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Early Plant Retirements Early Plant Retirements | 3 Months Ended
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Mar. 31, 2018
Early Plant Retirements [Line Items] |
Early Plant Retirements | Early Plant Retirements Fossil On June 1, 2017, Power completed its previously announced retirement of the generation operations of the existing coal/gas units at the Hudson and Mercer generating stations. For the three months ended March 31, 2017, Power recognized total D&A of $574 million for the Hudson and Mercer units to reflect the significant shortening of their expected economic useful lives in 2017. In the three months ended March 31, 2018 and 2017, Power recognized pre-tax charges in Energy Costs of $4 million and $7 million, respectively, primarily for coal inventory lower of cost or market adjustments. Power is exploring various opportunities with these sites, including using the sites for alternative industrial activity or the disposition of one or both of the sites. If Power determines not to use the sites for alternative industrial activity, the early retirement of the units at such sites would trigger obligations under certain environmental regulations, including possible remediation. The amounts for any such environmental remediation are neither currently probable nor estimable but may be material. As of December 31, 2016, Power had reduced the estimated useful life of Bridgeport Harbor Station Unit 3 (BH3) from 2025 to the summer of 2021 as it was more likely than not it will retire the unit by this time. PSEG and Power continue to monitor their other coal assets, including the Keystone and Conemaugh generating stations, to assess their economic viability through the end of their designated useful lives and their continued classification as held for use. The precise timing of a change in useful lives may be dependent upon events out of PSEG’s and Power’s control and may impact their ability to operate or maintain certain assets in the future. These generating stations may be impacted by factors such as environmental legislation, co-owner capital requirements and continued depressed wholesale power prices or capacity factors, among other things. Any early retirement or change in the held for use classification of our remaining coal units may have a material adverse impact on PSEG’s and Power’s future financial results. Nuclear Since 2013, several nuclear generating stations in the United States have closed or announced early retirement due to economic reasons, or have announced being at risk for early retirement. In February 2018, Exelon, a co-owner of the Salem units, announced its intention to accelerate the closure of its Oyster Creek nuclear plant located in New Jersey, one year earlier than previously planned for economic reasons. In addition, First Energy announced in March 2018 the early retirement of four nuclear units at the Davis-Besse, Perry Nuclear and Beaver Valley nuclear plants in Ohio and Pennsylvania by 2021. These closures and retirements are generally due to the decline in market prices of energy, resulting from low natural gas prices driven by the growth of shale gas production since 2007, the continuing cost of regulatory compliance and enhanced security for nuclear facilities, both federal and state-level policies that provide financial incentives to construct renewable energy such as wind and solar and the failure to adequately compensate nuclear generating stations for the attributes they bring similar to renewable energy production. These trends have significantly reduced the revenues of nuclear generating stations while limiting their ability to reduce the unit cost of production. This may result in the electric generation industry experiencing a further shift from nuclear generation to natural gas-fired generation, creating less diversity of the generation fleet. In the ordinary course, management, and in the case of the Salem units the co-owner, each makes a number of decisions that impact the operation of our nuclear units beyond the current year, including whether and to what extent these units participate in RPM capacity auctions, commitments relating to refueling outages and significant capital expenditures, and decisions regarding our hedging arrangements. When considering whether to make these future commitments, management’s decisions will primarily be influenced by the financial outlook of the units, including the progress, timing and continued outlook for enactment of proposed legislation in the state of New Jersey. At a co-owners meeting in February 2018, Exelon and Power agreed to cancel the funding of future capital projects at the Salem generating station that are not required to meet NRC or other regulatory requirements or that are not required to ensure its safe operation. The companies agreed that the funding of these projects may be restored when and if legislation is enacted in New Jersey that sufficiently values the attributes of nuclear generation and Salem benefits from such legislation. If any or all of the Salem and Hope Creek units were shut down, it would significantly alter New Jersey’s energy supply predominately by increasing New Jersey’s reliance on natural gas generation. Such a decrease in fuel diversity could also increase the market’s vulnerability to price fluctuations and power disruptions in times of high demand. In April 2018, the New Jersey Legislature voted to pass legislation that would provide a safety net in order to prevent the loss of environmental attributes from selected nuclear generating stations. Power cannot predict whether the legislation will be enacted or, if enacted, whether our nuclear generating stations in New Jersey will be selected or whether the legislation will provide a sufficient safety net for the continued operation of nuclear generating stations in New Jersey. If market prices continue to be depressed and legislation is not enacted that adequately compensates nuclear generating stations for their attributes, Power anticipates it will no longer be covering its costs nor be adequately compensated for its market and operational risks at the Salem and Hope Creek nuclear units and would anticipate retiring these units early. The costs associated with any such retirement, which may include, among other things, accelerated depreciation and amortization or impairment charges, accelerated asset retirement costs, severance costs, environmental remediation costs and additional funding of the NDT Fund would be material to both PSEG and Power. The following table provides the balance sheet amounts by generating station as of March 31, 2018 for significant assets and liabilities associated with Power’s owned share of its nuclear assets.
