Reports related to this article:
Plant(s): View 1 related plant in PECWeb
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The long-running controversy over the financial health of the Millstone Nuclear Power Station in Connecticut has moved into a new phase, with potential big-money impacts on Connecticut's electric customers, renewable energy providers, the state's carbon-reduction efforts and the region's electricity supply.
For most of this year, Millstone's owner, Dominion Energy Incorporated (NYSE:D) (Richmond, Virginia), has sparred with electric distribution companies, merchant generators and other critics over whether the two-unit, 2,411-megawatt nuclear plant was profitable enough to continue operating. Nuclear operators in other states, including New York and Illinois, have won hard-fought battles to secure financial aid for plants they said were unprofitable. Exelon Corporation (NYSE:EXC) (Chicago, Illinois) said it would close unprofitable nuclear plants in those states if it was not compensated for those plants' zero-emissions characteristics. For more on that, see December 20, 2016, article - Exelon Wins Financial Aid for Two Uneconomic Nuclear Plants and August 3, 2016, article - Cash on the Barrel: New York Clean Energy Standard Includes Multibillion-Dollar Support for Nuclear Power's Carbon-Free Generation.
Nuclear operators in other states, including New Jersey, Ohio and Pennsylvania, have sought similar types of financial support for their plants in those states. In Ohio, a "clean energy jobs bill" supported by FirstEnergy Corporation (NYSE:FE) (Akron, Ohio) was introduced in October. That utility has long been seeking financial support for its nuclear plants in the state, which it said are unprofitable. For more on that, see October 4, 2017, article - Electricity Scrum Set to Resume in Ohio Legislature and May 30, 2017, article - Down but Not Out? FirstEnergy Still Seeking $300 Million Per Year in Nuclear Support.
Pennsylvania reportedly has chosen a different approach. Its legislature has appealed to the Federal Energy Regulatory Commission (FERC) (Washington, D.C.) to support the Notice of Proposed Rulemaking (NOPR) drafted by the Department of Energy (DoE) (Washington, D.C.) to provide financial support for coal and nuclear plants. The draft NOPR, released in September, has drawn an avalanche of comments from the industry. For more on that, see October 12, 2017, article - How Will FERC Respond to Wholesale Power Fix Drafted by Energy Department?.
In Connecticut, the Public Utilities Regulatory Authority (PURA) (New Britain, Connecticut), has begun conducting a financial analysis of the Millstone plant pursuant to a bill signed into law by Governor Dannel Malloy on October 31. PURA tried to conduct such an analysis earlier this year, but was stymied when Dominion declined to provide information to the regulators. That forced PURA to rely on estimates about the plant's profitability that Dominion said were flawed.
But now Dominion is providing non-public financial information about Millstone to PURA, Dominion spokesperson Ken Holt told Industrial Info. Earlier this year, he said Millstone was profitable, but he declined to be specific. For more on that, see July 27, 2017, article - Fate of Millstone Hangs Over Connecticut and New England. Other than confirming that Dominion started providing PURA with non-public financial information about Millstone last month, pursuant to the new law, Holt declined to offer specifics.
That new law requires PURA to report on the profitability of Millstone by February 1, 2018. If the regulators conclude the plant is financially threatened, the state may issue a solicitation for zero-carbon generation and Millstone would be able to bid in that solicitation. The state runs zero-carbon auctions to support development of renewable energy generation and lower the state's carbon dioxide (CO2) emissions. Prices in that auction typically are "meaningfully higher" than market-clearing prices in the auctions run by ISO-New England to procure power for the region, Holt told Industrial Info.
"We've had a certain reluctance to share financial data about Millstone publicly," he acknowledged. If Millstone was able to participate in the state's zero-carbon solicitation, and it won, it would sign bilateral supply contracts with electric distribution companies. PURA, as the regulator of those distribution companies, would be able to review the prudence of those contracts, according to the text of the bill Malloy signed October 31. "If we submit a bid the state of Connecticut doesn't accept, there is no obligation for the state to buy electricity from Millstone," Hold said in an interview.
