Dominion to Reassess Plans for Millstone’s Continued Operation after Connecticut Nuclear Support Bill Thwarted

Dominion Energy told POWER it will begin a "strategic reassessment" of its plans for the 2,111-MW Millstone Nuclear Power Station in Connecticut after state legislators effectively blocked a bill that would have provided it a mechanism to bid for state contracts reserved for renewables.

Dominion waged a tough campaign to push the bill through the General Assembly after it was introduced on January 13. But while the bill had been voted out of committee and was to be taken up by the full House and Senate before the legislative session ends on June 7, in the end S.B. 106 failed to find enough votes owing to a hard-fought counter-campaign by opponents of the measure.

A group of independent power producers, including Calpine Corp., Dynegy, and NRG Energy-companies that have filed a federal suit to block nuclear subsidies in New York and Illinois-along with Eversource Energy and United Illuminating, utility companies that serve Connecticut, backed a digital campaign called "Stop the Millstone Payout." Among their chief complaints was that Dominion was asking for "a corporate handout straight from consumers' pockets, while refusing to open its books and prove that it actually needs the money."

The pushback was strengthened by opposition from a number of consumer advocacy groups and citizen groups, which claimed that the measure would only pad Millstone's profits while raising rates for consumers. Opponents cited recent data from the Massachusetts Institute of Technology (MIT) Center for Energy and Environmental Policy Research, Energyzt Advisors, and the New England States Committee on Electricity that suggests Millstone remains profitable and financially successful.

The study from MIT, notably, ranked the Waterford plant as the most profitable of the nation's 61 nuclear stations that are commercially operating. Millstone has a projected net profit of $14.80/MWh of energy produced. (As significantly, the study projected that only 23 of the 61 nuclear plants will be profitable between 2017 and 2019.)

An Environmental and Economic Engine

A similar bill had been introduced in 2016, but while it was passed unanimously by the Senate a year ago, it failed to clear the House before the legislature adjourned. The CT Mirror on June 3 quoted Rep. Lonnie Reed (D-Branford), co-chair of the Energy and Technology Committee, as saying: "It's dead. It's a toxic brand now, literally radioactive."

S.B. 106 has its roots in authority granted to the Department of Energy and Environmental Protection (DEEP) by the legislature in 2011-in a bid to mitigate soaring residential electric rates-to pursue multiple competitive processes to serve retail electric customers directly. DEEP's solicitations have only so far allowed natural gas, large scale hydro, and renewables to compete.

Dominion, which currently sells Millstone's output in long-term bilateral agreements to hedge funds and other financial institutions, argued that if Connecticut wants low-cost, long-term resources that meet economic and environmental goals, the solicitation process had to be expanded to include nuclear power.

"Currently, electricity generated by Millstone is sold to middlemen in hedge funds that drive up the costs, as it is excluded from the state authorized energy procurement processes, resulting in Connecticut having the highest residential electric rates in the continental United States," the company says on a website promoting the measure.

However, that was a point of contention for the Stop the Millstone Payout coalition opposing S.B. 106.

"Dominion's 'dilemma' about selling the Millstone output to hedge funds and increasing retail prices is totally disingenuous. Millstone is not forced, but is itself choosing to make purely financial transactions with counterparties such as hedge funds," said David Gaier, spokesperson for NRG Energy, a power company that is a member of the coalition. "However, that has no direct effect on prices paid for by ratepayers, because the actual output of all generators in the region is sold in the energy market operated by the independent regional grid operator, ISO New England. The suggestion of lowering costs by cutting out the so-called middleman is pure fiction, aimed at deceiving ratepayers who don't understand how they get the electricity they depend on."

Responding to that statement on June 6, Dominion spokesperson Richard Zuercher told POWER: "Connecticut has authorized that every resource, including natural gas and foreign government-owned hydro, can participate in state sponsored procurements. Coal, oil, and nuclear have been excluded." He added: "Dominion cannot participate in the bid process to sell its stable, carbon-free power directly to Connecticut consumers. That means they are missing the opportunity for cheaper, cleaner, more reliable power."

A Bill for Nuclear and Renewables

According to Dominion, if approved, the bill would have allowed Millstone to bid into a competitive auction conducted by state regulators that would likely have taken place this fall, for power deliveries beginning sometime next year. The bill would have essentially required the state's investor-owned utilities to purchase up to 950 MW of power generated by Millstone for five years.

It also proposed doubling the state's renewable portfolio standard (RPS) target to 40% by 2040 from 20% by 2020. But that measure was also widely criticized. Environmental groups like the Sierra Club said the target was too weak, pointing out that neighboring states have more aggressive standards: New York has a mandate of 50% by 2030; Vermont's is 55% by 2017; Rhode Island's is 38.5% by 2035; and Maine's is 40% by 2017. "Connecticut's RPS should mandate at least 50% renewables from the electric sector by 2030 to meet our [Global Warming Solutions Act greenhouse gas] reduction mandates," the group said.

Dominion played up the plant's carbon-free benefits, though it noted that 75% of nuclear plants in New England and New York had recently announced premature retirement due to suppressed wholesale power prices.

If Millstone were to close, it would be replaced by natural gas, a fuel on which Connecticut and New England are already over-reliant, it said. Connecticut would also lose a major baseload power source: Millstone provides 52% of the state's power and nearly 98% of its carbon-free electricity.

Questions About Millstone's Future

The measure's failure may deal a financial blow for the Richmond, Va.-headquartered company, which has a power portfolio of 26.2 GW, sizable transmission assets, as well as natural gas storage systems and pipelines. In a recent earnings statement, Dominion projected that profitability was expected to continue through 2017. An important negative driver it noted, however, involved limited hedging for 2018 production, specifically until the company saw the outcome of the legislation in Connecticut.

Dominion bought the Millstone Power Station in 2001 for $1.3 billion via a state-sanctioned auction, and it says it has invested more than $1.2 billion in capital towards safety, environmental, efficiency, and reliability upgrades. The company also claimed that Millstone was a significant environmental and economic engine in Connecticut, employing 1,060 full-time employees with an average payroll of $168,365 (including salary, overtime, and benefits).

And now, the plant's future may be uncertain.

Dominion had indicated that the plant would compete in ISO-New England's forward capacity auction next year, which could mean continued operations of the two-unit plant through at least 2022. In a statement to POWER on June 5, Dominion's Zuercher said: "The status quo, which our opponents champion, is not working for Connecticut. It would be surprising and a missed opportunity for Connecticut not to reduce the highest electric rates in the continental United States, meet its long-term carbon goals, and ensure the sustainability of a major employer this year given recent events."

Zuercher said Dominion remained committed to finding a long-term solution that benefits the people of Connecticut, "but we also must be fiscally responsible with our investments."

He added: "We will begin a strategic reassessment of our plans for Millstone Power Station." Responding to a question by POWER about what a reassessment might entail, the company said that it is "premature to say what those plans may be."

-Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)

Editor's note: Updated on June 6 to add comments from NRG Energy about Dominion's claim that the company cannot participate in the bid process to sell its power from Millstone directly to Connecticut consumers.

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