|  |  | As of March 31, 2018 |
|  |  | Hope Creek |  | Salem |  | Support Facilities and Other (A) |  | Peach Bottom |
|  |  | Millions |
| Assets |  |  |  |  |  |  |  |  |
| Materials and Supplies Inventory |  | $ | 84 |  |  | $ | 83 |  |  | $ | — |  |  | $ | 41 |  |
| Nuclear Production, net of Accumulated Depreciation |  | 602 |  |  | 653 |  |  | 207 |  |  | 797 |  |
| Nuclear Fuel In-Service, net of Accumulated Depreciation |  | 88 |  |  | 107 |  |  | — |  |  | 136 |  |
| Construction Work in Progress (including nuclear fuel) |  | 296 |  |  | 97 |  |  | 1 |  |  | 20 |  |
| Total Assets |  | $ | 1,070 |  |  | $ | 940 |  |  | $ | 208 |  |  | $ | 994 |  |
| Liability |  |  |  |  |  |  |  |  |
| Asset Retirement Obligation |  | $ | 305 |  |  | $ | 252 |  |  | $ | — |  |  | $ | 207 |  |
| Total Liabilities |  | $ | 305 |  |  | $ | 252 |  |  | $ | — |  |  | $ | 207 |  |
| Net Assets |  | $ | 765 |  |  | $ | 688 |  |  | $ | 208 |  |  | $ | 787 |  |
| NRC License Renewal Term |  | 2046 |  | 2036/2040 |  |  | N/A |  |  | 2033/2034 |  |
| % Owned |  | 100 | % |  | 57 | % |  | Various |  |  | 50 | % |
(A) | Includes Hope Creek’s and Salem’s shared support facilities and other nuclear development capital.
The precise timing of any potential early retirement and resulting financial statement impact may be affected by a number of factors, including co-owner considerations, the results of any transmission system reliability study assessments and decommissioning trust fund requirements and other commitments, as well as future energy prices. Power maintains a NDT Fund that funds its decommissioning obligations. See Note 8. Trust Investments.
Power [Member] |
Early Plant Retirements [Line Items] |
Early Plant Retirements | Early Plant Retirements Fossil On June 1, 2017, Power completed its previously announced retirement of the generation operations of the existing coal/gas units at the Hudson and Mercer generating stations. For the three months ended March 31, 2017, Power recognized total D&A of $574 million for the Hudson and Mercer units to reflect the significant shortening of their expected economic useful lives in 2017. In the three months ended March 31, 2018 and 2017, Power recognized pre-tax charges in Energy Costs of $4 million and $7 million, respectively, primarily for coal inventory lower of cost or market adjustments. Power is exploring various opportunities with these sites, including using the sites for alternative industrial activity or the disposition of one or both of the sites. If Power determines not to use the sites for alternative industrial activity, the early retirement of the units at such sites would trigger obligations under certain environmental regulations, including possible remediation. The amounts for any such environmental remediation are neither currently probable nor estimable but may be material. As of December 31, 2016, Power had reduced the estimated useful life of Bridgeport Harbor Station Unit 3 (BH3) from 2025 to the summer of 2021 as it was more likely than not it will retire the unit by this time. PSEG and Power continue to monitor their other coal assets, including the Keystone and Conemaugh generating stations, to assess their economic viability through the end of their designated useful lives and their continued classification as held for use. The precise timing of a change in useful lives may be dependent upon events out of PSEG’s and Power’s control and may impact their ability to operate or maintain certain assets in the future. These generating stations may be impacted by factors such as environmental legislation, co-owner capital requirements and continued depressed wholesale power prices or capacity factors, among other things. Any early retirement or change in the held for use classification of our remaining coal units may have a material adverse impact on PSEG’s and Power’s future financial results. Nuclear Since 2013, several nuclear generating stations in the United States have closed or announced early retirement due to economic reasons, or have announced being at risk for early retirement. In February 2018, Exelon, a co-owner of the Salem units, announced its intention to accelerate the closure of its Oyster Creek nuclear plant located in New Jersey, one year earlier than previously planned for economic reasons. In addition, First Energy announced in March 2018 the early retirement of four nuclear units at the Davis-Besse, Perry Nuclear and Beaver Valley nuclear plants in Ohio and Pennsylvania by 2021. These closures and retirements are generally due to the decline in market prices of energy, resulting from low natural gas prices driven by the growth of shale gas production since 2007, the continuing cost of regulatory compliance and enhanced security for nuclear facilities, both federal and state-level policies that provide financial incentives to construct renewable energy such as wind and solar and the failure to adequately compensate nuclear generating stations