Regulators back energy market changes pushed by Millstone
Waterford — Regulators on Monday said the daunting economic and environmental impacts of a potential Millstone Power Station closure inspired them to back the energy market overhauls many officials say are vital to keep the plant operational.
Millstone owner Dominion Energy wants to sell electricity generated at the plant to the state in competition with renewables, which The Department of Energy and Environmental Protection and the Public Utilities Regulatory Authority recommended Monday. The push from Dominion comes in the wake of high operational costs and competition in the wholesale market from cheap natural gas.
Regulators' draft determination follows more than six months of review and debate over Millstone's future. Many stakeholders agree Millstone is essential to the local and regional economy and to help the state meet carbon emissions reduction goals. But Dominion competitors, electricity distributors, environmentalists and regulators remain unconvinced the plant faces the dire economics that have threatened or shuttered nuclear plants across the U.S.
Asked about the determination's impact on ratepayers, PURA Chairwoman Katie Dykes said it opened the door for Millstone to bid at prices that would beat the market price, creating "a pathway to secure a lower cost for the state."
"Ultimately it's a competitive process in which bidders would sharpen their pencils and come in with their best prices," she said.
Millstone officials say the bidding process could lower electricity rates by eliminating "middle men," namely hedge funds, that purchase electricity on the wholesale market and then raise prices.
But Dominion competitors dispute that characterization; NRG on Monday said the bidding process amounted to a "handout."
Millstone's viability 'uncertain'
DEEP and PURA say the proposed bidding process comes with conditions ensuring "the state's ratepayers are protected from paying above-market costs for resources that are not verified to be at risk of retirement."
Whether Millstone is at risk of retirement remains uncertain, regulators said.
Initial analysis by DEEP and PURA showed Millstone's two nuclear units would remain substantially profitable through 2035. But regulators said the confidential, unaudited Millstone data recently turned over by Dominion "suggests that the generating facility's profitability is low."
Additionally, if Millstone isn't hitting Dominion's unknown company-wide requirements for return on investments, it "could lead to an unanticipated retirement decision," regulators said.
Such a shutdown, regulators warned, could cost ratepayers upwards of $719 million by 2035 due to increased price volatility in the wake of increased natural gas demand, reduced supply and the costs of new facilities being passed on to ratepayers. Millstone's retirement would also likely ramp up fossil fuel emissions from producers generating power in Millstone's absence, regulators said.
"The final appraisal is clear," Paul Koonce, CEO of Dominion Energy Power Generation Group, said in a statement. "Millstone is vital for Connecticut to meet its cheaper, cleaner and more reliable energy goals and aggressive carbon goals. Dominion Energy is committed to continuing to work with state energy officials to achieve those goals."
'Welcome news' or a 'handout'?
The state bidding process recommended by DEEP and PURA is allowed through a law signed by Gov. Dannel Malloy in October.
Almost 60 General Assembly members backed Millstone in a letter to regulators earlier this month.
"This is welcome news for our entire state," state Sen. Paul Formica, R-East Lyme, said Monday. "Connecticut is taking an important step forward to stabilize the state's largest energy provider to benefit ratepayers across New England. Ensuring Millstone's stability while we work toward building a future system that includes more renewable energy resources is needed to preserve reliability and affordability."
If the General Assembly accepts regulators' recommendation for a state bidding process, regulators will evaluate Millstone's bids solely on whether they are cheaper than forecasted energy prices, DEEP and PURA said.
If Dominion provides regulators audited data clearly proving Millstone's unprofitability, Millstone's bids could gain an edge over competitors, as regulators say they would also weigh Millstone's "non-price benefits" such as fuel diversity, grid reliability and zero-carbon emissions.
On Monday evening, Millstone spokesman Ken Holt said he could not say whether Dominion was considering turning over audited data.
NRG, a Dominion competitor that's challenged energy market overhauls that have benefited nuclear plants in several states, said through a spokesman that it still hadn't seen "any evidence that Millstone needs a handout."
"The state's own consultants confirmed the plant will be profitable at least through 2035," NRG spokesman Dave Gaier said. "It defies logic to conclude that Millstone is a 'renewable' resource like wind and solar, while it generates waste that will be hazardous for thousands of years."
Stakeholders can submit written comments on the draft determination by 4 p.m. Thursday. DEEP and PURA are scheduled to release a final report on Thursday, Feb. 1.
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