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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--A bitter fight over the future of the Millstone Nuclear Power Station in Connecticut has split investor-owned utilities operating in the Nutmeg State. On one side is Dominion Energy Incorporated (NYSE:D) (Richmond, Virginia), owner of the two-unit, 2,111-megawatt (MW) Millstone plant, a pressurized water reactor (PWR) facility that has operated for 45 years. On the other side are two investor-owned utilities--Eversource Energy (NYSE:ES) (Springfield, Massachusetts) and Avangrid Incorporated (NYSE:AGR) (New Gloucester, Maine)--as well as a clutch of merchant generators like Calpine Corporation (NYSE:CPN) (Houston, Texas), NRG Energy Incorporated (NYSE:NRG) (Princeton, New Jersey) and others who oppose what they have decried as a bailout for Millstone.
Dominion spokesperson Ken Holt told Industrial Info that the Millstone plant is profitable, with about 88% of its output hedged for 2017. Typically, he added, the plant's output is hedged three years into the future. Dominion announced a strategic assessment of Millstone in June after the state legislature ended its regular session without taking action on bills Dominion had sought, suggesting that the nuclear plant's continued operation may be in doubt. Dominion has been mum on its strategic reassessment since announcing it.
According to the U.S. Energy Information Administration (EIA) (Washington, D.C.), in 2015, Millstone Units 2 and 3 produced about 46% of the electricity used in Connecticut. Dominion says that Millstone is a critical element of Connecticut's effort to lower greenhouse gas emissions to meet a 2008 state law, which mandates an 80% reduction of such emissions by 2050 compared to a 2001 baseline. Millstone reportedly provides nearly all of Connecticut's carbon-free electricity.
Holt could not say when that assessment would be complete, but he did note, "Millstone is not immune to the same pressures that have caused other nuclear plants to close prematurely," including Dominion's own Kewaunee plant, in Wisconsin, which went offline in May 2013 because it could not operate profitably. Other nuclear plants that have decided to close prematurely because they were no longer economically viable include Fort Calhoun in Nebraska, Pilgrim in Massachusetts, Yankee in Vermont, the two-unit Indian Point facility in New York and the two-unit Diablo Canyon station in California. For more on the economic factors driving nuclear plant closures, see January 10, 2017, article - Entergy Strikes Deal to Close Indian Point Nuclear Plant.
Two states--Illinois and New York--have enacted measures to provide financial support for some nuclear stations in their states. For more on that, see December 20, 2017, article - Exelon Wins Financial Aid for Two Uneconomic Nuclear Plants. Other states, including Ohio and Pennsylvania, have been lobbied by nuclear utilities to enact similar measures, but to date, these states have not done so. For more on that, see May 30 2017, article - Down but Not Out? FirstEnergy Still Seeking $300 Million Per Year in Nuclear Support.
When the Connecticut legislature adjourned in early June, two Millstone-related bills died with it. One proposed bill would allow nuclear power to be counted as a "renewable" resource to help the state achieve its renewable portfolio standard. The other, Holt said, was supported by the state's Department of Energy & Environmental Protection (DEEP) (Hartford, Connecticut), which, among other things, regulates the state's electric utilities.
The bill, which DEEP supported, Holt explained, would have established fuel-specific "lanes" for hydroelectric, renewables, nuclear and waste-to-energy, and within each of those lanes, competing facilities could bid to supply up to 50% of the state's electric energy. Millstone might compete with the nearby Seabrook nuclear station for a slice of the nuclear energy "lane," Holt said. Capacity markets would continue to be administered by the ISO-New England grid operator. The DEEP-backed bill died when the state's legislature adjourned.
"We have two basic options for Millstone," Holt said in an interview. "We can shut it down or we can continue to operate it. Connecticut has the highest retail electric prices in the continental United States, but some of the lowest wholesale prices. Retail electricity costs $81 per megawatt-hour (MWh), but it sells on the wholesale market for $29 per MWh--that's a large gap, and there's room for improvement. We want to continue to work with policymakers on legislation that would benefit Connecticut customers and give us greater financial stability," Holt said.
If Dominion decided to close Millstone, it could contract with another firm to provide dispatchable energy and capacity to replace Millstone, Holt said. Or Dominion could pay a fine for failing to fulfil its contracts. Millstone is contracted to provide energy and capacity until 2021. "We don't have to continue operating Millstone," Holt said, adding he did not know what penalty could be levied if Dominion could not contract with another electricity provider to cover Millstone's foregone capacity and energy.