for the attributes they bring similar to renewable energy production. These trends have significantly reduced the revenues of nuclear generating stations while limiting their ability to reduce the unit cost of production. This may result in the electric generation industry experiencing a further shift from nuclear generation to natural gas-fired generation, creating less diversity of the generation fleet. In the ordinary course, management, and in the case of the Salem units the co-owner, each makes a number of decisions that impact the operation of our nuclear units beyond the current year, including whether and to what extent these units participate in RPM capacity auctions, commitments relating to refueling outages and significant capital expenditures, and decisions regarding our hedging arrangements. When considering whether to make these future commitments, management’s decisions will primarily be influenced by the financial outlook of the units, including the progress, timing and continued outlook for enactment of proposed legislation in the state of New Jersey. At a co-owners meeting in February 2018, Exelon and Power agreed to cancel the funding of future capital projects at the Salem generating station that are not required to meet NRC or other regulatory requirements or that are not required to ensure its safe operation. The companies agreed that the funding of these projects may be restored when and if legislation is enacted in New Jersey that sufficiently values the attributes of nuclear generation and Salem benefits from such legislation. If any or all of the Salem and Hope Creek units were shut down, it would significantly alter New Jersey’s energy supply predominately by increasing New Jersey’s reliance on natural gas generation. Such a decrease in fuel diversity could also increase the market’s vulnerability to price fluctuations and power disruptions in times of high demand. In April 2018, the New Jersey Legislature voted to pass legislation that would provide a safety net in order to prevent the loss of environmental attributes from selected nuclear generating stations. Power cannot predict whether the legislation will be enacted or, if enacted, whether our nuclear generating stations in New Jersey will be selected or whether the legislation will provide a sufficient safety net for the continued operation of nuclear generating stations in New Jersey. If market prices continue to be depressed and legislation is not enacted that adequately compensates nuclear generating stations for their attributes, Power anticipates it will no longer be covering its costs nor be adequately compensated for its market and operational risks at the Salem and Hope Creek nuclear units and would anticipate retiring these units early. The costs associated with any such retirement, which may include, among other things, accelerated depreciation and amortization or impairment charges, accelerated asset retirement costs, severance costs, environmental remediation costs and additional funding of the NDT Fund would be material to both PSEG and Power. The following table provides the balance sheet amounts by generating station as of March 31, 2018 for significant assets and liabilities associated with Power’s owned share of its nuclear assets.
|  |  | As of March 31, 2018 |
|  |  | Hope Creek |  | Salem |  | Support Facilities and Other (A) |  | Peach Bottom |
|  |  | Millions |
| Assets |  |  |  |  |  |  |  |  |
| Materials and Supplies Inventory |  | $ | 84 |  |  | $ | 83 |  |  | $ | — |  |  | $ | 41 |  |
| Nuclear Production, net of Accumulated Depreciation |  | 602 |  |  | 653 |  |  | 207 |  |  | 797 |  |
| Nuclear Fuel In-Service, net of Accumulated Depreciation |  | 88 |  |  | 107 |  |  | — |  |  | 136 |  |
| Construction Work in Progress (including nuclear fuel) |  | 296 |  |  | 97 |  |  | 1 |  |  | 20 |  |
| Total Assets |  | $ | 1,070 |  |  | $ | 940 |  |  | $ | 208 |  |  | $ | 994 |  |
| Liability |  |  |  |  |  |  |  |  |
| Asset Retirement Obligation |  | $ | 305 |  |  | $ | 252 |  |  | $ | — |  |  | $ | 207 |  |
| Total Liabilities |  | $ | 305 |  |  | $ | 252 |  |  | $ | — |  |  | $ | 207 |  |
| Net Assets |  | $ | 765 |  |  | $ | 688 |  |  | $ | 208 |  |  | $ | 787 |  |
| NRC License Renewal Term |  | 2046 |  | 2036/2040 |  |  | N/A |  |  | 2033/2034 |  |
| % Owned |  | 100 | % |  | 57 | % |  | Various |  |  | 50 | % |
(A) | Includes Hope Creek’s and Salem’s shared support facilities and other nuclear development capital.
The precise timing of any potential early retirement and resulting financial statement impact may be affected by a number of factors, including co-owner considerations, the results of any transmission system reliability study assessments and decommissioning trust fund requirements and other commitments, as well as future energy prices. Power maintains a NDT Fund that funds its decommissioning obligations. See Note 8. Trust Investments.

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