Nuclear Plant Closures Bring Economic Pain to Cities and Towns

This article was originally published by Stateline, an initiative of The Pew Charitable Trusts, and was written by Martha T. Moore.

BUCHANAN, N.Y. — From the road, overgrown greenery and a formidable razor-wire fence block the view of the twin domes of Indian Point Energy Center. But Indian Point’s neighbors in this densely populated New York City suburb have a clear picture of what will happen in 2020 when this 45-year-old nuclear power plant starts to shut down: millions of dollars in lost tax revenue.

Aging nuclear power plants are closing, doomed by the high cost of refurbishing them and the low price of natural gas. That is causing fiscal pain for municipalities that rely on revenue from the plants, and creating political pressure for state subsidies to forestall further shutdowns.

Nuclear power generates about a fifth of the nation’s electricity, through 99 nuclear reactors at 61 plants. That number is down from a peak of 112 reactors in 1990 and will likely shrink further.

Six reactors have shut down in the past five years, and eight more reactors are scheduled to close by 2025 at plants in California, Iowa, Massachusetts and Michigan. Nuclear power operators have said they will close a further five reactors at four plants in Ohio and Pennsylvania if those states don’t offer subsidies.

The closure of Indian Point, announced in January 2017, capped decades of controversy over its safety, and was a victory for environmental groups and Democratic Gov. Andrew Cuomo, who had long opposed the plant.

But the closure presents the local Hendricks-Hudson school district, where 2,500 children practice evacuation drills annually and nurses have iodide pills on hand in case of a radiation leak, with a budget crisis. About one-third of the district’s annual $79 million budget comes from Indian Point’s payment in lieu of taxes. By 2024, three years after the power plant shuts, the yearly payments will have dwindled from $25 million to $1.35 million.

Budget cuts and tax increases are inevitable, according to Joseph Hochreiter, the district’s superintendent.

“Should the power plant close, you can feel safe or not safe, depending on what your position is” on nuclear power, Hochreiter said. “But we’ve got to make up that revenue.’’

Hochreiter may reorganize the district’s three elementary schools to reduce the number of teachers needed. He knows parents won’t like it. “Those are going to be painstaking conversations, because families moved to the neighborhood because they can see the elementary school over there across the street.’’

Payments from Indian Point, which employs about a thousand people, also make up more than 40 percent of the budget for the little village of Buchanan. “The biggest challenges are the loss of revenue, the loss of jobs, the cleanup, and the reuse of the 240 acres,’’ said Linda Puglisi, supervisor of the town of Cortlandt, of which Buchanan is a part.

A local task force, formed after the shutdown was announced, has hired an economic consultant. But hopes for redeveloping Indian Point’s 240 acres on the Hudson River are slim: decommissioning a nuclear power plant takes years and leaves behind a cache of radioactive spent fuel “into perpetuity — untaxed,” Puglisi said.

To help communities affected by the Indian Point closure, New York state lawmakers this year pumped $24 million into a 3-year-old “cessation mitigation fund,” originally designed to help upstate towns with shuttered coal plants. It now totals $56 million.

“There’ll be something we will receive,” Puglisi said. “But it will not rise to what we have been used to.”

Other states may pursue the same strategy. In California, the Diablo Canyon reactor, which employs 1,500 people, will shut down in 2025. A bill on Democratic Gov. Jerry Brown’s desk would allocate $75 million to offset lost property tax revenue in San Luis Obispo County, the reactor’s home, $10 million for economic development, and $89 million for worker retraining.

Another Three Mile Island Crisis

At Pennsylvania’s Three Mile Island — a name that became a byword for the perils of nuclear power after the plant’s 1979 partial meltdown — officials in Londonderry Township are helping power plant owner Exelon lobby for state aid. The 5,200-resident township that hosts the plant could lose as much as $700,000 annually in school taxes if Three Mile Island closes.

“Nothing good comes from having the largest employer in the region shut down,” said Steve Letavic, the township manager. He has put off hiring an office manager and public works employee and cut the $15,000 summer parks and recreation program.

