Millstone ''shutdown'' seen as doubtful
Dominion is going on the offensive with arguments that it would have to shut down Millstone Power Station to avoid a proposed $330 million state tax, but the state's consumer advocate remains skeptical.
Dominion is running full-page ads in newspapers and setting up a public meeting for Monday in Waterford on the proposed legislation and other nuclear issues. But on Wednesday, the state's Office of Consumer Counsel, which supports the proposed Senate Bill 1176, insisted that the nuclear complex owner can afford to absorb the tax.
Lawmakers are proposing to tax the electric output of nuclear, oil and coal plants, putting the highest rate of 2 cents a kilowatt hour on Millstone. Dominion counters that if the tax passes, it would need to close one or both of its reactors indefinitely and lay off or furlough most of its 1,080-person work force until the economic climate changes.
Some 350 independent contractors would also be affected, the company said.
Since Millstone is no longer a publicly regulated utility in Connecticut, the attorney general's office could not compel its owners to keep it running, said Susan Kinsman, a spokeswoman for Attorney General George C. Jepsen.
Joe Rosenthal, a principal analyst for the Office of Consumer Counsel, insists that the high-flying electricity market in Connecticut is too attractive for Dominion to abandon. In his analysis, he relied on earnings reports, knowledge of the electric markets and the price of uranium fuel.
"The bottom line is, (Dominion) is going to remain profitable at the 2-cent (tax) level," Rosenthal argued. "They'll just keep doing what they're doing and make less money. And they're not going to fire people. I don't know if you can willy-nilly let go of nuclear expertise and then get it back later."
Dominion spokesman Ken Holt disputed that assessment. "Apparently, the Office of Consumer Counsel doesn't believe we're serious," Holt said. "We're in the business of making money, not in the business of playing games. This tax represents an incredible burden on Millstone, and if passed, Millstone will no longer be economically viable."
Dominion has commitments to provide power from Millstone through 2014, said Marcia Blomberg, a spokesperson for ISO New England, which manages the region's wholesale electric market. Millstone's two reactors generate 2,100 megawatts of electricity - enough to supply nearly 50 percent of the power needs of the state. ISO-New England must have adequate resources to operate its grid reliably, but if Millstone withdrew, the agency would look to other energy sources, Blomberg said.
Dominion, meanwhile, launched an attack against the proposed legislation in full-page ads in newspapers on Wednesday, including The Day and The Hartford Courant. The ad says Connecticut consumers pay 20 percent more for their electricity than neighboring New England states and asks citizens to fight a "bad idea" because the proposed tax will drive up electric rates, cost jobs and hurt the economy.
Consumer Counsel Mary Healey disputed that in testimony at the Capitol last month, saying the tax has been "carefully calibrated so as to avoid 'pass-through' (to consumers) of the tax by generators. ... The difference between the ISO New England market clearing price and Millstone's estimated costs of operations easily exceeds 2 cents per kilowatt hour" for most of the year.
Dan Weekley, vice president of government affairs at Dominion, said earlier this week that if Millstone reactors were shut down, the company would not need most of its employees to maintain the plants in a safe, shutdown mode.
Even if the reactors stop operating, Dominion has ways to meet its obligations for contracts it has already signed for power, which is sold into the wholesale market, he said.
For instance, Dominion could rely on electric output from its nuclear reactors in Wisconsin and Virginia and buy electricity on the open market to meet its contractual obligations, Weekley said.
"They're not going to take all of these risks," insisted Rosenthal. "And if they even tried to play this game, we would go to (the Federal Energy Regulatory Commission) and seek to have their market-based rate authority taken."
That market-based authority allows Dominion to operate as a "merchant plant" in a competitive, deregulated market.
At least one analyst was also unsure Dominion would close the reactors if the tax is enacted.
St. Louis-based Edward Jones analyst Andrew C. Pusateri said the market "doesn't seem too concerned" with the political battle under way in Connecticut. Dominion stock has been up this week, and closed Wednesday 26 cents higher, at $45.03. Pusateri said both sides appeared to be relying on rhetoric to make their case.
"There's some truth both ways," Pusateri said. "The fact the tax is directed almost entirely at Dominion seems a bit unfair. Dominion's reaction (to close), they know their company better than analysts, it's a decision that takes some time to make. I wouldn't be surprised, long term, if they wouldn't be able to keep those plants running even with the tax. Or maybe it won't come to fruition, and they won't have to pay a tax that large."
A New York-based analyst noted, however, that after costs to operate Millstone and the proposed tax are added together, the company would do only a little better than break even in annual revenue, justifying its call to shutter two reactors if lawmakers' proposal passes.
"You end up with almost nothing to cover associated costs for running the plant, so the threat that Dominion is voicing is justified by the economics of power generation from the plant," said Angie Storozynski, an analyst with the investment bank Macquarie Capital Inc.
Dominion plans to make its case publicly Monday at a 7 p.m. meeting at Waterford Town Hall. Other topics on the agenda include Dominion's routine shutdown this week of Millstone's Unit 2 reactor for refueling and the company's response to the Fukushima nuclear troubles in Japan.
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