In opposing state financial aid to Millstone, the plant's critics have noted that Connecticut's retail electric prices are the highest in the Lower 48 states. Providing the plant with additional funds would further elevate those prices. If Millstone was successful in a zero-carbon solicitation, the prices it would be awarded are expected to be higher than the market-clearing prices as determined by the ISO-New England, which would act as further upward pressure on the state's retail electricity prices.
If PURA determines that Millstone is not financially threatened, nothing would change, Holt said: The plant would continue to bid into auctions held by ISO-New England. Right now, most of the output from the plant, which began operating in the 1970s, is sold to hedge funds. Holt said the plant accounts for roughly 55% of the electricity generated in Connecticut and about 98% of all the state's zero-carbon generation. On a regional basis, he estimated Millstone provides between 10% and 20% of the New England region's electricity. Dominion has said 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.
"Across the country, you can see the nuclear industry is challenged," Holt said. "The legislation signed by the governor recognizes the economic and environmental importance of Millstone." Nuclear operators across the country have decided to close reactors for economic reasons, typically those plants' inability to compete with other sources of generation. For more on that, see December 5, 2017, article - Study: Renewable Energy Costs Stay on Downward Trajectory, Nuclear Up, Coal Flat and November 10, 2016, article - As Fort Calhoun Shuts Down, Analysts ask, 'Are Nuclear's Days Numbered?'.
Those who have criticized Dominion's efforts to win financial support for Millstone are unlikely to be mollified by the financial analysis being conducted by Connecticut utility regulators. The critics have included 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 including Calpine Corporation (NYSE:CPN) (Houston, Texas), Dynegy Incorporated (NYSE:DYN) (Houston, Texas) and NRG Energy Incorporated (NYSE:NRG) (Princeton, New Jersey). They have decried these efforts as a bailout for Millstone and a financial windfall for Dominion.
"Power markets only work if all participants adhere to the same set of rules," NRG East spokesperson David Gaier told Industrial Info. Referring to the potential for Millstone to bid in a zero-carbon solicitation, he said, "Out-of-market contract(s) distort markets and are patently and intrinsically unfair."
Gaier referred to a study conducted by consultants earlier this year that said Millstone was the most profitable nuclear plant in the country. But because the authors of that study did not have access to Dominion's financial data about Millstone, they were forced to make several assumptions, which Dominion spokesperson Holt said resulted in an inaccurate picture of the plant's financial condition.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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.
For most of this year, Millstone's owner, Dominion Energy Incorporated (NYSE:D) (Richmond, Virginia), has sparred with electric distribution companies, merchant generators and other critics over whether the two-unit, 2,411-megawatt nuclear plant was profitable enough to continue operating. Nuclear operators in other states, including New York and Illinois, have won hard-fought battles to secure financial aid for plants they said were unprofitable. Exelon Corporation (NYSE:EXC) (Chicago, Illinois) said it would close unprofitable nuclear plants in those states if it was not compensated for those plants' zero-emissions characteristics. For more on that, see December 20, 2016, article - Exelon Wins Financial Aid for Two Uneconomic Nuclear Plants and August 3, 2016, article - Cash on the Barrel: New York Clean Energy Standard Includes Multibillion-Dollar Support for Nuclear Power's Carbon-Free Generation.
Nuclear operators in other states, including New Jersey, Ohio and Pennsylvania, have sought similar types of financial support for their plants in those states. In Ohio, a "clean energy jobs bill" supported by FirstEnergy Corporation (NYSE:FE) (Akron, Ohio) was introduced in October. That utility has long been seeking financial support for its nuclear plants in the state, which it said are unprofitable. For more on that, see October 4, 2017, article - Electricity Scrum Set to Resume in Ohio Legislature and May 30, 2017, article - Down but Not Out? FirstEnergy Still Seeking $300 Million Per Year in Nuclear Support.
Pennsylvania reportedly has chosen a different approach. Its legislature has appealed to the Federal Energy Regulatory Commission (FERC) (Washington, D.C.) to support the Notice of Proposed Rulemaking (NOPR) drafted by the Department of Energy (DoE) (Washington, D.C.) to provide financial support for coal and nuclear plants. The draft NOPR, released in September, has drawn an avalanche of comments from the industry. For more on that, see October 12, 2017, article - How Will FERC Respond to Wholesale Power Fix Drafted by Energy Department?.
