND THAT'S NOT GOING TO HAVE AN IMPACT ON THE GRID, ON SUPPLY AND DEMAND IS SIMPLY RIDICULOUS.
TED: BUT, AGAIN, THE LEGAL ANALYSIS SAYS THAT APS CAN'T DO THAT WITHOUT THE AGREEMENT OF OTHER PEOPLE, WITHOUT THE AGREEMENT OF THE CORPORATION COMMISSION, AND THESE SORTS OF THINGS. SO THE QUESTION THAT THEY'RE SAYING IS APS KEEPS THREATENING, IF THIS GOES THROUGH, WE’RE GOING TO HAVE TO CLOSE THIS DOWN, THEY DON'T HAVE THE LEGAL AUTHORITY TO CLOSE IT DOWN.
MATTHEW BENSON: RIGHT, WHAT I'M SAYING AND WHAT APS IS SAYING IS ESSENTIALLY THAT THEIR HANDS WOULD BE TIED. ECONOMICS WILL DRIVE THIS DECISION, IF THIS INITIATIVE PASSES. THEY WILL HAVE NO CHOICE, NOT APS, NOT THE OTHER OWNERS OF THAT PLANT INVOLVED, AND RUKO BEING THE STATE AGENCY HAS LOOKED AT IT AND COME TO THE EXACT SAME CONCLUSION. SO REALLY IT'S THE YES CAMPAIGN AND THEY'RE PAID ATTORNEYS CHURNING OUT REPORTS FOR THEM ON THE SIDE WHO ARE ON AN ISLAND HERE. THEY'RE THE ONES SAYING THAT PALO VERDE WILL SURVIVE IN SPITE OF ALL EVIDENCE TO THE CONTRARY.
TED: WE MENTIONED 25% OWNERSHIP, 4% LEASING, COULD APS SELL SOME OF THAT OWNERSHIP TO GET OUT FROM UNDER THAT OVERGENERATION? IS THAT AN OPTION?
MATTHEW BENSON: I HAVE NO IDEA. THAT'S IMPOSSIBLE TO SAY. I DON'T KNOW THAT THEY WANT. I MEAN CERTAINLY, LOOK, APS, THIS IS THE FLAGSHIP. THIS FACILITY IS CENTRAL TO THE GRID. WHY WOULD THEY WANT TO SELL IT? THAT'S NOT SOMETHING THEY WANT TO CONTEMPLATE, AND FRANKLY, IF YOU'RE AN ARIZONA HOME OWNER, IF YOU LIVE IN THIS STATE, YOU SHOULD WANT APS TO CONTINUE TO HAVE PALO VERDE CHURNING OUT CLEAN, COST EFFECTIVE ENERGY IN THE STATE. THE LAST THING YOU SHOULD WANT IS THE INITIATIVE TO FORCE APS OR ANYONE ELSE TO SELL IT.
TED: LAST POINT, THE ANALYSIS BOTTOM LINE HERE IS THAT APS WON'T, AND THEY CAN'T SHUT DOWN PALO VERDE. YOU SAY?
MATTHEW BENSON: THAT'S SIMPLY WRONG. UH, THEIR HANDS WILL BE TIED. THE PLANT WILL CLOSE IF THIS INITIATIVE PASSES, AND THE BIGGEST QUESTION THAT ARIZONA VOTERS NEED TO TAKE INTO ACCOUNT HERE, IS THIS A CHANCE THAT WE WANT TO TAKE? DO WE REALLY, WITH THIS KIND OF UNCERTAINTY, WANT TO TAKE THE CHANCE THAT WE'RE GOING TO LOSE PALO VERDE, EMPLOYER OF 3,000 JOBS, THE LARGEST PAYER OF PROPERTY TAX IN THIS STATE, AND THAT PROPERTY TAX BY AND LARGE SUPPORTS K-12 SCHOOLS. SO ARE WE GOING TO TAKE THAT GAMBLE?
TED: ALRIGHT, MATTHEW BENSON, VERIDUS CONSULTING, THANK YOU FOR JOINING US.
MATTHEW BENSON: THANK YOU. .
consultant Matthew Benson of the consulting firm Veridus
