Dominion's Millstone nuclear plant could warrant subsidies, draft report says

Dive Brief:

Connecticut regulators, in a draft report, found sufficient justification to move forward with a possible solicitation process for zero emission credits (ZEC) for the state’s only nuclear power plant, Dominion Energy’s Millstone station.
The report, from the state’s Department of Energy and Environmental Protection (DEEP) and Public Utilities Regulatory Authority (PURA), found that Millstone is “economically viable under expected market conditions through 2035” and unlikely to retire prior to that date.
However, the draft report also found that the retirement of the nuclear plant could cost Connecticut ratepayers as much as $5.5 billion to replace Millstone’s zero emission generation with renewable resources.

Dive Insight:

Last fall, the Connecticut legislature passed a bill that permits, but does not require, the state to allow Dominion to sell up to 75% of Millstone’s output in a competitive solicitation with other generation resources that do not emit carbon dioxide.

The bill was the latest state effort to shore up ailing nuclear power plants. It follows similar efforts by Illinois and New York, emboldening other states, such as New Jersey, which just revived a bill that that died in last year’s lame duck session that would provide subsidies for Public Service Enterprise Group’s two nuclear plants in the state.

The nuclear subsidy programs in Illinois, New York and Connecticut have all withstood court challenges, but the Connecticut effort comes with an additional controversy.

The ZECs in Illinois and New York were designed to rescue power plants belonging to Exelon and Entergy that were facing closure absent subsidies. Those plants face competition from generation fired by low-cost natural gas and can operate more economically than nuclear plants.

Critics of the Connecticut bill have claimed that Dominion’s Millstone plant is profitable and not at risk

Stop the Millstone Payout, a group challenging Connecticut’s ZEC program, has cited research by the MIT Center for Energy and Environmental Policy Research that says Millstone is projected to be the most profitable nuclear plant in the U.S.

Dominion contests those findings, but has been reluctant to share what it views as confidential financial data. Under pressure from Connecticut regulators, Dominion finally did share financial data for the DEEP/PURA report, but that data was received after Levitan Associates completed an analysis for those agencies.

The agencies say Dominion submitted a two page summary of high-level, short-term forward financial projections at the end of November and a longer, redacted document on Jan. 10, 2018. DEEP and PURA included that data in its analysis of Millstone, finding that “when some adjustments are made, the financial viability of Millstone’s continued operation could be at risk.”

However, the report also noted that a “sensitivity scenario can confirm how much impact a key input or assumption will have on the outcome of a financial model, but it cannot confirm which assumption is correct or most accurate to use.”

DEEP and PURA said that the constraints imposed by the timing of the Dominion submissions, the need for verification, and complexity of the Levitan analysis made it “impossible to verify the cost assumptions asserted in this proceeding.”

The report did, however, find that the retirement of Millstone would not necessitate replacement capacity in Connecticut, but it would require replacement capacity in the ISO New England region, potentially harming resource diversity in the region.

The report also found that the retirement of Millstone would increase carbon dioxide emissions in New England by 25%. That increase in CO2 emissions could cause Connecticut to “backslide” on its statutory greenhouse gas emissions targets. Replacing 25% of that zero emission generation would cost Connecticut ratepayers $1.8 billion and replacing all of that zero emission generation would cost ratepayers $5.5 billion, the draft report found.

Asked by Utility Dive if they would provide Connecticut regulators with more financial data, Dominion responded with a statement from Paul Koonce, CEO of Dominion Energy Power Generation Group.

“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.”

DEEP and PURA are now seeking stakeholder comment on an expedited basis and are scheduled to prepare a final assessment and determination by Feb. 1. That report will be submitted to the governor and the General Assembly.

If the General Assembly approves the findings, a solicitation could be issued sometime between March 1 and May 1. Meanwhile, a nuclear subsidy bill in New Jersey that died in the lame duck session has been revived and is slated to be voted on in by a Senate Energy & Environment Committee.

Under the bill, ratepayers would pay up to $300 million a year in nuclear subsidies if the state’s Board of Public Utilities determines the plants are in economic distress. Without the subsidies, Public Service Enterprise Group (PSEG) has said that it would have to close the plants.