Millstone Power Station owner Dominion Resources will absorb its $10.5 million share of the $17.5 million energy generation tax rather than pass it on to ratepayers, company spokesman Kevin Hennessy said Tuesday.

Hennessy, director of government affairs for Dominion, said the company is pleased overall with the compromise reached by the state General Assembly that will allow the 2-year-old tax on Connecticut energy generators to expire in September. The compromise came as part of Monday's state budget deal. The budget awaits Gov. Dannel P. Malloy's signature.

"We are very grateful for the efforts of members of the legislature, especially the southeastern Connecticut delegation," he said. "There will be an impact on our bottom line, certainly. But overall, this is a good public policy decision."

Hennessy said the company's power sales contracts would have to be reopened for the three-month period to enable Dominion to recoup the $10.5 million tax through higher rates. Because that is a difficult process, the company instead decided to absorb the tax.

Under Malloy's budget proposal, the energy generation tax would have continued beyond its originally established July 1 expiration, costing Dominion about $43 million annually. The company argued that while it had absorbed the tax for two years, it would not continue to do so and would pass the cost along in higher rates for the power it sells to distributors, which ultimately would affect consumer utility rates.

State Sen. Andrea Stillman, whose district includes the nuclear power station in Waterford, was one of the leaders of the local delegation who fought against continuing the tax. Up until late last week, the tax was set to continue through 2014, though at a lower rate. Under the last proposal before the final compromise, Millstone would have been responsible for $16 million to $17 million annually.

"It was a team effort," Stillman said. "We worked hard to make it go away, and I'm grateful for the folks who were willing to listen and compromise."

She said keeping the tax would have hurt the economy statewide and locally, sending an anti-business message about the state.

"It was about sending a message that Connecticut will live up to its promises," she said. Keeping the tax, she added, "would have sent a terrible message to the business community that you can't trust Connecticut."

The final compromise, while far better than the governor's original proposal, still leaves Bill Sheehan, the Waterford resident who is chairman of the state's Nuclear Energy Advisory Council, critical of the state budget process.

"I'm disappointed it didn't get eliminated completely, but smaller is better than larger," he said.

Although Dominion said it would absorb the remaining tax, Sheehan said consumers may still see an impact on their rates if other energy generators don't do the same.

j.benson@theday.com