The loss, or even the potential loss, of Millstone could throw New England's electric market into disarray, something Dominion's critics say is behind the company's strategic assessment of that nuclear power station. New England has seen the closure of several nuclear and coal-fired plants coupled with a difficulty siting interstate transmission lines as well as natural gas pipeline that would fuel some of the announced gas-fired generation projects designed to replace the shuttered coal and nuclear capacity. For more on that, see April 29, 2016, article - Low Commodity Prices Kill, Stall North American Pipeline Projects and April 8, 2015, article - Developers Delay, Cancel Gas Projects in U.S. Northeast.
Right now the Connecticut legislature is in an open-ended special session, focusing primarily on passing a state budget, Holt said. There's no Millstone-related bill in play, but the Dominion spokesperson emphasized that bills on any topic could be introduced. There is no end date for the special session.
Dominion bought Millstone for $1.3 billion in 2011. Since that time, the company said that it has invested an additional $1.2 billion upgrading the plant.
Dominion's critics have alleged the company is seeking a $300 million bailout to keep Millstone open, a number Holt said was "made up." He also denied that the company was seeking a bailout. The critics, organized under the banner of "Stop the Millstone Payout," on June 30 sent a letter to Connecticut lawmakers imploring them to reject Dominion's efforts to secure financial support for Millstone.
"As many of you have noted, our organizations don't agree on many issues," began the letter, signed by Connecticut's two investor-owned utilities, five competitive power providers and a petroleum group. "But one thing has brought us together: opposition to providing unnecessary financial support for the nation's most profitable nuclear plant at the expense of ratepayers."
"The Massachusetts Institute of Technology recently concluded that the Millstone Nuclear Plant in Waterford ranks #1 for profitability among the more than 60 nuclear plants operating in the United States," the letter continued. "A separate study performed for the New England States Committee on Electricity (NESCOE) concluded that "under every hypothetical scenario" Millstone will remain profitable through 2030."
"Connecticut faces very tough choices as it looks to adopt a budget. Whenever a deal is reached, the end result will be painful cuts to many services that residents count on," the Millstone critics wrote. "Why would Connecticut make a situation like that even worse by raising residents' electricity bills when they can least afford it?"
The letter went on: "A recent report from an industry analyst showed that Connecticut ratepayers would be on the hook for any financial support given to Millstone costing them more than $300 million extra each year. There is no impending danger that Dominion will close Millstone, despite its implied threat."
Many of the group's assertions were challenged by a July 7 letter sent from Dominion to Connecticut Governor Dannel Malloy. "Dominion Energy has been honest this entire legislative session. Our opponents have not. Their latest letter is proof that they are purposefully misleading policymakers for their gain at the expense" of Connecticut homes and businesses.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Dominion spokesperson Ken Holt told Industrial Info that the Millstone plant is profitable, with about 88% of its output hedged for 2017. Typically, he added, the plant's output is hedged three years into the future. Dominion announced a strategic assessment of Millstone in June after the state legislature ended its regular session without taking action on bills Dominion had sought, suggesting that the nuclear plant's continued operation may be in doubt. Dominion has been mum on its strategic reassessment since announcing it.
According to the U.S. Energy Information Administration (EIA) (Washington, D.C.), in 2015, Millstone Units 2 and 3 produced about 46% of the electricity used in Connecticut. Dominion says that Millstone is a critical element of Connecticut's effort to lower greenhouse gas emissions to meet a 2008 state law, which mandates an 80% reduction of such emissions by 2050 compared to a 2001 baseline. Millstone reportedly provides nearly all of Connecticut's carbon-free electricity.
Holt could not say when that assessment would be complete, but he did note, "Millstone is not immune to the same pressures that have caused other nuclear plants to close prematurely," including Dominion's own Kewaunee plant, in Wisconsin, which went offline in May 2013 because it could not operate profitably. Other nuclear plants that have decided to close prematurely because they were no longer economically viable include Fort Calhoun in Nebraska, Pilgrim in Massachusetts, Yankee in Vermont, the two-unit Indian Point facility in New York and the two-unit Diablo Canyon station in California. For more on the economic factors driving nuclear plant closures, see January 10, 2017, article - Entergy Strikes Deal to Close Indian Point Nuclear Plant.
Two states--Illinois and New York--have enacted measures to provide financial support for some nuclear stations in their states. For more on that, see December 20, 2017, article - Exelon Wins Financial Aid for Two Uneconomic Nuclear Plants. Other states, including Ohio and Pennsylvania, have been lobbied by nuclear utilities to enact similar measures, but to date, these states have not done so. For more on that, see May 30 2017, article - Down but Not Out? FirstEnergy Still Seeking $300 Million Per Year in Nuclear Support.
