Entergy Sells RI CCGT: Reading the Tea Leaves

John Dalton, President, Power Advisory LLC

Entergy announced that it had an agreement with Carlyle Power Partners to sell its 583 MW Rhode Island CCGT for $840/kW.  Is this a strategic exit from the ISO-NE market with an anticipated top in Forward Capacity Auction (FCA) prices or, as has been suggested by UBS, another indication that Entergy is getting close to shutting down the Pilgrim nuclear plant?

It certainly appears that FCA prices have peaked based on evidence of “capacity creep”, i.e., what are likely to be relatively low cost increases in capacity at various existing facilities (primarily CCGTs) across New England. (See the ISO-NE Interconnection Queue)  However, if Entergy were planning on closing Pilgrim wouldn’t it hold on to its RI CCGT to get the market heat rate and possibly the FCA valuation bump from the closure of the 677 MW of baseload supply?

UBS notes that the RI CCGT was a physical hedge for Entergy’s Vermont Yankee (retired) and Pilgrim Nuclear Power Plants and that with an impending retirement of Pilgrim the CCGT isn’t core to Entergy’s return to basics strategy.