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Regulators back Millstone assertion of ‘at risk’ status

October 1, 2018

Waterford — Millstone Power Station’s push for a competitive edge in the state’s zero carbon electricity auction recently gained a boost from regulators and a consumer advocacy agency, who backed Dominion Energy’s assertion that the nuclear plant could face premature closure.

In a brief filed with the Public Utilities Regulatory Authority on Friday afternoon, The Department of Energy and Environmental Protection and the Office of Consumer Counsel urged PURA to designate Millstone “at risk” of closure, a status that would give Millstone’s proposals an edge against many hydropower, solar and wind power producers competing in the zero carbon auction.

If PURA agrees that Millstone faces early retirement, regulators will score the plant’s proposals as if it were a new power resource, grading not only the bid price but benefits the plant provides such as grid reliability, fuel diversity and security, and avoiding greenhouse gas emissions produced by other fuels.

DEEP and OCC — an independent state agency representing utility customers — wrote that at-risk facilities “should be treated as new resources because their retention has the same effects as a new resource in furthering Connecticut’s electric sector goals.”

Regulators earlier this year created the at-risk designation and let Millstone compete in the zero carbon auction after state-hired consultants said early plant closure would spark heavy job losses, grid unreliability and spikes in greenhouse gas emissions from replacement power sources. Millstone’s two operating units are licensed until 2035 and 2045.

Dominion sent PURA and DEEP heavily redacted financial data in an effort to prove the substantially profitable plant was in danger of closing because the wholesale market is dominated by cheaper natural gas.

“We are pleased that DEEP and OCC agree that Millstone should be treated as at risk,” said Millstone spokesman Ken Holt. “They have been given complete access to Millstone’s books, have done their own analysis, and reached the same conclusion that Dominion has: Millstone is at risk.”

DEEP and OCC noted natural gas’s total contribution to electric generation rose from 19 to 33 percent nationwide between 2005 and 2016, threatening several U.S. nuclear plants. Natural gas’s growth was “even more pronounced in New England, where gas-fired generation grew from 15 percent of the fuel mix in 2000 to 49 percent in 2016. This has translated into historically low wholesale electricity prices in New England.”

According to DEEP and OCC, Dominion officials told PURA that nuclear plants’ “reliance on energy margins make the plants more sensitive to unplanned shutdowns and extended outages. During such occurrences, the facilities are not generating power or receiving revenue, yet the high fixed costs remain.”

In its own briefing, Dominion noted that in 2012 it “prematurely retired a very well-run, but uneconomic” nuclear plant in Wisconsin, the Kewaunee Power Station, which faced similar price pressures due to low-cost natural gas. Kewaunee was licensed to operate until 2033.

“These operational decisions are not taken lightly,” Dominion wrote to PURA.

Dominion said its Chairman, President and Chief Executive Officer Thomas Farrell recently told investors that “we have a very high level of confidence that Connecticut recognizes the critical importance of Millstone in that state. I feel highly confident about Millstone’s future now because you know it would be very regrettable for us to have to close it, but we would.”

PURA, DEEP to make final decisions this winter

Earlier this month, Dominion submitted its Millstone proposal to DEEP among 100 other competitors in the zero carbon auction. DEEP says it will select bid winners by the end of the year, and PURA says it will make a final determination on Millstone’s at risk status by Nov. 28.

After DEEP selects winning proposals, the winning energy producers will hammer out fixed-price contracts with the state’s utility companies.

DEEP and OCC said “much of the risks associated with the operation of Millstone were not quantified” in the data turned over by Dominion.

They also said “Dominion has not proffered any evidence supporting its assertion that it is at risk of retiring in the next several years,” largely because Millstone is obligated to provide electricity through at least 2022 after participating in ISO New England’s Forward Capacity Market.

But DEEP and OCC still concluded that Dominion demonstrated Millstone was at risk of retirement starting in June, 2023, and said their finding “does not preclude DEEP from selecting and recommending a contract with Millstone prior to that date, depending on the outcome of the scoring and evaluation process.”

Eversource and United Illuminating filed separate briefs with PURA on Friday.

Eversource and UI argued that to protect ratepayers, PURA must limit contracts between Millstone and utilities to amounts required to simply alleviate the plant’s at risk status.

UI argued the state’s auction could hurt competition, saying Millstone potentially could “comfortably offer a price substantially higher than what is needed to alleviate any at-risk condition, yet still undercut the price offers for new zero carbon resources.”

UI also argued the at-risk status should be revisited if the plant gains a new revenue source that could “render the at risk contract payments unnecessary.”

Both utilities also say they should have access to Dominion’s confidential financial data.

Eversource said as a proposed contracting party, it should gain access to capacity and energy forecasts, revenue sources, capital and operations and maintenance plans for the next 10 years, and estimated shutdown costs. Eversource said Millstone should also exhaust any potential remedies available through the Federal Energy Regulatory Commision.

b.kail@theday.com

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