Report asserts electricity bills would rise if Millstone bill passes
Instead of lowering electricity rates, a bill that would allow the Millstone Power Station to sell its power directly to energy retailers would actually increase them by about $90 per year for the average ratepayer, according to an economic analysis released Wednesday by a group of competing electricity generators actively lobbying for defeat of the measure.
The Stop the Millstone Payout coalition — a group that includes Calpine, Dynegy and NRG Energy, Houston-based companies that primarily own fossil fuel generating plants — commissioned the Energyzt Advisors study that concluded that the Waterford plant has been and will continue to be profitable into the foreseeable future.
SB 106, the bill now headed for a vote in the state Senate, only would benefit shareholders of Millstone owner Dominion at the expense of Connecticut ratepayers, the report contends.
“There is no reason to anticipate that Millstone will face financial challenges or be at risk of retirement within the next five years or in the longer term,” the report states. It was written by Tanya Bodell, executive director of Energyzt, who spoke about it in a conference call with reporters on Wednesday.
Bodell said she based the $90 price increase on a scenario in which the bill passes and Millstone is approved to sell about half of the power it generates through the state-run bid process at a price of $85 per megawatt hour.
Currently, Millstone sells its 2,100 megawatts of electricity to third-party hedge funds in long-term contracts to third-party middlemen, who in turn sell it to the wholesale market. The bill would allow Millstone power to be sold directly to Eversource and United Illuminating, the state’s two main energy distribution companies, through a state-run bid process now open only to renewable energy producers.
Bodell said the $85 per megawatt hour figure is based on the prices for renewable energy bids offered previously through the state process. Her analysis of Dominion’s publicly available financial information, she said, indicates that Millstone can generate power at a break-even price of $45 per megawatt hour.
Under those assumptions, Millstone would be able to generate an additional $300 million per year for the company that would be a windfall for Dominion shareholders, she said.
“It would go straight to the equity shareholders, not to support a plant that’s not covering its costs,” she said.
Kevin Hennessy, Dominion’s director of state policy for New England, faulted the assumptions of Bodell’s analysis. He noted that the bill only would allow Dominion to bid for a single five-year contract that would not be accepted unless it was deemed “in the best interests of ratepayers” by four different state regulatory agencies.
“If we came in with a bid of $85, we’d be laughed out of the room,” he said. “We would not be successful in our bid unless it was a good deal for ratepayers.”
Bodell, however, said the language in the bill "is vague" and that it is not clear what would be considered to be "in the best interests of ratepayers."
Hennessy called the report “just a lot of noise and hyperbole and a lot of assumptions that are not validated."
“Look who’s putting it out,” he said. “It’s the owners of the old, dirty oil and gas units that benefit from high volatility and high prices in the energy markets.”
The companies in the coalition stand to benefit financially if Millstone were to close, Dominion said in a statement issued before release of the report.
In the report, Bodell said Dominion already has recouped the $1.2 billion purchase price it paid for the two operating Millstone plants in 2001 and enjoyed high profitability through 2009, when energy prices dropped due to lower natural gas prices. Even after 2009, however, Dominion continued to turn a profit from the plant that remained even in 2016, when energy prices hit their lowest level in a decade.
Bodell said she used the “worst-case scenario” assumption that energy prices would continue at 2016 levels through 2021 and determined that “Millstone would more than cover its costs and provide a reasonable return on investments.”
Hennessy said the analysis does not factor in that Millstone’s operating costs are higher than those at many other nuclear plants in lower-cost states, or the benefits of stabilizing it as a carbon-free power generator to help Connecticut reach its goals for reducing greenhouse gas emissions.
The bill has been crafted as a way of stabilizing Millstone against volatility in the energy markets and easing financial pressures that have caused nuclear plants elsewhere in the country to close or need state subsidies to continue operating.
Only a portion of the bill is specific to Millstone, however. The majority of the measure is dedicated to laying out a process for moving toward increasing reliance on renewable energy.