Waterford — Dominion Energy this week issued its starkest warning yet to regulators that Millstone Power Station faces closure unless the state quickly reverses course and fully considers the plant's benefits to the environment and regional grid in an upcoming electricity auction.

After Dominion argued for years that increased expenses and competition from cheap natural gas threatened Millstone, regulators this year agreed to let the plant compete among solar, wind and hydropower for fixed-price contracts with state-regulated utilities. Regulators will pick bid winners by the winter and approve contracts by next spring.

Millstone's bids will have an edge over competitors if regulators deem the plant "at risk" of closing, because bids from "at risk" facilities will be evaluated not only on price, but on benefits such as greenhouse gas avoidance, fuel diversity and grid reliability.

Dominion says the state isn't planning to move quickly enough, while others argue Dominion is making empty threats.

In a draft request for proposals issued June 22, the Department of Energy and Environmental Protection said facilities "can only be deemed at risk" during an "at risk time period" commencing June 1, 2023.

The suggestion of waiting five years for contracts that fully consider Millstone's benefits sparked a sharp response from Dominion, which argued environmental and other benefits "exist now, and should be valued accordingly."

"Millstone is at risk now, and Dominion Energy must face critical business decisions regarding the future of Millstone, irrespective of the consequences those decisions might have on Connecticut or the New England region," Dominion President and CEO Paul Koonce wrote on Monday.

Dominion says if DEEP doesn't allow bids to be evaluated based on all of Millstone's benefits starting this year, the company might not submit a proposal at all, because "any contract that results from the RFP is unlikely to be viable and the efforts of all involved will be wasted."

Chris Collibee, DEEP spokesman, said Thursday that "we will carefully review comments submitted regarding the draft RFP before issuing the final RFP statement."

The final RFP should be released by July 31.

Millstone spokesman Ken Holt said employees "are following this process closely and are engaged with their state legislators. They remain committed to the safe operation of Millstone."

State Sen. Paul Formica, R-East Lyme, said the draft RFP "in no way represents" the legislature's intentions when the General Assembly and Gov. Dannel P. Malloy prompted DEEP's review of whether to include nuclear power in the zero-carbon auction. Almost 60 lawmakers wrote in support of Millstone in January, and Formica said lawmakers were now "mobilizing to make sure DEEP understands."

Formica and Koonce noted the "at risk time period" starting in 2023 was not mentioned before the draft RFP, either by lawmakers or regulators.

"To have this happen at the 11th hour is a slap in the face to the process," he said. "We worked hard for three or four years to make sure everybody understood the severity of premature closure."

Formica said it was wrong to suggest Dominion might be bluffing and pointed to DEEP's own conclusions that early closure would almost immediately lead to higher pollution to replace Millstone's power generation, higher electricity rates, grid unreliability and drastic regional economic losses.

Competitor, environmental group remain opposed to 'bailout'

The state's assessment of Millstone earlier this year noted the plant was obligated to deliver energy capacity sold in advance through 2022 in ISO New England's Forward Capacity Market. State-hired consultants said this meant Millstone was unlikely to close before then without shedding obligations to another buyer or incurring severe costs covering any power shortages that could occur by not fulfilling their obligations.

The consultants also said Millstone's two operating units should remain substantially profitable under expected wholesale market revenues through 2035. Millstone Unit 2 is licensed until 2035, and Unit 3 until 2045; Unit 1 shut down in 1995.

Claire Coleman, of the Connecticut Fund for the Environment, said DEEP's decision to hold off on potentially granting "at risk" status to Millstone made "perfect sense."

"Forcing ratepayers to foot the bill for a bailout payment to Millstone at all — let alone during a time when Millstone is committed to the regional market and there is no real risk of retirement — makes no sense," Coleman said, citing existing high electricity costs and an "urgent need to invest" in wind, solar and battery storage.

David Gaier, spokesman for the energy company NRG, also cited Millstone's capacity obligation through 2022.

"The threat from Dominion that it may have to retire Millstone now is empty," Gaier said. "There's still no evidence that Millstone needs a handout from Connecticut ratepayers."

But Dominion's participation in the Forward Capacity Market should not be seen as evidence of economic vitality, the company said.

Dominion participated in the market "in good faith while the company was engaged with Connecticut officials in seeking a mutually beneficial solution regarding Millstone," wrote Koonce, who added that the Forward Capacity Market was a "small portion of the plant's total revenue."

"If the course DEEP proposes in the draft RFP is evidence of the path DEEP plans to take going forward ... the prospects of Dominion Energy having the confidence to enter into another capacity obligation are dim," he added.

Formica noted Connecticut wasn't considering direct subsidies for Millstone — just a shift out of the wholesale market that he argued could prove beneficial to ratepayers.

He also said DEEP's proposed "at risk time period" undercuts the spirit of bipartisan bills signed by Malloy this year that will increase the state's reliance on renewables and help reduce greenhouse gas emissions.

Formica said while incoming offshore wind development was positive, the energy delivered by Deepwater Wind's new project was "not even close" to Millstone's roughly 2,100 megawatts.

Dominion: market forcing shifts in focus

Dominion executives in May pointed to their 2012 decision to shutter the Kewaunee Power Station in Carlton, Wis., as an example of a "difficult decision based on operations but a prudent decision" for shareholders that could be replicated in Connecticut.

Dominion says it shared with regulators a host of confidential data that proves keeping Millstone open isn't economically viable for the company as a whole, even if the plant "remains marginally profitable going forward."

Koonce on Monday noted that 10 years ago, Dominion owned and operated "a robust fleet of merchant generating assets, including coal, natural gas and nuclear units in both the Midwest and in New England," but market changes have forced the company to shift its focus. Dominion now owns three remaining merchant plants, including Millstone and two natural gas plants in Providence and Philadelphia, which it's considering selling.

Connecticut's zero-carbon auction follows efforts in New York, Illinois and New Jersey to establish policies to compensate struggling nuclear plants for the benefits they provide.

It also comes as President Donald Trump is pushing the federal government to intervene in energy markets to prevent premature closure of failing coal and nuclear plants.

DEEP said any contracts for "at risk" facilities will include language protecting ratepayers "if a market or regional solution is implemented that addresses the resource's risk."

DEEP is accepting public comments on the draft RFP until 4 p.m. on July 20. Written comments may be filed electronically on DEEP's website or submitted to DEEP.EnergyBureau@ct.gov.

b.kail@theday.com