Possible Indian Point Nuke Shutdown Heightens Economic Fears

For more than half a century Indian Point has been a prime employer and tax-revenue generator in the Westchester County region of New York

Mayor Michael Bloomberg
New York City Mayor Michael Bloomberg says Indian Point's nuclear power supply is critical to the city's economy viability/Credit: Andy Sternberg

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Editor’s Note: In this three-part series, SolveClimate News examines the feasibility of closing the Indian Point nuclear facility in Buchanan, N.Y. The plant, now up for relicensing, faces demands for a shutdown by Gov. Andrew Cuomo and many environmental groups. This is part three. (Read parts one and two.)

Danny Carey, a third-generation steamfitter at the Indian Point nuclear power plant, sits on his porch in Cortlandt Manor, N.Y., reminiscing about his family’s decades-long contribution to the facility in Buchanan, about 15 minutes north. 

Carey’s grandfather, Tom, helped build Indian Point 1, which was shut down 37 years ago. His father, Tom Carey Jr., worked on the current active reactors, units 2 and 3. And for the past three decades, Danny, 51, has welded pipes and repaired valves at the controversial nuclear complex that serves up to a quarter of New York City’s electrical needs.

“So many families lived and made careers out of that plant,” he said, his muscled arms and sun-etched face bearing witness to a lifetime of labor. “It’s provided a lot of work for a lot of years.”

For more than half a century Indian Point has been a prime employer in the region, providing work to nearly 1,000 contractors and 1,100 salaried workers each year, said Jerry Nappi, a spokesperson for the plant. 

Nappi estimated that the plant’s total annual payroll is $137 million, putting the average yearly income for employees at roughly $125,000.

Government officials have relied on the approximately $75 million in property taxes, fees and revenue-sharing that Indian Point — now owned by Entergy Nuclear — pays to state, county and local governments. 

Entergy foots a third of Buchanan’s tax bill, making it one of the least-taxed villages among Westchester County’s six cities, 19 towns and 23 villages, according to village records. The utility contributes nearly $18 million, or approximately one quarter, of all the taxes collected by the local Hendrick Hudson School District. Additionally, Indian Point’s security force rivals that of many local police departments.

However, all of these perks may soon end. 

The 40-year operating licenses for the plant’s two reactors, 2 and 3, are set to expire in 2013 and 2015. Gov. Andrew Cuomo along with other state politicians and residents who are galvanized by fears that a tragedy similar to Japan’s Fukushima disaster could happen in their backyard are demanding the plants’ licenses not be renewed.

As federal regulators weigh approval, key political and business figures on both sides of the battle are trying to shape the debate over the economic impacts of Indian Point’s closure.

Bloomberg: ‘Critical to the City’s Economy’

The plant has the capacity to provide more than 2,000 megawatts of electricity, roughly a quarter of New York City’s electricity needs and 12 percent of the entire state’s, reports the New York Independent System Operator (NYISO), which oversees New York’s power markets and distribution. 

Currently, New York City doesn’t have enough alternatives to substitute for Indian Point’s electricity, especially during high-demand periods such as in the summer months, NYISO says.

Because the city is located far from sources of relatively inexpensive and cleaner hydroelectric or wind resources, a 2006 assessment by the National Academy of Sciences said the city would need five new natural gas- or oil-fired plants to replace Indian Point. Other options include building high-voltage transmission lines to carry power from upstate New York, New Jersey or Canada to New York City.

High-profile opponents have challenged the feasibility of these solutions. 

“All of these other alternatives are a number of years down the road,” said New York City Mayor Michael Bloomberg at a recent news conference. “We have to have power if we’re going to grow, and Indian point, at the moment, is a big part of that.” New York City is expected to add 1 million residents by 2030.

“Local air pollution would increase” with new fossil-fuel generation, Bloomberg added, making “our efforts to reduce greenhouse gas emissions … unachievable.” The city aims to cut heat-trapping gases by 30 percent by 2030. Overall, the mayor said: Indian Point is “critical to the city’s economic viability.”

The Business Council of Westchester, the largest business organization in the county where Indian Point is located, makes a similar point for its region.

In a 2008 analysis, the group concluded that closing Indian Point would “cripple lower Westchester’s economy.”

The report said that “sky-high electricity prices” would force businesses to close or relocate,  costing the region 9,000 jobs, on top of the plant’s direct employees. A shutdown would cost $2.1 billion in cumulative lost wages and nearly $5.5 billion in lost economic output, it said.