In Connecticut, the Public Utilities Regulatory Authority (PURA) (New Britain, Connecticut), has begun conducting a financial analysis of the Millstone plant pursuant to a bill signed into law by Governor Dannel Malloy on October 31. PURA tried to conduct such an analysis earlier this year, but was stymied when Dominion declined to provide information to the regulators. That forced PURA to rely on estimates about the plant's profitability that Dominion said were flawed.
But now Dominion is providing non-public financial information about Millstone to PURA, Dominion spokesperson Ken Holt told Industrial Info. Earlier this year, he said Millstone was profitable, but he declined to be specific. For more on that, see July 27, 2017, article - Fate of Millstone Hangs Over Connecticut and New England. Other than confirming that Dominion started providing PURA with non-public financial information about Millstone last month, pursuant to the new law, Holt declined to offer specifics.
That new law requires PURA to report on the profitability of Millstone by February 1, 2018. If the regulators conclude the plant is financially threatened, the state may issue a solicitation for zero-carbon generation and Millstone would be able to bid in that solicitation. The state runs zero-carbon auctions to support development of renewable energy generation and lower the state's carbon dioxide (CO2) emissions. Prices in that auction typically are "meaningfully higher" than market-clearing prices in the auctions run by ISO-New England to procure power for the region, Holt told Industrial Info.
"We've had a certain reluctance to share financial data about Millstone publicly," he acknowledged. If Millstone was able to participate in the state's zero-carbon solicitation, and it won, it would sign bilateral supply contracts with electric distribution companies. PURA, as the regulator of those distribution companies, would be able to review the prudence of those contracts, according to the text of the bill Malloy signed October 31. "If we submit a bid the state of Connecticut doesn't accept, there is no obligation for the state to buy electricity from Millstone," Hold said in an interview.
In opposing state financial aid to Millstone, the plant's critics have noted that Connecticut's retail electric prices are the highest in the Lower 48 states. Providing the plant with additional funds would further elevate those prices. If Millstone was successful in a zero-carbon solicitation, the prices it would be awarded are expected to be higher than the market-clearing prices as determined by the ISO-New England, which would act as further upward pressure on the state's retail electricity prices.
If PURA determines that Millstone is not financially threatened, nothing would change, Holt said: The plant would continue to bid into auctions held by ISO-New England. Right now, most of the output from the plant, which began operating in the 1970s, is sold to hedge funds. Holt said the plant accounts for roughly 55% of the electricity generated in Connecticut and about 98% of all the state's zero-carbon generation. On a regional basis, he estimated Millstone provides between 10% and 20% of the New England region's electricity. Dominion has said 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.
"Across the country, you can see the nuclear industry is challenged," Holt said. "The legislation signed by the governor recognizes the economic and environmental importance of Millstone." Nuclear operators across the country have decided to close reactors for economic reasons, typically those plants' inability to compete with other sources of generation. For more on that, see December 5, 2017, article - Study: Renewable Energy Costs Stay on Downward Trajectory, Nuclear Up, Coal Flat and November 10, 2016, article - As Fort Calhoun Shuts Down, Analysts ask, 'Are Nuclear's Days Numbered?'.
Those who have criticized Dominion's efforts to win financial support for Millstone are unlikely to be mollified by the financial analysis being conducted by Connecticut utility regulators. The critics have included 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 including Calpine Corporation (NYSE:CPN) (Houston, Texas), Dynegy Incorporated (NYSE:DYN) (Houston, Texas) and NRG Energy Incorporated (NYSE:NRG) (Princeton, New Jersey). They have decried these efforts as a bailout for Millstone and a financial windfall for Dominion.
"Power markets only work if all participants adhere to the same set of rules," NRG East spokesperson David Gaier told Industrial Info. Referring to the potential for Millstone to bid in a zero-carbon solicitation, he said, "Out-of-market contract(s) distort markets and are patently and intrinsically unfair."
Gaier referred to a study conducted by consultants earlier this year that said Millstone was the most profitable nuclear plant in the country. But because the authors of that study did not have access to Dominion's financial data about Millstone, they were forced to make several assumptions, which Dominion spokesperson Holt said resulted in an inaccurate picture of the plant's financial condition.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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.
