Regulators recommend energy market changes backing nuclear
Waterford — Regulators on Thursday officially opened the doors to let Millstone Power Station compete with renewables in a state auction, an energy market shift lawmakers and owner Dominion Energy argue is crucial to sustain the plant and critics deride as an unwarranted subsidy.
The Department of Energy and Environmental Protection says it will begin the proposed bidding process this spring, pitting new and existing zero-carbon resources against one another in competition for fixed-price contracts with state-regulated utilities.
DEEP plans to move forward, barring rejection from the General Assembly, where a simple majority vote to kill the proposal would be required in both houses by March 1. Lawmakers allowed the proposed bidding process in a bill signed by Gov. Dannel Malloy in October, and almost 60 General Assembly members wrote in support of Millstone in January.
Dominion has pushed for the change for the last few years, saying Millstone has suffered along with much of the nuclear industry as it grapples with high operational costs and competition from cheap natural gas in the wholesale market.
Currently, the state's bidding process is only open to hydropower, solar and wind producers. The new system could see contracts established between utilities and nuclear or hydropower generators lasting between three and 10 years; other renewable resources may receive contracts up to 20 years in length, regulators said.
When evaluating bids, DEEP potentially could give added weight to benefits like fuel diversity, grid reliability and greenhouse gas avoidance provided by energy generators like Millstone, but only if those generators can prove they're at risk of retirement.
"The onus is on us to produce a bid that is acceptable to the state," Millstone spokesman Ken Holt said Thursday.
Regulators and a host of Dominion competitors and advocacy groups argue Dominion has failed to turn over financial data proving Millstone faces burdens that could prompt its early closure.
NRG recently argued regulators' draft report failed to demonstrate "action is necessary" as mandated in the October law.
But DEEP and the Public Utilities Regulatory Authority said the daunting economic and environmental challenges facing the state if Millstone were to shutter helped convince them action was necessary, despite Millstone's apparent profitability according to public data.
"The Millstone nuclear units provide significant value to Connecticut and to the entire New England region," regulators wrote.
The report cites the plant's $1 billion-plus in statewide economic benefits and zero-carbon generation helping the state meet greenhouse gas emissions reduction targets. Replacing Millstone's power generation would result in greater carbon emissions and hundreds of millions of dollars in costs passed on to ratepayers, regulators said.
Under the policy proposal laid out in Thursday's report, utilities like Eversource would take ownership of the electricity following the bidding process and resell it into the existing wholesale market. According to DEEP, if the wholesale market price is higher than the contract price, the profit is returned as a bill credit to ratepayers; if market energy prices go down, ratepayers would pay the difference through a charge on distribution rates.
Dominion consistently has argued the change will lead to lower rates, because hedge funds currently buy much of Millstone's electricity on the wholesale market and hike prices for consumers.
Competitors like NRG describe that characterization as misleading, arguing Dominion chooses to sell its power to hedge funds to provide greater revenue certainty.
According to regulators, the earliest Millstone could close without severe financial ramifications would be 2022, as the plant already has capacity supply obligations sold in advance in the wholesale market. To close prior to 2022, Dominion would have to buy out of its obligation or shed its obligations to another electricity producer. Millstone Unit 2 is licensed until 2035, and its Unit 3 until 2045; Unit 1 shut down in 1995.
If Dominion wanted to close the plant in mid-2022, it would need to submit notices to the regional marketplace, ISO New England, between March 9 and March 23, 2018, regulators said.
DEEP expects to initiate the bidding process by May 1.
Details regarding the bidding process, schedule and procedure for confirming whether a resource is at risk of retirement "will be presented for stakeholder comment in the normal course of DEEP's solicitation," the report states.