When the Connecticut legislature adjourned in early June, two Millstone-related bills died with it. One proposed bill would allow nuclear power to be counted as a "renewable" resource to help the state achieve its renewable portfolio standard. The other, Holt said, was supported by the state's Department of Energy & Environmental Protection (DEEP) (Hartford, Connecticut), which, among other things, regulates the state's electric utilities.
The bill, which DEEP supported, Holt explained, would have established fuel-specific "lanes" for hydroelectric, renewables, nuclear and waste-to-energy, and within each of those lanes, competing facilities could bid to supply up to 50% of the state's electric energy. Millstone might compete with the nearby Seabrook nuclear station for a slice of the nuclear energy "lane," Holt said. Capacity markets would continue to be administered by the ISO-New England grid operator. The DEEP-backed bill died when the state's legislature adjourned.
"We have two basic options for Millstone," Holt said in an interview. "We can shut it down or we can continue to operate it. Connecticut has the highest retail electric prices in the continental United States, but some of the lowest wholesale prices. Retail electricity costs $81 per megawatt-hour (MWh), but it sells on the wholesale market for $29 per MWh--that's a large gap, and there's room for improvement. We want to continue to work with policymakers on legislation that would benefit Connecticut customers and give us greater financial stability," Holt said.
If Dominion decided to close Millstone, it could contract with another firm to provide dispatchable energy and capacity to replace Millstone, Holt said. Or Dominion could pay a fine for failing to fulfil its contracts. Millstone is contracted to provide energy and capacity until 2021. "We don't have to continue operating Millstone," Holt said, adding he did not know what penalty could be levied if Dominion could not contract with another electricity provider to cover Millstone's foregone capacity and energy.
The loss, or even the potential loss, of Millstone could throw New England's electric market into disarray, something Dominion's critics say is behind the company's strategic assessment of that nuclear power station. New England has seen the closure of several nuclear and coal-fired plants coupled with a difficulty siting interstate transmission lines as well as natural gas pipeline that would fuel some of the announced gas-fired generation projects designed to replace the shuttered coal and nuclear capacity. For more on that, see April 29, 2016, article - Low Commodity Prices Kill, Stall North American Pipeline Projects and April 8, 2015, article - Developers Delay, Cancel Gas Projects in U.S. Northeast.
Right now the Connecticut legislature is in an open-ended special session, focusing primarily on passing a state budget, Holt said. There's no Millstone-related bill in play, but the Dominion spokesperson emphasized that bills on any topic could be introduced. There is no end date for the special session.
Dominion bought Millstone for $1.3 billion in 2011. Since that time, the company said that it has invested an additional $1.2 billion upgrading the plant.
Dominion's critics have alleged the company is seeking a $300 million bailout to keep Millstone open, a number Holt said was "made up." He also denied that the company was seeking a bailout. The critics, organized under the banner of "Stop the Millstone Payout," on June 30 sent a letter to Connecticut lawmakers imploring them to reject Dominion's efforts to secure financial support for Millstone.
"As many of you have noted, our organizations don't agree on many issues," began the letter, signed by Connecticut's two investor-owned utilities, five competitive power providers and a petroleum group. "But one thing has brought us together: opposition to providing unnecessary financial support for the nation's most profitable nuclear plant at the expense of ratepayers."
"The Massachusetts Institute of Technology recently concluded that the Millstone Nuclear Plant in Waterford ranks #1 for profitability among the more than 60 nuclear plants operating in the United States," the letter continued. "A separate study performed for the New England States Committee on Electricity (NESCOE) concluded that "under every hypothetical scenario" Millstone will remain profitable through 2030."
"Connecticut faces very tough choices as it looks to adopt a budget. Whenever a deal is reached, the end result will be painful cuts to many services that residents count on," the Millstone critics wrote. "Why would Connecticut make a situation like that even worse by raising residents' electricity bills when they can least afford it?"
The letter went on: "A recent report from an industry analyst showed that Connecticut ratepayers would be on the hook for any financial support given to Millstone costing them more than $300 million extra each year. There is no impending danger that Dominion will close Millstone, despite its implied threat."
Many of the group's assertions were challenged by a July 7 letter sent from Dominion to Connecticut Governor Dannel Malloy. "Dominion Energy has been honest this entire legislative session. Our opponents have not. Their latest letter is proof that they are purposefully misleading policymakers for their gain at the expense" of Connecticut homes and businesses.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