Keeping Indian Point Has Its Own Price

However, safely maintaining a nuclear power plant 24 miles from America’s biggest city also carries a hefty price tag, critics say.

“Any evaluation of the expense of replacing the power generated by Indian Point — if it is to be at all honest — must take into consideration the multitude of extraordinary safety, security, environmental, public health, emergency planning and regulatory oversight-related expenses,” wrote Michael Lee, an attorney and member of the Indian Point Safe Energy Coalition, a non-profit whose goal is to close Indian Point.   

To calculate these costs, Westchester County commissioned a study by Levitan & Associates, Inc., a management consulting firm that specializes in the energy industry.

Its conclusions, released in 2005, are similar to those of other studies assessing potential losses of tax payments, jobs and local spending from an Indian Point closure.

The study estimated that by 2014, Indian Point would pay $26.8 million in yearly state, town and local school district taxes.  If the plant were to retire, “it is unknown how the school district would replace these funds other than through higher property taxes,” it said.

Heavy job losses in the county, however, are not a given, the report said. Just under 20 percent of the plant’s employees reside in Westchester. Staff would be needed to decommission the plant in the event of a shutdown. As well, job losses could be further mitigated if replacement gas, oil or other facilities are built.

The study also calculated some less obvious savings from retiring Indian Point.

Hudson Valley fisheries, for instance, could reap $2.2 billion in economic benefits if Indian Point no longer ran a cooling system that expels hot water into the Hudson River and causes massive fish kills, the report said. Westchester County could save $35 million by reducing emergency preparedness costs. 

Prices: How High is Too High?

New York State’s electricity prices are already 70 percent higher than U.S. electricity prices on average, according to U.S. Energy Information Administration statistics. New York City and Westchester County pay among the highest rates in the state, second only to Long Island. 

Without Indian Point’s electricity, rates would be pushed higher still, concludes NYISO. When coupled with the state’s already high taxes, an increase in electricity rates could potentially cross a threshold that would cause businesses to flee, say Indian Point supporters.

According to an analysis called plaNYC, which was updated and released by the Bloomberg administration in April 2011, the cost of replacing Indian Point’s electricity with other power-generating sources, including gas-fired plants, would be over $2 billion.

While this amount would likely be borne by power companies constructing the new generators or transmission wires, the companies would be forced to pass expenses onto ratepayers. 

This could translate into at least $1.5 billion in higher energy costs for New Yorkers over the next decade, said the same report. For the average resident, this would mean a 6 percent increase in monthly utility bills or an average of $65 per year in electricity costs, according to figures from Con Edison, New York’s biggest utility.

Many say this would be a small price to pay to no longer have to worry about Indian Point.

“The experts play the odds, and the odds are not as long as they seem,” said Gary Shaw, a founding member of the Croton Close Indian Point group.

Decommissioning Costs

If the U.S. Nuclear Regulatory Commission (NRC) does not renew the licenses for reactors 2 and 3, the regulatory agency estimates that it would cost $407 million to decommission the plant, a five- to 10-year process, according to estimates. 

Entergy is mandated to have funds set aside for this purpose. The state could choose to purchase the plants from Entergy before they’re decommissioned, the Levitan study says.

In so doing, Gov. Cuomo could follow his father’s example. Responding to the urging of a vocal majority of voters, Gov. Mario Cuomo negotiated an agreement with the Long Island Lighting Company (LILCO), owner of the Shoreham nuclear power plant in Long Island, to close the $5.3 billion facility in 1989 and turn it over to the state in return for a $2.5 billion tax write-off and rate increases. 

Some observers argue that these increases, coupled with the absence of nuclear power, have contributed to Long Island’s notoriety for having the highest electricity costs in the state.

The Levitan study also states that Entergy would be compensated between $500 million and $2.7 billion for closing Indian Point, depending on whether closure was voluntary or obtained through condemnation. This amount, the firm speculated, would be funded with tax-exempt general obligation bonds and paid by taxpayers. 

The site could then potentially be sold to developers to build gas-fired generating plants that may help prevent losses in electricity, jobs and tax revenues.

For Gov. Cuomo, however, the priority now is safety not cost. “I understand the power and the benefit,” he said following the Japan disaster. “I also understand the risk, and this plant — in this proximity to New York City — was never a good risk.”