Many nuclear power plants have curried public favor by being good corporate citizens. In Londonderry, for example, Three Mile Island runs a golf tournament for the local fire department that raises enough money to cover the $50,000 annual mortgage payment on the firehouse.

Redevelopment of Three Mile Island isn’t an option, Letavic said, because of the nuclear waste that will remain on the site, which is in the middle of the Susquehanna River. “I see it as a complete loss. It’s a loss of revenue, it’s a loss of jobs … and you end up with an underutilized piece of real estate.”

In Lacey Township on the New Jersey shore, the nation’s oldest operating nuclear plant, Oyster Creek, will shut down in September after 49 years. The town gets $11 million in annual taxes from Oyster Creek and has identified itself so closely with the nuclear plant that its municipal seal bears the symbol of an atom as well as a sailboat and a pheasant.

Development long ago chased wild pheasants from the area, and now nuclear power is disappearing as well. “I have no more pheasants and no more nukes. I still have sailboats, as long as there’s Barnegat Bay,” said Township Administrator Veronica Laureigh.

The experience of other towns with shuttered nuclear plants isn’t encouraging. After the Vermont Yankee nuclear plant closed in 2014, the 2,200 residents of Vernon, where the plant was located, found their tax base cut in half. As a result, police patrols, library hours and municipal staff were cut, too.

Asking for State Help

Four states have moved to shore up nuclear power plants financially despite opposition from some environmental groups, consumer advocates and the coal and natural gas power industries.

In 2016, New York passed a $7.6 billion package to help three upstate nuclear power plants — though not Indian Point. And Illinois passed legislation directing $2.4 billion to two plants in the state through “zero emissions credits” that reward nuclear plants for not producing climate-changing carbon emissions.

In New Jersey, where 40 percent of the state’s electricity comes from nuclear plants, the state will subsidize two plants at a rate of $300 million a year under a bill enacted in May. (Oyster Creek was not included in the subsidy plan.) Connecticut enacted legislation last October that could allow its sole nuclear plant, the Millstone reactor in Waterford, to sell electricity at higher prices if Dominion Energy, its owner, can show the reactor is financially strapped. 

States “understand the value of these incredible nuclear assets that are in their backyard,’’ said Christine Csizmadia, director of state and governmental affairs and advocacy for the Nuclear Energy Institute, an industry association. “They don’t want to lose the jobs, they don’t want to lose the economic benefit, they don’t want to lose the clean energy.”

States shouldn’t make long-range energy plans based on low natural gas prices, she said. “This is a short-term market condition that is pushing out a long-term asset.’’

Nuclear providers in Ohio and Pennsylvania also are asking for state funding, but they face opposition from those states’ large coal and natural gas industries, as well as consumer advocacy groups who oppose any potential rate increases.

While Pennsylvania legislators have formed a nuclear power caucus, proposals are not likely until next year, according to David Fein, senior vice president of state governmental and regulatory affairs for Exelon, which owns Three Mile Island as well as New Jersey’s Oyster Creek. “I believe we are most likely to see activity after they get through their fall elections,” he said.

Some large environmental organizations are also pressing states to keep nuclear power plants operating. Groups including the Environmental Defense Fund and the Natural Resources Defense Council fear that energy from nuclear plants will be replaced by emissions-producing coal and natural gas plants. Without maintaining nuclear power, states won’t be able to meet targets for reducing carbon emissions, they say.

“We do see that as a threat and are concerned about it,” said Steve Clemmer, director of energy research for the Union of Concerned Scientists.

Keeping nuclear plants going for another decade will give states time to increase the amount of energy from wind and solar, and also cut emissions by improving energy efficiency, Clemmer said.

“Over a longer time frame, with sufficient planning,” he said, “most existing nuclear facilities could be replaced with renewables and efficiency.”

As part of the nuclear subsidy packages, some states have increased requirements for obtaining power from renewable sources: New York and New Jersey will require half of their power to come from renewables by 2030, and Connecticut will require 40 percent by that date. Illinois will require a quarter of its power to come from renewables by 2025.